Crypto License in Bulgaria 2023 — Gofaizen & Sherle
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Crypto License in Bulgaria

Bulgaria is becoming an increasingly popular jurisdiction for obtaining a crypto license due to its favorable tax regime

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There is no need to obtain a crypto license in Bulgaria for transactions related to cryptocurrency. In addition, there is no cryptocurrency regulation in Bulgaria, because cryptocurrency is not considered a financial instrument or virtual money and does not fall under the supervision of the financial regulator.

Bulgaria has no special crypto license for crypto activities, as cryptocurrencies (bitcoins, altcoins) are perceived, verified, and declared as financial assets.

The regulation of cryptocurrency in Bulgaria at the moment does not fall under any of the provisions of the legislation. Based on this, it is possible to establish a cryptocurrency company without violating Bulgarian laws, while crypto activities are not subject to direct sanctions.

As of 2018, the cryptocurrency regulatory policy has not changed significantly but has been indirectly regulated by the "Anti-Money Laundering (AML) Act". Companies must exercise diligence, develop and implement verification rules and regulate transactions exceeding 15,000 euros.

Request more information about the Bulgaria Crypto License

To start operating, an entrepreneur only needs to register a company or, in some cases, obtain an ordinary financial license from the FSC. This applies to businesses that make transactions not only with crypto-assets but also with fiat currency. However, legal activities do not require a special Cryptocurrency license in Bulgaria, as in other jurisdictions.

Bulgaria has long been out of sight for the introduction of the cryptocurrency business but meets all investors' expectations of an ideal jurisdiction to start or scale existing projects. Advantages: stable development of foreign trade, economic security, the Bulgarian currency pegged to the euro, and access to the EU market. In addition, there is no currency control in the country, and company registration and opening a bank account can be done remotely.

Bulgarian taxation remains loyal to the business. Only company profits are taxed, the rate is 10% of annual income. In addition, the state has signed a bilateral treaty on the avoidance of double taxation with more than 60 countries.

Thus, Bulgaria is one of the most attractive jurisdictions for the introduction of the cryptocurrency business, which is not subject to strict cryptocurrency regulation in Bulgaria, unlike other countries.

Packages of services for obtaining crypto license in Bulgaria

  • Popular package

    Full

    6900 EUR

    Initial set up

    • Full turnkey company formation
    • Registering company as VASP within the regulator
    • Address of registration
    • Individual AML/KYC Policy
    • Assistance in Handling communication with the regulator
    • Full set of corporate documents apostilled and translated into English language
    • Assistance with opening of corporate account for crypto operating activity
    • Search, Integration, direct employment agreement for Anti-Money Laundering Officer
  • Advanced

    4500 EUR

    Initial set up

    • Full turnkey company formation
    • Registering company as VASP within the regulator
    • Address of registration
    • Individual AML/KYC Policy
    • Basic set of corporate documents
    • Assistance in Handling communication with the regulator
  • Basic

    2500 EUR

    Initial set up

    • Full turnkey company formation
    • Registering company as VASP within the regulator
    • Standard AML/KYC Policy
Fintech lawyers in Bulgaria
Mark Gofaizen

Mark Gofaizen

Senior Partner, Consultant

Maksim Gasanbekov

Maksim Gasanbekov

Junior Partner, Consultant

BULGARIAN CRYPTO LICENSE REQUIREMENTS

  • The company must have internal policies for Anti-Money Laundering (AML) and Know Your Customer (KYC), along with policies for internal control
  • The cryptocurrency company must designate a worker responsible for ensuring that the company complies with AML and CTF obligations
  • The requirement of identifying customers and keeping track of the business relationship specified
  • The requirement to comply with international sanctions regimes
  • Commitment to retaining customers' data
  • The requirement to inform any suspicious transactions and specific operations
  • The company's shareholders and senior directors must have a credible business reputation and a clear criminal record
  • A requirement of adopting a risk-based approach during licensed activities and considering risks determined through the national risk assessment
  • Additional obligations that arise from applicable laws

Procedure for Obtaining a Crypto License in Bulgaria

Stage 1

COLLECTING DOCUMENTS FROM THE CLIENT TO INITIATE THE PROCESS

Result: Acquiring basic details from the client; delivering an initial set of documents to proceed with a power of attorney (PoA); defining the project's scope and budgets

  • Preparatory analysis of the project
  • Gathering KYC papers and business depiction
  • Preparation of power of attorney for notarization and legalization
  • Verifying the chosen business name
  • Collecting criminal record certificates of shareholders and directors
  • Receiving documents at our office in Prague

Stage 2

INCORPORATION OF A LIMITED LIABILITY COMPANY (LLC/S.R.O.)

Result: The company has been registered under the chosen name and is now eligible to obtain a crypto license from the Bulgarian Trade Licensing Register

  • Sworn translation of power of attorney and certificate of criminal records into Bulgarian
  • Conducting the notarial deed for company registration
  • Entering company data into the commercial register

Stage 3

THE LICENSING PROCESS

Result: The company has acquired a license for crypto-related activities and is now ready to commence operations

  • Collecting extra information about the client's business (to identify risk appetites, customer geography, and the nature of the business, among others) and developing AML/KYC policies for the client company's cryptocurrency operations
  • Submitting the license application to Bulgarian authorities and communicating during the license issuance process
  • Recruiting and training AML administrators for the company and adapting their skills to its operations. Providing instructions to the officers on regulatory reporting and registration
  • Preparing the AML Officers' registration form and applying

Stage 4

OPENING OF CORPORATE ACCOUNTS AND ACCOUNTING

Result: The company is completely functioning with an open corporate account and meets the requirements of both the tax authorities (with an integrated accountant) and the supervisory authority as a virtual asset service provider

  • Analyzing the most relevant Banks/EMIs and comparing their risk appetite with the Client based on previously prepared AML policies
  • Gathering necessary papers from the Client to initiate the process, such as flow of funds, source of wealth, the purpose of account opening, key partners, company website, and utility bill
  • Initiating the onboarding procedure simultaneously with 2-3 crypto-friendly EMIs
  • Assisting the client's company throughout the entire process of opening an account
  • Developing accounting rules for the client's crypto company
  • Incorporating an accountant and providing initial consultation on how to conduct activities within the framework of crypto accounting

Types of crypto licenses in Bulgaria

Crypto license in Bulgaria

Currently, cryptocurrency companies can operate without a separate crypto license. The FSC (Financial Supervision Commission) does not license or regulate operations with virtual currency due to the lack of a legal framework

Financial license from the FSC

If your activity involves operations not only with virtual currency but also with fiat money or financial instruments, it is necessary to obtain a classic financial license from the FSC

Other Crypto Licences

Crypto License in Lithuania
Crypto License in Poland
Crypto License in Estonia
Crypto License in Czech
Crypto License in Slovakia
Crypto License in Canada
Crypto License in UAE
Crypto License in Portugal
Crypto License in Georgia
Crypto License in Kazakhstan
VARA Regulation
MiCA Regulation
Other legal support to crypto projects: ICO/STO/NFT etc

Cryptocurrency regulation in Bulgaria

Bulgaria has no official legal definitions of cryptocurrencies. The country is guided by the European Union policy in its legal approach.

However, unlike other jurisdictions, regulators do not require a crypto license because virtual currencies do not fall under the definition of financial instruments. Moreover, there is currently no law regulating crypto assets.

In 2018, the National Bank of Bulgaria warned of the risk of buying virtual currencies, noting that it was caused by increased volatility and also had signs of a price bubble. According to their statement, cryptocurrency is an unregulated product, not suitable as an investment, savings, or pension plan.

Despite this statement, the government has not appointed financial regulators and has refused to consider crypto-assets as electronic money or financial instruments. On this basis, Bulgaria's cryptocurrency regulation does not apply to cryptocurrency transactions.

However, contrary to the comments of the Bulgarian Central Bank that crypto-assets do not have the status of financial instruments, from the tax side - income from transactions related to cryptocurrency will be treated as income from sales of financial assets. This statement is in the conclusion of the National Revenue Agency. It states that income from the sale/exchange of cryptocurrencies must be declared in the tax return for the current year and paid the appropriate tax.

As of 2018, the policy of regulating cryptocurrencies has not changed significantly but has been indirectly regulated by a regulation of the "Anti-Money Laundering (AML) Act."

Virtual currencies are not issued or guaranteed by the central bank and have no legal financial status, but can be accepted by individuals or legal entities as means of exchange and sale and stored electronically.

Should we expect more regulation in the future?

The regulation of virtual currencies around the world is expanding every year. Many countries adopt special legislation and define a regulator and legal acts regarding cryptocurrency activities. Bulgaria is one of the few countries that has not yet introduced monitoring and cryptocurrency regulation laws in Bulgaria.

However, the FSC published a strategy for cyber business development, which notes 4 key provisions:

  • to increase the security of currency trading, it is necessary to introduce cyber business management
  • licensing of exchanges and companies dealing with virtual currencies
  • creating a special center for innovative testing
  • establishment of an oversight mechanism and a regulatory framework

For now, this is at the level of development, but shortly, the government may activate the regulation of virtual currencies and pass a law on obtaining a cryptocurrency license in Bulgaria.

AML/KYC requirements in Bulgaria

In 2020, the Council of Ministers of Bulgaria adopted a regulation containing a provision for the formation of a special register of companies that provide cryptocurrency services. Its main purpose is to separately designate the need to comply with AML regulations.

Later, the Ministry of Finance issued an Order establishing the procedure and conditions for the companies to be included in the public register, which is under the regulation of the National Revenue Agency (NRA). The creation of the registry limits the possibility of sponsorship of terrorism or money laundering.

Sections 10 and 4 of the Anti-Money Laundering Act apply to the activities of a cryptocurrency company.

Under Section 4 of the AML Act, companies must apply customer due diligence measures when:

  1. establishing a business relationship, including the opening of an account, if the business relationship is established by opening an account;
  2. the execution of a single transaction or the conclusion of a single transaction for an amount equivalent to or over the equivalent of 15,000 euros;
  3. A single transaction or conclusion of a single transaction for an amount equivalent to or exceeding the left-hand equivalent of 5,000 euros or an equivalent amount in another currency, if paid in cash;
  4. in case of any suspicious activities or transactions.

When violations or suspicious transactions are detected, the company is required to:

  1. apply clear internal policies and procedures, including defining activities, internal rules for accountability, control and allocation of functions within the organization, checking key employees for negative public information, full control of bank accounts and financial instruments used, and control of affiliates or associated nonprofit legal entities;
  2. apply customer control procedures, documenting in writing to government authorities when a violation is detected;
  3. Identify donors and beneficiaries by collecting as much information as possible to make a positive, unambiguous identification;
  4. check donors and beneficiaries and partner non profit organizations for negative public information.

Section 10 of the Anti-Money Laundering Act sets forth provisions for customer due diligence and possible penalties.

Taxation of cryptocurrency companies in Bulgaria

According to the NRA Law of 2018, cryptocurrency activities can be classified as a service that falls under the payment of VAT, in case the transaction is directly related to payment and is provided by a person subject to cryptocurrency tax in Bulgaria.

In taxation, all types of tokens are defined as financial assets because the NRA (National Revenue Agency) does not distinguish between types of tokens. From a tax collection perspective, crypto-assets would be treated the same as a gain on the sale of a financial asset. Government agencies in a tax situation do not maintain a distinction between cryptocurrency and financial transactions, which means both categories are subject to tax and should be included in the annual return.

Taxation of individuals. The Income Tax Law states that gains from the exchange/sale of assets are taxable. However, only profits are taxed, and losses and replacement assets are not taxed. The tax rate is 10% of the income received within one calendar year.

Taxation of legal entities. Each legal entity is liable to pay corporate tax at the rate of 10% of the realized income. When income is distributed to owners or partners, they must pay tax on dividends. The rate is 5% of profits after annual tax.

If the company has employees, wages under the employment contract must be paid only in fiat money.

If employees are paid by a foreign company, the company must register as an insured person in Bulgaria and pay all taxes and social security contributions.

FAQ about crypto license in Bulgaria

Is crypto activity legal in Bulgaria?

The regulation of cryptocurrency in Bulgaria at the moment does not fall under any of the provisions of the legislative acts of the state. Therefore, cryptocurrency activity is not prohibited by law and can be regarded as a legitimate business.

Do you need a license for cryptocurrency trading in Bulgaria?

Bulgaria is one of the few countries that have not yet introduced monitoring and cryptocurrency regulation laws in Bulgaria. At the moment, no cryptocurrency license is required in Bulgaria to provide virtual currency services. FSC (Financial Supervision Commission) does not issue licenses for operations with virtual currency and does not regulate it due to the lack of a legal framework.

Who can conduct crypto activities in Bulgaria?

Crypto activities can be carried out by a natural person or a legal entity, paying income tax. At the same time, any person who meets all the requirements of the Bulgarian legislation and complies with the AML Laws can establish a cryptocurrency company in Bulgaria.

Do I have to pay tax on cryptocurrency in Bulgaria?

In terms of tax collection, crypto assets in Bulgaria are considered equal to profits from the sale of financial assets. Cryptocurrency tax in Bulgaria must be paid by all persons receiving income from crypto active transactions. The tax rate is 10% of the income, which was received during one calendar year.

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