This article is inspired from a chat with perspective client from Germany who wanted to open Bulgarian company. We once again realized how many fraudulent “agents” there are and how easy is for them to manipulate genuine clients by making false promises, giving “guarantees”, and much, much more… Please read below and let us know what your thoughts are.
Fake Bulgarian companies, fake agents, fake promises
The reluctance of the banks in Bulgaria to open bank accounts for foreigners has many unexpected consequences
And this is because no bank account means no Bulgarian company registration possible. And no Bulgarian company – no ultra low 10% tax rate and no ease of administration in Bulgaria. So what is left for the client?
THE LEGITIMATE OPTIONS
Ultimately, all this results in two legitimate options for many clients from high-tax countries (ie Germany, France, Belgium, etc.):
- Doing international business from their home countries and paying ultra high tax rates, or;
- Going to third countries (non-EU) like Georgia, Ukraine, Moldova and putting all their assets at risk alongside with the uncertainty of the immature legal framework there.
But the farther a country from the EU is, the more difficult the administration and the higher the associated costs are. And on top of that, the unclear tax legislation is like a time bomb for everybody who wants to try his luck with a company in Moldova or Georgia (for example). Not to mention that these third countries don’t even come close to the ridiculously low 10% tax rate in Bulgaria.
THE SCAMS
It is not a secret that virtually all “agents” hire local Bulgarian lawyers to register the Bulgarian companies for their clients. Since the problems with the bank accounts started, these agents had no luck in succeeding in the opening of new companies. To prove that, we have even opened a bonus campaign for everyone who successfully opens Bulgarian company without our assistance.
Some of the agents simply backed off, informing their clients that they can be of no assistance. Others, unfortunately the majority of them, continued to collect money from their clients with false promises and futile guarantees. And so the fake Bulgarian companies started to pop up.
A chat with perspective client from Germany proves how sensitive our western European clients can be…
And how susceptible these clients are to false promises and even to fraud
The chat took place recently when a German national inquired about the possibility to open Bulgarian company to conduct consultancy business from Bulgaria.
He sounded quite confident, stating that he already owns different businesses in different EU and non-EU countries. It appeared that he has already been in contact with some Bulgarian lawyers. He didn’t spare us this information, so we were kind of encouraged to try our best to beat the offers of his other lawyers1. To our surprise, no matter his confidence, he was totally misinformed, to the point of ridiculousness.
1In Bulgaria, telling your agent, lawyer, doctor, etc. that you have inquired the same offers from others is considered gross. Of course, you are free to inquire as many offers as you like, but our advice is to keep this information for yourself. Stating that is like going out on a date and letting your date know that tomorrow you have another one scheduled. You can do this, but isn’t it better to keep that private?
So what did the German gentleman “knew” already from the other lawyers?
The Bulgarian-German GMBH
The client knew that a company has to be EOOD or OOD, which is more or less true. But he has been informed that he can also register in Bulgaria a GMBH (the Bulgarian equivalent?). So in that way, his Bulgarian company would have been easily recognized in Germany. While there are other company options in Bulgaria, such as AD, ET, limited partnerships, etc, the suitability of those is subject of another analysis. We have to state here that the client did suspect that the “Bulgarian GMBH” may be a “fake news”. But this is what “agents” tend to tell clients, for the sake of keeping them happy.
The Bulgarian seed capital bank account
We informed the client that we have to open for his future company a bank account in Bulgaria first. We told him about the difficulties in opening bank accounts for foreigners and that there is no 100% guarantee that the bank will accept him as a customer. At this moment he became very irritated and stated that he, as EU citizen, has the right to open bank accounts anywhere in the EU. He even went that far to state that he doesn’t need Bulgarian bank account. He thought he can open an account in Cyprus or Romania for example.
The irritation kept building up…
When we informed him that the registration of Bulgarian LTD requires opening bank account in Bulgaria, his irritation obviously went over the roof. He said that “this is not acceptable“, that “no country can play such stupid game” and that he will go with other companies that will “give him guarantee“.
The guarantees
No lawyer, or any legal entity, may give guarantee that the bank will open an account for a client. Such a guarantee would be illegal and voided by Bulgarian laws. It is the bank’s own decision to either work with or to decline the application of a customer. And this doesn’t interfere with any EU rights. This is the right of the “free entrepreneurship” and “right of free choice”.
We urge all perspective clients who are ever been guaranteed illegal promises to vote with their feet. And to ask themselves, how can they enforce such “guarantees” when their application is denied and reputation ruined?
The Finale
We never heard of this customer anymore. We tend to believe that sweet lies and false promises are more convincing than the truth. What do you think?