BETL hits Bulgaria
The BETL Ponzi scheme stunned many Bulgarians and foreigners, living in Bulgaria. It’s hard to estimate the number of people hit by the scam, but we are talking about tens of thousands, to say it the least. One of the main factors for the “success” of Betl in Bulgaria was probably the lack of real passive income investment opportunities in Bulgaria. The banks in Bulgaria offer virtually no interest on bank deposits, which left Bulgarians with very few choices. So what can the victims of the Betl scam do now, after they lost their savings? Today we will focus mainly on the possibility for the Betl victims to lower significantly their Bulgarian tax bill for 2024.
Trying to recuperate the money from BETL
The first and most obvious call of action for the Betl victims is to try to recuperate their losses. This involves hiring an experienced Bulgarian lawyer, contacting the prosecutor’s office, etc. You can read a very informative article (in Bulgarian) on the website of lawyer Hristo Vasilev, outlining the available options.
Lower your Bulgarian tax bill, because of your losses from BETL
You might have lost from Betl, but let’s be honest, 2024 was great year for the investors. The stock markets hit new all-time highs (ATH). Cryptocurrencies exploded after Donald Trump was elected. S&P 500 rose about 28% YTD and Bitcoin went up 155% from the start of 2024. These numbers are great for investors, but also for the Bulgarian tax authorities. It is indeed so that many regulated stock exchange investments are tax-free in Bulgaria, but some are not. And apparently, many victims of the Betl scam have also invested in legitimate, taxable assets elsewhere. And these investments now result in tax liabilities to the Bulgarian tax office. But is it possible to reduce your taxes in Bulgaria due to the losses from your “investment” in Betl?
Income and losses from financial assets?
According to the Bulgarian personal income tax law:
Taxable income from the sale or exchange of shares, units, compensatory instruments, investment notes and other financial assets, including virtual currencies, as well as from trading in foreign currencies is determined by the sum of the gains realised during the year, determined for each specific transaction, reduced by the sum of the losses realised during the year, determined for each specific transaction, reduced by 10 per cent of expenses.
art. 33, par. 3 of the Bulgarian personal income tax law
In other words, the losses from Betl, should they be considered as “other financial assets”, will be deducted from other investment profits. This may significantly lower one’s tax bill, bearing in mind the huge returns from legitimate investments in 2024. But is the “investment” in Betl a “financial asset” after all?
Income from other sources?
In all cases, the investors in Betl, who made profits at the beginning of the scam (yes, there are such), will need to pay taxes on these gains. But if the “investments” in Betl are not considered as “financial assets”, what are they? The only option left is these to be regarded as “income from other sources”, as defined in Bulgarian law:
All other sources not specifically mentioned in this Law and not subject to direct taxes under this Law or to direct taxes under the Corporate Income Tax Law.
art. 35, p. 6 of the Bulgarian personal income tax law
In contrast to income from “financial assets”, “income from other sources” doesn’t provide the opportunity to deduct losses. This implies that income from sources that fluctuate in value, such most “investments” should not be considered as “income from other sources”. However, it is yet to be seen how the losses from Betl will be defined by the Bulgarian tax authorities and sub-sequentially from the Bulgarian courts.
If you need assistance to lower the pain from your losses from Betl, please don’t hesitate to contact us.