The end of the “offshore subsidiaries”. Or not quite?

If the State Agency for National Security determines that there may be a risk for money laundering or financing of terrorism, it may prevent the registration of subsidiaries and representative offices of companies that do not apply the latest EU anti money laundering standards, writes Trud.bg.

These measures were widely expected and we at Euroformat have been since long alerting our clients, that the days of the “offshore subsidiaries” are nearing their end.

To put an end to all speculations, the Council of Ministers has yesterday ratified the amendments of the “Law for the measures against the money-laundering“. These were made in order to respond to multiple requests of the EU for tightening the relevant regulations.

Who will be affected?

All Bulgarian companies, registered as subsidiaries (this is to say when an offshore company is the shareholder, not necessarily holding the majority of the shares), of “offshore” companies are falling under the scope of the new regulations.

Offshore or not (or what is meant by offshore company)

Usually, in the good old days, an “offshore company” meant only a company that is registered in jurisdiction that applies 0% income tax. These were the well known old-timers as BVI, Belize, Panama, Seychelles, etc. Today is different though. The list includes now “companies from jurisdictions that do not apply the latest EU anti money laundering standards“. Even the slightest doubt in the jurisdictions determination to apply the “latest EU standards” will immediately put it in the grey zone. Well known jurisdictions like Dubai, Hong Kong and Singapore are a prime examples.

New or old companies, who will be affected?

The short answer is BOTH. While the State Agency for National Security may directly prevent the registration of new companies, it will definitely sniff the business of the already existing ones. Even the slightest deviation of the “latest EU anti money laundering standards” will result in immediate actions, that may be devastating in some cases.

So what is the solution for you as an offshore subsidiary?

The only way forward is to adopt zero tolerance for tax evasion and ultimate legal and administrative compliance! If your Bulgarian company is registered already, then there is no reason to panic.

GDPR compliance

Your GDPR administration needs to be fully in order. If you are required to have Data Protection Officer (DPO) – hire it without any delay. Failing to do so will not only trigger huge fines by the GDPR commission, but may be also deemed a reason for further investigation by the authorities.

AML compliance

Anti money laundering regulations are the core of the complications that you might face. Talk to the Agency for National Security – explain them what you are doing so they can be assured about the legality of your business. Establish contact with an officer who is ready and is willing to listen. This is the most difficult part of your “compliance effort”, but is definitely worth trying.

Declare the ultimate beneficial owner (UBO)

Declaring the UBO is a new requirement in Bulgaria that was implemented in 2019. This is essential for you to do on time and as accurate as possible. If you have missed the deadline (many have), please contact us to see whether we can assist you.

Keep your books (accountancy) in order

Keeping your company’s accountancy in order is another must in your situation. Generic accountants do good job when it comes to standard financial transactions. The moment it gets complicated they simply block. Or worse, they don’t tell you they reach dead end and they start filing rubbish. And you, unaware of all that may fall in the trap of the penal legal system. Please, be extremely cautious.

How can we assist yo in this situation?

As part of our turnkey accountancy services, we provide legal support on fixed monthly basis. Empowering us to represent you in front of the state authorities (tax authorities, State Agency for National Security, etc.) will give you the peace of mind that all your dealing in Bulgaria are fully in order so you can continue working without the hassle of the added bureaucracy.

Most importantly, your company will be not affected by the strengthened regulations and its existence will not be hindered.

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