On Friday, 22 March 2019, the Bulgarian Government published a draft Bill with proposed changes relating to Bulgaria’s citizenship by investment (CBI) programme.
The draft may change significantly before it is final, or may be rejected, leaving the law as is. We comment on the proposals as they are.
The legislative process in the Bulgarian Parliament takes from a few weeks to several months, and as above, some bills are ultimately rejected. Our view is that the Government proposals will be very likely to make their way in the final draft of the law, but at least some additional options will be added in later. We expect that the scope of eligible investments that will ultimately be in place may be wider than the initial draft.
Fast track citizenship by investment to stay
If the current proposals pass, citizenship by investment will be preserved (the Government had at one point announced that citizenship by investment would no longer be possible). There will continue to be Standard and Fast Tracks, too. What will change are the investments which will be permitted.
Eligible Fast Track investments
The investments proposed to be eligible for the Fast Track from now on will make Bulgarian CBI similar to the US EB-5 visa programme.
The minimum investment will be approximately €1 million of which half may be in government bonds, equities and other currently eligible instruments and the other half - in the priority certified investment projects. A further alternative of narrower application will be available for smaller projects, where up to 8 investors per project will qualify.
What projects have been previously certified?
Since 2004, more than 130 projects have been certified by the Bulgarian Government, of which 7 are priority certified projects.
We are endeavouring to identify and to be in a position to inform potential clients of a range of current and upcoming projects. We will not be directly able to advise you on your investment decisions ourselves, but will hope to be able to inform you of and refer to all known projects and help you carry out due diligence.
If you have already submitted your citizenship application or submit before any amended law comes into effect, you should be dealt with on the basis on which you originally started. The Government has confirmed you will not be affected.
If you have permanent residence status, but are not near your citizenship application yet and the law changes before you arrive at that point, you will likely wish to consider the new opportunities.
Progress of legislation
We will gladly advise you on this further and will comment on important developments as they become known to us. Please do not hesitate to contact us via
email@example.com or on +359 2 950 6239
On 22.01.2019 and 23.01.2019, the Government of Bulgaria (GoB) announced intended amendments to Bulgaria’s citizenship law. These will, if passed in Parliament, abolish investment citizenship and align Bulgaria with the 17 EU member-states which the European Commission in its simultaneous report (Report) classifies as offering solely investment residence. GoB intends to introduce a draft Bill to Parliament as soon as the end of this month. It is as yet unclear when it is intended for the change to take effect.
Commissioner Jourová, sponsor of the Report, has welcome the policy turnaround.
GoB has expressly stated that this policy change is the result of an internal review carried out over 11 months by a working group convened for this reason (Working Group) and denied that it was forced by the Report. The policy change is explained as part of a drive for administrative simplification in home affairs and it is said that investment has been more anaemic than expected.
There has unfortunately been no transparency on the activities of the Working Group, its composition; evidence it has heard or used; and whether it has conducted any form of external consultation.
Bulgaria has to date allowed investment citizenship through investments in government bonds, listed shares, private companies and intellectual property since 2013.
More generally, reported problems in the area of grant of citizenship in Bulgaria have exclusively concerned completely different processes: mainly citizenship on the basis of origin through which more than 100,000 have become Bulgarian citizens.
As Bulgarian legal service providers specialising in private client matters, New Balkans Law Office wish to clarify the following.
According to GoB data, about 45% of investors are Russian or Russian-speaking citizens of the former USSR.
In our experience and understanding, these people are not wealthy oligarchs, most are entrepreneurs. Investing in government bonds is a way to save money while planning for the future and for their children and avoiding the difficulties of travel on a low-prestige passport.
The Bulgarian passport has only recently become desirable and given that Bulgaria boasts relatively fewer natural resources, it seems to us that given that security requirements are maintained, a viable CBI scheme can only help increase Bulgaria’s attractiveness.
Equally, if Bulgaria is perceived to respond to general Report recommendations by urgently renouncing its national policy, there is a risk of loss of prestige including among its European partners.
At the same time, it seems to us right for Bulgaria to optimise and adjust its CBI law as its economic circumstances change. If the move by the GoB helps open an informed discussion of what form of investments are best and how they are best utilised, this would be welcome.
If you have any enquiries about the topic, please write to us at CBI@newbalkanslawoffice.com or via our Contact Us page.
Bulgaria’s citizenship by investment programme was introduced in its current form in late 2013. In domestic terms, the key innovation was to permit permanent residence leading to citizenship based on an investment of BGN 1,000,000 (approx €512,000) and expedited processing of 2 years where an investment of BGN 2,000,000 (approx €1.02m) was made.
While highly competitive compared to other EU citizenship routes, Bulgarian citizenship by investment has not been promoted by the Government of Bulgaria.
This slowed take-up but there is now evidence of organic and likely sustained demand growth and of an adequate administrative capacity to process applications.
As of September 2018, the cumulated total of applications for citizenship by investment in Bulgaria stood at 193. 95 of these were Standard Track and 98 – Fast Track.
Since the Standard Track requires applicants to hold a residence permit for at least 5 years, most standard applications are only beginning to be eligible.
An average of 18 applications were submitted via Fast Track annually between 2013-2017. In 2018 the annual application rate doubled to 35 on an annualised basis.
Applicants from the Middle East and the ex-USSR make 77% of the Fast Track applications, with most applicants being from Russia. This may be connected to the close cultural connection between the two countries and Bulgaria’s familiarity to Russians.
Around 64% of all Fast Track applications made have been approved by the Ministry of Justice so far. The majority of the remaining Fast Track applications were filed in 2018 and cannot be expected to have reached approval.
The final checkpoint in the process, the Vice Presidential decree, has been passed by 50% of the applications approved by the Ministry of Justice. In another positive sign about improved administrative capacity and procedural familiarity, the data shows that so far in 2018, the Vice President’s office has granted as many citizenships as in the previous 4 years combined.
This information tends to demonstrate that the Bulgarian citizenship by investment is highly competitive compared to other EU countries.
Comparing to Malta, EU citizenship can be obtained within roughly the same timeframe, but with a significantly lower cost. This also applies to Cyprus, where the typical outlay is on an investment in real estate. While the Bulgarian route is not as rapid as the Cypriot one, avoiding the volatility of real estate and the bias accompanying the selection of qualifying real estate by investing in government bonds is highly attractive.
Our team has already successfully assisted a large number of ultra high-net worth, high net worth and affluent applicants, and our clients have so far had a 100% success rate.
If you would like more information, please feel free to contact us at firstname.lastname@example.org.
The starting point in Bulgarian civil proceedings is that in claims with an identifiable monetary value, the court fees for the issue of a claim are calculated as a percentage of the value of the claim, namely 4 %. Certain categories of claim (which we list below) are excluded from the operation of the rule, but it applies in the majority of cases.
To take an example, a contractual claim for €100,000 brought to a Bulgarian court would attract a court fee of €4,000 (payable in the Bulgarian currency), while a tort claim for $10,000,000 would involve a fee of $400,000, once again payable in Bulgarian lev.
The court fee is a single fee and is payable entirely by the claimant(s).
Such a court fee is payable at the commencement of a claim or within a short period (typically 7 days from the date of a court order requiring a non-paying claimant to conform with the requirement), on penalty of a stay of the claim and a resumption of accrual of limitation.
Of course, the approach has a potential effect of putting at a disadvantage claimants who cannot afford fees which are high in absolute terms, and may be unfair to claimants in situations where the chances of success are difficult to gauge before the proceedings are fully developed.
Once a claim fee is paid, Bulgarian civil proceedings do not generally involve the payment of further court fees. E.g. there are no fees specific to the conduct of hearings or to the passing of certain stages in such proceedings. However, appeals involve the payment of further court fees, typically set at half of the court fee due for the origination of a claim and in addition, all parties should be prepared for the possibilities of being required to pay experts’ fees (via a payment into court) or to deposit further sums into court on the order of the court (e.g., as a potential compensatory fund for the addressee of a freezing order).
As a response to the potential issues of access to justice and management of litigation risk we outline above, Bulgarian proceedings commonly feature the making of a claim for a part of the total potential value in dispute, termed partial claims.
To adapt the first of our examples above, the claimant may choose to bring in the first place only a claim for €25,000 out of the total potential claim value of €100,000. This reduces the court fee fourfold to €1,000 expressed in Bulgarian levs.
The claimant remains able to expand the claimed amount either within the same proceedings or to bring a separate claim for the previously unclaimed part subject to the constraints and otherwise as we describe below.
Certain claims deemed to have no monetary value and are therefore not relevant to a discussion of partial claims, or are otherwise expressly excluded from the partial claim rule.
The following categories of claim are examples:
- Claims for state and municipal liability under the State and Municipal Liability Act;
- Collective claims;
Applications for the division of title.
A claimant may bring any part of its potential claim at any stage, subject to the time limits and considerations we describe below.
While the choice of level of claim is always very specific to the facts of a case, our general recommendation to clients considering partial claims is to bring claims initially at or slightly above the value threshold required for the claim to be justiciable to the District Courts (okruzhen or gradski sud), rather than the lower-level Local Courts (rayonen sud).
Currently, the threshold for allocation to the District Court as a first instance court is BGN 25,000 (approximately €12,500), implying a court fee of approximately €500.
A procedural advantage of starting a claim in the District Court is that if the claimant wished to increase the amount of their claim, there would be no need for transfer between courts after increasing the claim amount, which saves time and expense.
Partial claims allow claimants to test the prospects of success in complex cases. During the disclosure stage of the proceedings the claimant will be able to evaluate the strength of the defendant’s case, their evidence and the attitude of the court towards allowing expert witnesses.
A further possible advantage is the minimisation of possible instances of appeal by the defendant.
Depending on the amount of the partial claim (if below BGN 5,000 in civil cases and BGN 10,000 in what are technically termed commercial cases), there may be only a single instance of appeal. A partial claim of below these thresholds would tend to thus save time and costs in comparison to the three-stage proceedings involved with a claim for the full possible amount or at any rate one brought above the threshold.
Additionally, after an effective judgment, the claimant may wish to proceed to enforcement. Successful enforcement of a part of the claim might help the applicant fund the pursuit of the balance of the claim.
The partial claim device is not without its downsides. Two of these are the need to consider limitation and the way in which a partial claim may interact with the availability of freezing orders.
To prevent limitation from accruing to any part of a claim, it needs to be commenced. Bringing a partial claim has this effect in respect of the part of the total value of the potential claim that is brought, but does nothing in respect of the part which is not.
Reduced or no availability of freezing orders and other forms of defendant asset protection
Bulgarian courts are generally more likely than those in other jurisdictions (e.g., England) to grant freezing orders either before proceedings are issued or after issue. Freezing a defendant’s assets is a very effective and powerful means of securing a claim and one that claimants generally find appealing.
By bringing a partial claim only, a claimant reduces his or her chances of obtaining a freezing order over an asset (e.g., land) of a higher value, since the disproportionality between the claim size and the asset value widens.
At the same time, until an asset is charged, an unscrupulous defendant remains free to dispose of it.
Losing a partial claim is a bar to a separate claim on the balance
Once a partial claim has been decided and an effective judgment is entered against the claimant, the reminder cannot be pursued.
It is generally possible for a claimant to raise the claim size and pay any shortfall in the adjusted fee, calculated as 4% of the new claim value.
This may be done until the first open hearing in the proceedings and in rare cases, later on.
Once a set of proceedings is past the end of the first hearing in the case, bringing the remainder of the claim can be done only by way of a separate claim.
The litigation team at New Balkans Law Office is available to respond to your questions. Please feel free to contact us at any time.
We wish to provide all interested investors with the relevant information so that they can rest assured that choosing Bulgaria’s Citizenship by Investment Program will be the best option.
The following is a recopilation of our clients’ frequently asked questions.
For more information, please contact us at email@example.com or by our Contact Form.
For more information, please contact us at firstname.lastname@example.org or by our Contact Form.
As Bulgarian agricultural land has been appreciating to approximate Europe-wide land values, and as Bulgaria is discovered as an investment destination more generally, and thus the demand for and implied price of land currently set aside or zoned as agricultural increase, international investors are increasingly interested in receiving advice on the restrictions that may apply to holding Bulgarian land, and specifically those applicable to non-EU investors acquiring currently agricultural land.
In this note, we begin by looking at the applicable law, before raising the issue of the practical implications of such restrictions for purchasers or those who acquire such assets as part of a transaction.
We suggest that the restrictions, properly interpreted, are in fact narrower than is commonly assumed. However, in practice (and this applies particularly to an acquirer), notaries have considerable freedom to express preference to as what they feel an acquisition structure should look like to be compliant. A risk-averse approach therefore makes it preferable to discuss with a notary in the area where land you intend to hold is situated, and we hope our note will be helpful to inform such discussions.
THE BULGARIAN OWNERSHIP AND USE OF AGRICULTURAL LAND ACT
The Bulgarian Ownership and Use of Agricultural Land Act 1992 (the Act), substantively amended most recently in 2014, restricts the acquisition and holding of property rights in ‘agricultural land’, a phrase which is defined in the Act, by certain categories of entities and persons. Specifically the Act restricts ownership of agricultural land by non-EU and non-EEA individuals and companies.
Lesser rights in real estate are not within the Act’s scope.
The Act defines agricultural land as land which is not ‘purposed’ for agricultural use (it is unclear whether certain land may be deemed agricultural based purely on its administrative status for the purposes of the Land Zoning Act, or an objective measure like whether or not the land being capable of certain use or yet further, the use to which the land's owner puts it). In addition, such land must not be (among others):
Subsection 3(4) of the Act expressly permits such agricultural land to be held by foreign nationals and companies pursuant to international treaties to which Bulgaria and the relevant foreign state are parties.
Subsections (5) and (6) of s 3, which was introduced in 2007, at the time of Bulgaria's accession to the EU, contain express reservations for EEA (including herein EU, unless specified otherwise) nationals (subs 4) and companies (subs 5): these are expressly allowed to acquire property interests in agricultural land.
In 2014, section 3 was amended further, introducing a number of express restrictions on who can acquire and hold agricultural land. The following were prohibited:
It follows from the wording of s 3 of the Act that where agricultural land is held by a company which is itself held by another company (whether registered in Bulgaria or another EEA member state), such land can be lawfully held by this structure as long as its shareholders are either:
While subsections 4 to 6 of s 3 appear to be a list of what is permitted, they should not be interpreted as a closed or exhaustive list: s 3 as a whole is a mixture of permissive and restrictive provisions.
A further amendment to the Act in 2014 introduced section 3C (3в in the Cyrillic alphabetical order). Subsection 1 of this sets out a further permissive provision: individuals who have resided in Bulgaria for 5 years or more are permitted to acquire agricultural land, as are legal persons established (in Bulgaria) for a period of 5 years or more.
While at first sight s 3C(1) could be taken as introducing a further filter, an additional requirement, that this is not the correct interpretation becomes clear given that the provision does not distinguish between Bulgarian nationals and foreign nationals.
If s 3C(1) were intended to be read as a restriction, it would have prohibited Bulgarian individuals who have not been resident in Bulgaria for 5 years or more from acquiring land as much as it would prohibit foreign nationals (including the EEA foreign nationals who are otherwise permitted). Such a restriction would appear to be a violation of Bulgarian nationals’ constitutional right to property by imposing an unwarranted requirement of residence as a pre-condition to holding certain types of property and a violation of Bulgaria’s EU obligations by introducing a discriminatory provision and/or a provision impeding freedom of movement of labour, capital and of establishment (which are otherwise protected) which will generally be impermissible, except on very clear grounds and with a very express intent.
On the other hand, read as a provision that enables some otherwise restricted non-nationals to acquire agricultural land after a qualifying residence period, the provision makes good sense.
Therefore, excluding any assistance that non-nationals may derive under international treaties, the following are restricted from holding Bulgarian agricultural land under OUALA 1992:
For further information, please contact us. We will explore your individual case in detail and provide you with tailored legal advice.
With over 15 years of history, Bulgaria is established in support services relating to online gambling, including software development at various levels of the value chain; technical and customer support and back office functions.
A range of mainly British, Gibraltarian and Israeli players run substantial Bulgarian operations (e.g., Ladbrokes, Playtech, Bwin.party, William Hill, SB Tech).
A strong outsourcing industry more generally provides the backdrop to online gambling support.
Bulgarian developers and support agents are generally seen as capable of high-quality output and possessing excellent intercultural skills. The timezone (UTC +2), places Bulgaria close in its working day to several large global markets.
Bulgaria generally ranks in the top tier for Internet speed and accessibility. The average connection speed in Bulgaria is 15,815 kbps, with average peak connection speeds of 59,048 kbps according to data from Akamai’s State of the Internet report. 4 Mbps broadband penetration reaches 96.8% and 15 Mbps broadband penetration at 40.2%. The advantageous Internet infrastructure makes it ideal to base servers or staff that remotely support the online gambling operators.
On the risks side, due to the smaller labour market, it might be harder to scale beyond a certain size particularly over a short period of time.
The Bulgarian Gambling Act (most recently updated in 2014) allows the licensing of online gaming operators.
Substantial policy efforts have been invested in modernising legislation. The government has focused on adopting best practices and sought to lower the barriers to licences and create a balanced regulatory environment in a favourable tax regime.
For example, exchange betting specialist Betfair was granted two online gambling licenses by Bulgaria‘s State Gambling Commission (SGC) in 2014. Betfair is authorized to offer sports betting (including exchange wagering) as well as wagers on horse and dog racing. Betfair was also separately licensed for online casinos and poker.
Operators are charged a one-off licensing fee of approximately US$ 56,000 plus 20% on the difference between the value of the bets received and the winnings paid out, except that games which involve the collection (by the operator) of a commission or a fee for participation are instead charged a fee of 20% on the value of such commissions or fees collected.
An online gaming licensee may be a corporation established elsewhere in the EU (e.g., Malta). Once licensed, it may operate anywhere in the world subject to local laws and
In conclusion, Bulgaria may be an appropriate destination for online gambling operators.
Bulgaria’s gambling taxation regime together with the balanced regulations currently in place, makes the country attractive for local licensing and gambling operations based upon a low corporate tax and comparatively highly-qualified and low-priced technical specialists.
The International Comparative Legal Guides (ICLG) series by Global Legal Group provides “current and practical comparative legal information on a range of practice areas.”
This guide covers 49 jurisdictions and reviews different issues in litigation and dispute resolution laws including “ preliminaries, before commencing proceedings, commencing proceedings, defending a claim, joinder & consolidation and duties & powers of the court.”
This article appeared in the 2016 edition of The International Comparative Legal Guide to: Litigation & Dispute Resolution published by Global Legal Group Ltd, London."
The International Comparative Legal Guides (ICLG) series by Global Legal Group provides “current and practical comparative legal
information on a range of practice areas.”
The series covers 33 jurisdictions for real estate, and reviews different topics in real estate law, including ownership, real estate rights, system of registration, the registry or registries in a given jurisdiction, the real estate markets of such jurisdictions and the liabilities of buyers and sellers in real estate transactions.
This article appeared in the 2016 edition of The International Comparative Legal Guide to Real Estate, published by Global Legal Group Ltd, London.
Further improvements to the transparency of the procedure involved in applying under the Bulgarian citizenship by investment programme.
The Bulgarian Ministry of Justice has published on its website lists of supporting documents, which in its view are expected from applicants for citizenship by investment under both the standard and fast tracks to citizenship by investing.
Each category of document in the list is broadly related to a requirement in the Bulgarian Citizenship Act(BCA) and the Decree-Law on the application of Chapter Five of the BCA: e.g., the requirement to provide a criminal record check is fleshed out by the need to demonstrate that the applicant has clear criminal past and is not a threat to public order and national security.
The MoJ advises that each supporting document should be listed in the application form, duly legalised and translated.
These official lists contribute to the transparency of the programme and the smooth completion of the process.
A win in an insurance exclusion clause dispute at the Supreme Court
NBLO's dispute resolution team, led by Yordan Neshkov, secured a success against a large Bulgarian insurer in a claim brought on behalf of a UK national, who had lost her property in a fire. The insurer had refused to pay out under the insurance, on the grounds that a widely drawn clause in its general terms allegedly excused it from paying whenever there was a breach of building regulations, even if (as was accepted in this case) this breach was invisible externally, could not be discovered through reasonable investigation and was not caused by the insured. NBLO had good reasons to argue that this position was unsupported in the Bulgarian Insurance Code or civil law generally and persuaded the Supreme Cassation Court to back it. This is covered more fully in an article on our website.
© New Balkans Law Office 2019