Bulgaria moves to align local legislation on tax haven companies and financial markets with EU. By Kristina Spasova, Relationship Manager, GSS Bulgaria
Economic and financial relations with companies registered in preferential tax treatment jurisdictions, the persons controlled by them and their beneficial owners
The latest amendments to the Economic and Financial Relations with Companies Registered in Preferential Tax Treatment Jurisdictions, the Persons Controlled Thereby and Their Beneficial Owners Act aim to align the provisions of the law with EU regulations. The main changes include as follows:
- The general prohibition for tax haven companies and the persons controlled by them directly and/or indirectly to participate in a procedure for licensing of certain types of companies, including but not limited to credit and financial institutions, insurance and pension insurance companies, payment system operators and asset management companies of collective investment schemes, has been modified to not apply to minority holdings under the qualifying thresholds of 10% or as defined in the respective laws that regulate the activities of the entities that fall within the scope of the prohibition.
- The scope of the exceptions to the prohibitions has been widened to also include tax haven companies resident for tax purposes:
- in a country which is a party to the Agreement on Public Procurement of the World Trade Organization
- in a country with which the European Union has concluded a bilateral agreement guaranteeing access to the market for public procurement in the European Union
- in an overseas country or territory in accordance with Council Decision 2013/755/EU of 25 November 2013 on the association of overseas countries and territories to the European Union
- in a country, or is part of a business group whose parent company is a resident for tax purposes in a country with which Republic of Bulgaria has concluded international trade and/or economic agreement, including commitments under the General Agreement on Trade in Services of the World Trade Organization
The amendments entered into force on 1 July 2016. Tax haven companies have a period of six months to align their activities with the amended provision of the law.
Public offering of securities
Effective 7 June 2016, the Public Offering of Securities Act has been amended to further align the local legislation with EU regulations. The main changes include (but are not limited) to the following:
- Improved provisions for disclosure of information by public companies including:
- requirements to publish 6-month reports instead of 3-month reports and make them available to the public for a period of at least 10 years instead of at least 5 years
- requirements to publish annual reports in a unified electronic form approved by ESMA
- requirements for the annual report on the activity of the company to include also a declaration by the issuer on good corporate governance
- requirements to announce on 3-month basis information on the company's financial status in a form approved by the Financial Supervision Commission (FSC)
- Improved provisions related to the calculation of the disclosure thresholds of 5% and multiples of 5% in the share capital of a public company to include all financial instruments that provide unconditional rights to acquire shares or rights of discretionary choice with regards the rights to acquire voting shares. The disclosed information shall contain details about the types of instruments that are included in the calculation of the respective reported threshold.
- The administrative sanctions and monetary penalty provisions for incompliance with the significant shareholding disclosure obligations by investors are supplemented and provide for the right of FSC, among other measures, to impose monetary fines from BGN 3,000 to BGN 30,000 on private individuals and from BGN 5,000 to BGN 50,000 or more on legal entities, to impose temporary prohibition of voting rights or to issue corrective guidelines. FSC may also disclose to the public the imposed sanctions unless this would have a significantly negative effect on the stability of financial markets or would cause disproportionate damage to the sanctioned person or entity.
Markets in financial instruments
Effective 7 June 2016, the Markets in Financial Instruments Act has been amended to provide that no enforcement and establishment of collateral on the cash and the financial instruments of clients shall be allowed to secure investment firms' obligations.
Collective investment schemes and other undertakings for collective investments
Similarly, the Activities of Collective Investment Schemes and Other Undertakings for Collective Investments Act has been amended, with effect from 7 June 2016, to state that the cash and the financial instruments of collective investment schemes may not be used to secure the obligations of management companies or of depositories.
Kristina Spasova
Relationship Manager
GSS Bulgaria
kristina.spasova@unicreditgroup.bg