Recently, opening an account with Bulgarian banks has become a problem for many foreigners. What is behind this, and what can be done to remedy the situation?
Bank policy on opening accounts has changed recently for Bulgarian companies with foreign managers and founders, as well as for individuals who are foreign nationals. Opening an account has become a real problem for those who are not residents of Bulgaria, do not hold a residence permit and are not even in the process of applying for one. Moreover, cases of previously opened accounts being closed have become more frequent. Bank staff give no explanations, at best referring to internal instructions.
Following the adoption of the Правилник (the regulation on the application of the rules) to the Закон за мерките срещу изпирането на пари Bulgarian banks have received strict instructions to treat foreign clients with the utmost care. Financial institutions are among the first required to adopt internal rules implementing the Law, under which they must carry out complex, multi-stage checks on numerous transactions that may be suspicious — above all, international transfers.
As a result, banks (at least most of them) have decided to play it safe and avoid dealing with suspicious foreign clients altogether, seeing every one of them as a potential source of problems. Although the law contains no prohibitions in this respect, foreigners are often refused account opening, or their accounts are closed if funds arrive whose origin appears unclear.
It has already become practically impossible to open a bank account in Bulgaria for companies involving citizens of Estonia and Angola. The high-risk list also includes clients from the other Baltic states, as well as companies receiving funds from Russia and China. Any transaction is considered questionable if it involves “high-risk states” outside the EU. All legal entities and individuals using virtual currencies have also come under suspicion.
The few banks that still open accounts for foreigners usually refuse to provide online banking services outside Bulgaria, and in some cases within the country as well. Opening accounts by power of attorney for companies founded by foreign nationals has become practically impossible.
For the time being, a Bulgarian company can continue operating by opening an account not only in Bulgaria, but also in any other EU country that allows it. However, it should be borne in mind that the EU Anti-Money Laundering Directive has led to a rapid consolidation of all account data in EU countries into a single centralised system, which Bulgaria is also joining.
Managers and founders of Bulgarian companies who have not yet obtained a residence permit in the country should urgently begin the application procedure if they have the opportunity to do so. Otherwise there is a high risk that the company’s operations will be blocked, since the option of opening accounts for companies involving non-residents may be fully restricted as early as the end of May 2019. A sudden closure of existing accounts is also possible if the bank receives information that the client does not hold a long-term residence permit in Bulgaria or is not in the process of applying for one.
It may seem that those permanently residing in Bulgaria face no difficulties. However, this is not the case, and residents may also encounter unpleasant surprises. Attention should be paid to money coming into personal accounts: under the new law, even gifts or financial assistance may be taxed if the inspecting authorities find them insufficiently convincingly substantiated. It is therefore necessary to have evidence that the assistance was provided in force majeure situations.
Importantly, checks may cover not only the past period but also earlier years (up to 5 years), so if there have been incoming funds that do not fall under the categories exempt by law, it is better to mention them in the individual income tax return in April and pay all the due taxes. In any case, this will be cheaper than paying fines if the supervisory authorities discover undeclared income.
Why has the situation with banks become so complicated in recent months? It may be assumed that the problems are linked to Bulgaria’s planned accession to Schengen. This step requires the precise implementation of all European Union Directives, including those that previously received insufficient attention. It is possible that after accession to Schengen the situation will normalise and the environment will become calmer.
At the same time, it is unclear how long this process may drag on. In addition, there is no telling whether bank policy will change further, since the control of financial structures is becoming ever stricter and banks try to avoid risks wherever possible. For this reason, it is better not to postpone obtaining a long-term residence permit, especially since this procedure takes time and is also gradually becoming more complicated.
It is worth noting that the status of lawful residence in the country not only makes dealing with banks easier, but also brings other advantages. In addition, you can establish tax residence in Bulgaria, obtain a tax residence certificate and pay taxes only here. Bulgarian Expert will help you prepare all the necessary documents and provide the required legal support in obtaining any residence status in Bulgaria, provided there are lawful grounds for it.
Company registration in Bulgaria
Declaration of beneficial owners
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