Bulgaria: restrictions on the activities of companies registered in tax havens

From 1 January 2014, access to public funding and to financial management activities is restricted for companies that are registered in preferential tax jurisdictions (“PTJ”), and to any persons registered in such jurisdictions who are their beneficial owners or otherwise related to the companies.

The list of jurisdictions with preferential tax regimes is in the Corporate Income Tax Act.

The restrictions prohibit these companies from directly or indirectly:

- being licensed (or holding shares in a company with a licence) to carry out banking, financial, insurance or payment services, or to perform independent financial audits or evaluations, or to act as a collective investment vehicle, investment intermediary in financial markets or a pension fund;

- being licensed (or holding shares in a company with a licence) to be a professional sports club, or a TV, radio, publishing or mobile operator, or to carry out renewable energy activities;

- being licensed under the Excise Duties and Tax Warehouses Act, the Energy Act or the Gambling Act;

- obtaining a permit to trade in dual-use goods or explore natural resources or a concession for the supply or discharge of water, waste collection or cleaning;

- participating in privatisations, public-private partnerships, public procurement procedures or priority investment projects (as per the Act on the Investment Promotions);

- acquiring municipal or state property.

These restrictions do not apply (as long as the relevant circumstances are duly entered in the Commercial Register) in case that:

- the shares of the company in which directly or indirectly participates a company registered in PTJ are traded on a regulated stock exchange in the EU or the EEA;

- the parent company of the company registered in PTJ is tax resident in a country which has signed a DTT or an agreement for exchange of information with Bulgaria;

- the company registered in PTJ has a parent company or a subsidiary that is tax resident in Bulgaria and either its beneficial owners are disclosed, or its shares are traded on a regulated stock exchange in the EU or the EEA;

- the company - publisher of periodicals whose shareholder, directly or indirectly, is a company registered in PTJ, has disclosed its beneficial owners.

The penalties for non-compliance range from BGN 50,000 to BGN 1,000,000.

Law: Act on the Economic and Financial Relations with Companies Registered in Jurisdictions with Preferential Tax Regime, Persons Related to Them and Their Beneficial Owners (State Gazette No. 1 dated 3 January 2014).