Or why you should NOT trust an “international lawyer/consultant” in Bulgaria

DISCLAIMER: The story, all names, characters, and incidents portrayed in this article are fictitious. No identification with actual persons (living or deceased), places, buildings, and products is intended or should be inferred.

This is a story that once again shows how easy anyone can fall in the traps of the unscrupulous crooks. This is a story that should warn you, the reader, that doing international business is always done locally.

Lawyers, no matter how good they are, can only fully comprehend what they are doing in their own country!

The same goes for the business consultants. There are no “polyglots” among lawyers, who can do their job in different jurisdictions, better than their local colleagues. And in 99% of the cases, these lawyers have absolutely no clue how things work in the other country or jurisdiction.

The Greek trap

As far as international crooks goes, in Bulgaria we mostly hear about the insurance fraudsters form the UK, the Italian motorway scammers and the Albanian pick pocketers. Today however, we will tell you a story with a Greek scent…

The Greek lawyer in Bulgaria – as incompetent as it can be

Greeks are great people. No matter how many wars there have been between them and us, Bulgarians, we will always love each other. Today however, we will tell you about a Greek scam artists in Bulgaria.

So here is what has happened in short. A foreign businessman, attracted from the low taxation in Bulgaria and the relative ease of doing business, decides to register a Bulgarian company and to route some of his business activities through it. At that time, he is in contact with a Greek “businessman”, who introduces him to a lawyer, who undertakes to assist him with his business activities in Bulgaria. The catch however is that the lawyer, same as the businessman, is Greek. And as it logically appears later, the Greek lawyer’s understanding of the Bulgarian legal ecosystem is on par with my understanding of the Constitution of Vanuatu. So far so good. And it is all good for the next 6 years. But it is then when the foreign businessman finds out that everything that has been “done” during this time has been a big fat lie.

No taxes, incomplete fillings, fake documents

This is the nightmare of every professional lawyer and accountant. A company with incomplete fillings (commercial register? who cares…), unpaid taxes and cash register for hundreds of thousands, that the owner and director of the company has no knowledge of. During all these years, the foreign businessman has been paying to the Greek lawyer and consultant hefty fees in order for his Bulgarian company to be in good standing.

But guess what, during all these years, the foreign shareholder has been paying himself dividends out of the Bulgarian company, believing that the 5% dividend tax has been paid to the National revenue agency. But as it now appears, the dividend tax paid is ZERO. Yes, 0,00 BGN. The documents that the foreign shareholder has been receiving for the tax paid have been… FAKE. Now we already see the Bulgarian lawyers and accountants, who are reading this article, fainting and losing consciousness. And there is good reason for that.

The possible consequences for the “gross fiscal negligence”

We will not analyze the “international” aspect of the situation in full. As the foreign businessman and shareholder of the company has been made to believe that he is a Greek tax resident, although later it became apparent, that he is not, the Greek-Bulgarian double-tax treaty should have been applied. But as his dividend tax has not been paid at all, what treaty, WTF? It’s all mess, all because the Greek “consultant”, together with the Greek lawyer, have been misinforming the foreigner that his taxes are paid and company is administered as per the Bulgarian regulations.

But what happens now? Unless special and urgent measures are taken, the Bulgarian authorities will impose the following:

  • 5% tax on hidden distribution of profit;
  • penalty interest on the above tax;
  • 20% penalty for undeclared hidden distribution of profit;
  • lots of administrative penalties for non-compliance (ie not publishing Financial Reports).

Worst of all, the situation may be even escalated to the Prosecutor’s office, as non-payment of tax is considered a crime in Bulgaria, if the tax exceeds 3000 BGN (1534 EUR). And if the amount exceeds 12000 BGN (6135 EUR), the crime is penalized with additional severity and the jail term is from 3 to 8 years plus confiscation. Nonsense you will say? Ask those serving times in Bulgarian jails, they know better what tax evasion can end up with.

Then there comes the infamous article 19 of the tax code that can be applied. This is due to the most recent tax inspection of the Bulgarian company.

And all that because a foreigner has believed that a Greek lawyer can handle his business in Bulgaria

We often wonder why people fall in such traps. Yes, some scam artists can be very convincing. But after all, please use common sense. The very thought of a Greek lawyer claiming to be able to be an expert in Bulgaria should be worrying enough. Don’t get us wrong, the same goes for a Bulgarian lawyer in Greece. Luckily we don’t know of such cases yet.

When in Rome, do as the Romans do!

Don’t believe that a Greek lawyer, from his or her warm office in Athens, can show you the legal path in Bulgaria. Don’t trust Greek “consultant”, telling you that he is a friend of the Bulgarian president, prime minister, the chief of the tax office and God knows who else. These may be scam artists and they should be stopped somehow. Because otherwise, you will have to pay the price for being too naïve.

… an epilogue

We will end up this sad article with the hope that these particular scam artists will be spending time in other places. Hopefully they will not be poisoning any longer the Bulgarian marketplace. We can’t stop EU lawyers from operating in Bulgaria, because it’s what the EU is all about – freedom. But we will keep on helping victims of such fraudsters find justice, minimize their losses and start a “new business life” in Bulgaria. This time in full legal compliance, safety and peace of mind!

And as finale, two beautiful songs. The first is it to remind us not to trust everyone. The second is about where the place of such crooks should be.

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