Bulgaria’s Parliament passed at second reading on December 20 a bill regulating the activity of offshore companies in the country, including restrictions from participating in key areas of Bulgaria’s economy, from banking to pension firms and media ownership.
The bill defines any body, whether local or foreign, controlled by a company registered in a low-tax jurisdiction as being included in the restrictions. It bans such companies from taking part in public tenders, privatisations, public-private partnerships, in competitions to acquire state or municipal property. They will also not be eligible for state aid under the investment promotion act.
These companies are also banned from owning any assets in a number of sectors: credit institutions, insurance, pension funds, health insurance, prospecting and mineral exploration, privatisations involving municipal property, excise warehousing, creating or acquiring a stake in a professional sports club, holding a gambling license, trade in dual-use goods, bidding for mobile operator license, a licence or contract for delivery or removal of water, waste collection. The media provisions bar such companies from acquiring radio and television broadcast licences under the Radio and Television Act or from establishing or acquiring a print publication.
At second reading, the list of banned activities was expanded to include ownership of polling agencies, auditing and appraising activities. Such companies are also banned from owning land in Bulgaria.
Exceptions can be made if the parent company of an offshore firm is publicly listed on a regulated stock exchange in an EU member state or if the parent company is registered in a country with which Bulgaria has a bilateral agreement to avoid double taxation. Offshore firms that have Bulgarian companies with clearly-identified people as owners are also exempt.
The law goes into effect on January 1 2014, with companies affected by the changes given a six-month transition period to bring their operations in line with the new regulations.
(Photo: Jaime Pérez)