Peer Review of the Automatic Exchange of Financial Account Information 2024 Update

Bulgaria

Overall findings

Bulgaria’s legal framework implementing the AEOI Standard is in place but needs improvement in order to be fully consistent with the requirements of the AEOI Terms of Reference. While Bulgaria’s international legal framework to exchange the information with all of Bulgaria’s Interested Appropriate Partners (CR2) is consistent with the requirements, its domestic legislative framework requiring Reporting Financial Institutions to conduct the due diligence and reporting procedures (CR1) has a deficiency significant to the proper functioning of elements of the AEOI Standard. More specifically, a deficiency has been identified in relation to Bulgaria’s enforcement framework.

The methodology used for the peer reviews and that therefore underpins this report is outlined in Chapter 2.

Overall determination on the legal framework: In Place But Needs Improvement

Conclusions on the legal framework

General context

Bulgaria commenced exchanges under the AEOI Standard in 2017.

In order to provide for Reporting Financial Institutions to collect and report the information to be exchanged, Bulgaria:

• enacted Art. 142a to Art. 142y of the Tax and Social Security Procedure Code (TSSPC), §1a of the Additional Provisions of the TSSPC;

• enacted Order ZCU-1576/18.12.2015 of the Executive Director of the National Revenue Agency as amended by Order № ZCU-720/22.05.2018 of the Executive Director of the National Revenue Agency;

• introduced § 55 - § 66 of the Transitional and Concluding Provisions; and

• made reference to §2 of the Supplementary Provisions of the Measures Against Money Laundering Act implementing the FATF Recommendations for the purposes of the identification of Controlling Persons under the AEOI Standard.

Under this framework Reporting Financial Institutions were required to commence the due diligence procedures in relation to New Accounts from 1 January 2016. With respect to Preexisting Accounts, Reporting Financial Institutions were required to complete the due diligence procedures on High Value Individual Accounts by 31 December 2016 and on Lower Value Individual Accounts and Entity Accounts by 31 December 2017.

Following the initial Global Forum peer review, Bulgaria amended its legislative framework to address an issue identified, effective from 22 May 2018.

With respect to the exchange of information under the AEOI Standard, Bulgaria:

• is a Party to the Convention on Mutual Administrative Assistance in Tax Matters and activated the associated CRS Multilateral Competent Authority Agreement in time for exchanges in 2017;

• has in place European Directive 2011/16/EU on Administrative Cooperation in the Field of Taxation as amended by Directive 2014/107/EU; and

• has in place European Union agreements with five European third countries.1

Detailed findings

The detailed findings for Bulgaria are below, organised per Core Requirement (CR) and sub-requirement (SR), as extracted from the AEOI Terms of Reference (see Annex B).

CR1 Domestic legal framework: Jurisdictions should have a domestic legislative framework in place that requires all Reporting Financial Institutions to conduct the due diligence and reporting procedures in the CRS, and that provides for the effective implementation of the CRS as set out therein.

Determination: In Place But Needs Improvement

Bulgaria’s domestic legislative framework is in place and contains all of the key aspects of the CRS and its Commentary requiring Reporting Financial Institutions to conduct the due diligence and reporting procedures but it needs improvement in relation to the framework to enforce the requirements (SR 1.4). More specifically, Bulgaria’s legislative framework does not have an explicit legal basis to enforce a sanction for non-compliance if the Reporting Financial Institution is a legal arrangement.

SR 1.1 Jurisdictions should define the scope of Reporting Financial Institutions consistently with the CRS.

Bulgaria has defined the scope of Reporting Financial Institutions in its domestic legislative framework in accordance with the CRS and its Commentary.

Recommendations:

No recommendations made.

SR 1.2 Jurisdictions should define the scope of Financial Accounts and Reportable Accounts consistently with the CRS and incorporate the due diligence procedures to identify them.

Bulgaria has defined the scope of the Financial Accounts that are required to be reported in its domestic legislative framework and incorporated the due diligence procedures that must be applied to identify them in accordance with the CRS and its Commentary.

Recommendations:

No recommendations made.

SR 1.3 Jurisdictions should incorporate the reporting requirements contained in Section I of the CRS into their domestic legislative framework.

Bulgaria has incorporated the reporting requirements in its domestic legislative framework in accordance with the CRS and its Commentary.

Recommendations:

No recommendations made.

SR 1.4 Jurisdictions should have a legislative framework in place that allows for the enforcement of the requirements of the CRS in practice.

Bulgaria has a legislative framework in place to enforce the requirements in a manner that is largely consistent with the CRS and its Commentary. However, deficiencies have been identified. Most significantly, Bulgaria’s legislative framework does not include an explicit legal basis to enforce a sanction where a Reporting Financial Institution is a legal arrangement. This deficiency relates to a key element of the AEOI Standard and is therefore material to the proper functioning of the AEOI Standard. A deficiency has also been identified with respect to the retention period for records in relation to closed accounts, it is considered relatively minor and does not materially undermine the implementation of SR 1.4. This is because the deficiency is only with respect to closed accounts and Bulgarian Financial Institutions are still required to keep records of the steps taken and evidence relied upon in relation to such accounts for five years after the account is closed.

Recommendations:

Bulgaria should amend its domestic legislative framework to require Reporting Financial Institutions to maintain records for at least five years from the deadline to report the information, even when the account is closed.

Bulgaria should amend its domestic legislative framework to ensure that there is an explicit legal basis to enforce a sanction when there is noncompliance by a Reporting Financial Institution that is a legal arrangement.

CR2 International legal framework: Jurisdictions should have exchange relationships in effect with all Interested Appropriate Partners as committed to and that provide for the exchange of information in accordance with the Model CAA.

Determination: In Place

Bulgaria’s international legal framework to exchange the information is in place, is consistent with the Model CAA and its Commentary and provides for exchange with all of Bulgaria’s Interested Appropriate Partners (i.e. all jurisdictions that are interested in receiving information from Bulgaria and that meet the required standard in relation to confidentiality and data safeguards) (SRs 2.1 – 2.3).

SR 2.1 Jurisdictions should have exchange agreements in effect with all Interested Appropriate Partners that permit the automatic exchange of CRS information.

Bulgaria has exchange agreements that permit the automatic exchange of CRS information in effect with all its Interested Appropriate Partners.

Recommendations:

No recommendations made.

SR 2.2 Such an exchange agreement should be put in place without undue delay, following the receipt of an expression of interest from an Interested Appropriate Partner.

Bulgaria put in place its exchange agreements without undue delay.

Recommendations:

No recommendations made.

SR 2.3 Jurisdictions should ensure that the exchange agreements in effect provide for the exchange of information in accordance with the requirements of the Model CAA.

Bulgaria’s exchange agreements provide for the exchange of information in accordance with the requirements of the Model CAA.

Recommendations:

No recommendations made.

Comments by the assessed jurisdiction

Bulgaria acknowledges the recommendations made and confirms that it has already taken steps to change its legislation and address the deficiencies identified.

Note

← 1.  Andorra, Liechtenstein, Monaco, San Marino and Switzerland.