European countries are imposing increasingly strict rules for blockchain-based projects. There are fewer and fewer jurisdictions to choose from for legal and minimally restricted cryptocurrency businesses in the EU. In such circumstances, Bulgaria can be considered as one of the last “hidden gems” – a simplified and effective legal framework in the country allows setting up a European cryptocurrency business in a comfortable environment and on favorable terms.

 

Opening a crypto company in Bulgaria is a versatile solution, which will be suitable both for an existing business as a “back-up license” and for launching a new blockchain project with customers in the EU. With the support of Lawyers Association Lawrange, the whole way from the request to the full operation of the company can be completed in a few weeks. In doing so, we offer comprehensive services, including the necessary steps such as opening a bank account and registering with the National Revenue Agency.

 

 

Features of Bulgaria as a jurisdiction for crypto business

 

In addition to the sea, the sun and other tourist advantages, Bulgaria in recent years offers attractive conditions for non-residents to do business. In particular, this applies to the Fintech sector and cryptocurrency trading. Lawyers Association Lawrange offers a “Company Registration in Bulgaria” service. And such a legal entity, after a few additional steps, will be able to legally engage in crypto commerce.

 

This crypto jurisdiction is suitable:

  1. for new projects, including cryptocurrency exchanges that wish to operate in a European country with a simple legal framework;
  2. for existing companies registered in other countries, but wishing to get a back-up business platform in the EU;
  3. for subsidiary companies to legally expand their customer base in European markets.

 

Note! Many e-commerce projects offer cryptocurrency payments to customers along with other payment methods. Moreover, cryptocurrency is an alternative payment method in some restaurants, bars, pubs, and hotels in Bulgaria.

 

The starting point of the legal regulation of cryptocurrencies in Bulgaria is considered to be 2014. On April 2, 2014, Bulgaria’s National Revenue Agency (NRA) published news on its website stating that income from cryptocurrency transactions must be declared and taxed. The Tax Service recognized such income as income from financial assets and ruled that it is taxable at the rate of 10%.

 

Legislative innovations concerning cryptocurrency business

 

As of 2022, the first and only legal definition in Bulgarian legislation concerning cryptocurrencies can be found in paragraph 24 §1 of the Supplementary Provisions of the Anti-Money Laundering Measures Act (Law for Measures Sredchu izpiraneto on Betting 2017, Bulgarian Measures Against Money Laundering Act – MAMLA).

 

“Virtual currencies are a digital representation of value that is not issued and guaranteed by a central bank or state authority, is not necessarily linked to an officially established currency and has no legal status of currency or money. However, it is accepted by individuals and entities as a medium of exchange. It can be transferred, stored and sold electronically”.

 

In 2019, Paragraph 25 was added to the MAMLA Supplemental Regulations with the definition of “custodial wallet provider“. This refers to an individual or entity that provides private cryptographic key storage services on behalf of its customers for the possession, storage, and transfer of virtual currencies. This definition was taken as a basis in the Bulgarian Ministry of Finance Regulation No. H-9 “On Conditions and Procedure for Registering Persons Providing Exchange Services for Virtual Currencies and Recognized Currencies without Security in Gold” dated August 7, 2020.

 

The introduction of these definitions was driven by the need to align Bulgarian legislation with the Fifth EU Anti-Money Laundering Directive (AMLD (EU) Directive 2015/849). In particular, this refers to the requirement for cryptocurrency exchanges to register with financial regulators, as well as the transfer of customer wallet addresses to them. The European Union is gradually tightening regulation of the cryptocurrency market, and Bulgarian national regulators are ready to follow any European norms in the field of cryptocurrency regulation.

 

Bulgaria’s Financial Supervisory Commission (FSC) issued a separate warning in 2022 regarding the volatility and unregulated nature of crypto investment funds.

 

Note! According to the deputy governor of the country’s central bank, expressed in 2022, cryptocurrencies in Bulgaria are not regulated in any aspect except for anti-money laundering (AML) purposes. And this will remain the case until pan-European legislation is adopted and comes into force. This is about adopting a new legal framework proposed by the European Commission, particularly the Regulation on the Crypto-Asset Market (MiCA Regulation). The European Union plans to introduce comprehensive regulation of cryptocurrency by 2024.

 

 

Crypto licenses in Bulgaria

 

The Bulgarian Ministry of Finance Decree No. H-9 introduces the obligation to register with the National Revenue Agency for a number of companies. The public registry is created to achieve more clarity about this particular sector and to limit the possibilities for money laundering and other illegal activities. The obligation to register applies to:

 

  1. providers that provide exchange services between digital and fiat currencies – cryptocurrency exchangers;
  2. wallet providers – providers of digital wallets for storing cryptocurrencies.

 

Important! In fact, we are talking about the authorization procedure for companies whose activities are related to cryptocurrency. However, many people consider registration in the NRA as getting a crypto license in Bulgaria.

 

When registering with the NRA, a certificate is issued, which in practice is known as a crypto certificate or crypto license. And this is the only legal document issued by a state body in Bulgaria, allowing companies to provide crypto services in accordance with the current legislation.

 

At the moment, no licenses are required to provide crypto services such as transfer, exchange (crypto-crypto, crypto-fiat and vice versa), and storage of virtual currencies. After a number of discussions, both EU authorities and Bulgarian financial supervisors have concluded that cryptocurrencies are not subject to payment and investment services legislation.

 

This is because, on the one hand, cryptocurrencies are not legal tender issued by the central bank or other competent authority and, on the other hand, they are not funds (banknotes and coins, account money and electronic money) within the meaning of payment services legislation. On the other hand, it is unlikely that cryptocurrencies can also be classified as financial instruments.

 

However, there may be exceptions to this general rule. First, when crypto-assets have an investment purpose or are associated with an expectation of return, they can qualify as financial instruments. This means that a provider of such services may need to obtain an investment intermediary license.

 

Secondly, opening and managing payment accounts (even if the payment account is used only as a platform for buying and selling cryptocurrencies), processing transactions with prepaid physical or digital payment cards, may qualify as payment services. And providing them in Bulgaria always requires a license from a payment institution or electronic money issuer. In order to make sure that one of these licenses is definitely not required, a thorough analysis of the chosen business model and the types of services provided should be carried out.

 

 

Taxation of Cryptocurrencies

 

Regardless of the fact that the Central Bank does not classify digital assets as cash in the context of taxation, profits from transactions with them is treated as income from the sale of a financial asset. The income tax rate in Bulgaria, both for individuals and corporations, is 10%. At the same time, there is also a tax on dividends at the rate of 5%. It is applied when the income is distributed to the owners of the company. As a result, the effective tax that applies to cryptocurrency-related activities is 15%.

 

According to the Value Added Tax Act 2006, crypto-asset transactions are equivalent to the provision of financial services and are therefore considered exempt from VAT, i.e. 0% VAT applies.

 

However, there is also a rule that once a legal entity reaches the threshold of BGN 50,000 (approximately EUR 25,500) in turnover over 12 consecutive accounting periods (months), it must undergo mandatory registration as a VAT payer. The Bulgarian parliament voted for a change from January 2023 to increase the turnover threshold for VAT registration to BGN 100,000 (approximately EUR 51,000) for 12 consecutive months.

 

 

Requirements for opening a crypto company in Bulgaria

 

Note! In terms of requirements for founders, directors and capital, the registration of a cryptocurrency company in Bulgaria does not differ from the establishment of any other business company. Bulgarian legislation does not contain norms prohibiting persons without Bulgarian or EU citizenship to be appointed as directors.

 

The main focus when starting a crypto company should be to implement AML measures. Paragraphs 38-39 of Article 4 of the Anti-Money Laundering Measures Act (MAMLA) include crypto-exchangers and crypto-purse providers in the list of persons who are required to perform:

  • customer due diligence;
  • collection and preparation of documents and other information;
  • custody of documents, data, and information;
  • assessing the risk of money laundering and terrorist financing;
  • disclosure of information about suspicious transactions, transactions, and customers.

 

Customer due diligence can be simplified, standard, and enhanced. In practice, in the case of crypto-businesses, simplified due diligence is not applicable. Standard due diligence must be conducted in any case where transactions in excess of €15,000 or its equivalent in another currency are conducted. MAMLA’s general provisions oblige companies to adopt internal rules for the control and prevention of money laundering and terrorist financing and to apply disclosure and reporting policies to public authorities.

 

Companies may establish specialized departments to comply with AML or conduct internal monitoring of their obligations through managers, directors or representatives. That said, aside from the obligation to register with the public registry maintained by the NRA, there are no further separate or additional anti-money laundering obligations for crypto service providers.

 

So, based on this, when starting a cryptocurrency business, care should be taken to develop internal AML policies and regulations. It is also very important to properly prepare contracts with consumers (B2C). First of all, it’s about providing consumers with upfront information about the services (before the direct provision of the services). The information must, among other things, be communicated in writing or in another suitable way for the user to understand, and be accurate, complete, clear and comprehensive.

 

In addition, crypto service providers must take measures to avoid including unfair clauses in user contracts (e.g., a clause allowing only the provider to terminate the contract without giving a reason). Any clauses are inherently invalid unless individually agreed upon.

 

Important! Internal AML policies, rules and user contracts are ready to be developed by Lawrange representatives, which will help minimize the risk of errors and inaccuracies.

 

 

Required documents for registration of crypto-business in Bulgaria

 

At first, you need a package of documents for the registration of a legal entity, including the identity documents of the founders (foreign passports), the memorandum of association, and the contract of management (with the director). After the company registration, another package of documents is required for opening a corporate account.

 

Further, in order for the company to be included in the public registry of persons who professionally provide services for exchanging virtual currencies, as well as providers of digital wallets, it is necessary to fill out an application form. It contains the following information:

  1. Name of the company.
  2. Location and office address of the legal entity.
  3. Address for correspondence.
  4. E-mail address for correspondence.
  5. Details of the person or persons representing the interests of the company.
  6. Contact persons (name, title, telephone number, e-mail address for correspondence).
  7. Unique identification code (Unique Identification Code – UIC) in the commercial register.
  8. Information on the opened payment account: account number, name of the payment service provider where the account is opened (one or several accounts can be indicated).
  9. Website or mobile application address for virtual currency exchange or digital wallet services.
  10. Description of the activity the applicant intends to perform.
  11. List of countries in which the applicant intends to offer its services.
  12. Information on whether the applicant is a cross-border company or part of a cross-border entity.

 

Important! The application is to be submitted only as an electronic document signed with a qualified electronic signature in accordance with the Electronic Documents and Electronic Authentication Services Act. Inclusion in the public register requires payment of a state duty of BGN 50 (approximately EUR 25). The payment is made according to the requisites.

 

 

Steps for obtaining a crypto license in Bulgaria

 

To register a cryptocurrency company in Bulgaria, with the support of Lawyers Association Lawrange representatives, two important steps are carried out beforehand: 1) registration of a legal entity; 2) opening an account in Bulgaria. And then the registration of the company with the National Revenue Agency, i.e. the so-called crypto license. This procedure is described in detail in the Bulgarian Ministry of Finance Decree No. H-9 dated August 7, 2020.

 

Note! As opening a new company requires a temporary bank account to deposit the authorized capital, the procedure of business registration from scratch for a foreigner may take 1,5-2 months. You can speed up the process by re-registering a ready-made company, which takes only 5 to 7 working days.

 

When registering a company with the NRA, the following points deserve attention:

  • Obligated entities must register before they can begin their activities as cryptocurrency exchanges or custodial wallet providers.
  • The entry in the public registry is made within 14 days of receiving the application or correcting errors in the documents (if any).
  • If the application for registration does not comply with the prescribed form or does not contain the necessary information, the registrar’s employee notifies the applicant thereof in writing within 7 days after acceptance of the application.
  • Within 7 days after receiving such notification, the applicant must provide the necessary information or correct the errors pointed out by the registrar’s officer.
  • All documents submitted to the NRA in connection with the entry in the public register shall be kept for five years after the deletion of the entry.
  • If the name, location or office address of the company or data on the persons representing it changes, a new entry is made in the registry and a new certificate (crypto license) is issued. The new entry is made without payment of the fee.
  • Registration certificate (crypto license) is issued in the form of an electronic document signed by a qualified electronic signature, about which the registered person is notified to the e-mail address specified by him.

 

 

Cost of a crypto license in Bulgaria

 

Costs will depend on the goals and objectives you set for us. In general, registering a crypto business in Bulgaria involves: 1) payment of state fees; 2) cost of specialists’ services; 3) notarization and legalization of documents; 4) costs of registering a new or re-registering an existing firm; 5) registration of a corporate account.

 

Send us a request to receive a personalized commercial offer for the registration of a crypto company in Bulgaria!

 

 

Conclusions

 

Bulgaria is a cryptocurrency-friendly country. There is no special legislative regulation of cryptocurrencies yet. The only requirement for an entrepreneur who wants to provide cryptocurrency services is to comply with AML rules. Accordingly, a crypto company must be included in a special register of persons.

 

Registration of a crypto company in Bulgaria involves authorization in a public registry, which is administered by the National Revenue Agency (NRA). And if the representatives of the Lawyers Association Lawrange take care of this procedure, there are no problems or delays for the entrepreneur. You will be able to start your crypto business in Bulgaria rather quickly and easily.

 

 

FAQ

 

Is it possible for a non-resident to open a crypto company in Bulgaria?

Yes, there are no citizenship requirements for founders (shareholders) or directors.

 

 

Do I need my presence to register a crypto business in Bulgaria?

In the process of company registration, the director (foreigner) will have to visit Sofia for 1 working day.

 

 

How long will it take to process documents to get a crypto license in Bulgaria?

The procedure for adding a company to the public register of the NRA (obtaining a crypto license or crypto certificate) takes 14 to 30 days. However, the company must be incorporated and set up a corporate account beforehand.

 

 

 

 

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