Cyprus: The Cypriot CIP falls the first victim of the tightened regulations introduced by the EU authorities. Read more.
"There was another life that I might have had, but I am having this one." - Kazuo Ishiguro
Under an enormous pressure from the European Commission, all European Union citizenship (and residency) by investment programs were (and will still be) tightened in the course of 2019. The respective national EU governments and/or parliaments were forced to take legislative measures in order to ensure not only ultimate AML zero tolerance policy, but to also prevent the so called "Sale of citizenship" whereby the citizenship applicant obtains an EU passport solely by monetary contribution, without the establishment of any sustainable bond with the respective EU country.
The programs of Malta and Cyprus were most harshly criticized, which has resulted in the Malta’s program rejection rate to increase even further, making it virtually impossible to qualify for, although it comes with extremely high price tag (about 1 million Euro on non-refundable fees). Additionally, the government of Cyprus introduced increased investment threshold of 2,5 million Euro, a non-refundable contribution of 150 thousand Euro, as well as other restrictive measures. The Bulgarian Citizenship by Investment Program currently remains the only feasible EU fast-track CIP, although its conditions have also tightened and are probably going to be tightened even more later in the year.
So what has changed for the applicants for Bulgarian Citizenship by Investment in 2019?
Bulgarian Citizenship by Investment 2019 – your ultimate guide to what has changed
In this, regularly updated guide, we will keep you informed about the amendments in the Bulgarian Citizenship by Investment program as of the start of 2019. The information will mainly cover the following:
- The legal foundation of the Bulgarian Citizenship by Investment program;
- The eligible investments, namely concerning the mix of investments, which is no longer allowed;
- Dual (or multiple) citizenship;
- The new requirements about the certificates of no criminal record (lack of criminal convictions);
- List of restricted nationalities who can (not) apply for Bulgarian Citizenship by Investment as from 2019;
- Shortened time to obtain Bulgarian Citizenship by Investment;
- Stricter policy on the infamous "financed option";
- Increase of the rate of successful applications;
- More information about the proof of funds and the zero tolerance AML policy.
As you can see, although the conditions of the program are being tightened, there are also some very important advantages for the applicants, such as the shortened time of the process, the increased success rate, etc. Below we will explain in more detail each of the amendments.
The legal foundation of the Bulgarian Citizenship by Investment program
Unlike many (mostly Caribbean) programs, the Bulgarian route to obtaining fast-track citizenship by investment is not a stand-alone document, rather than a solid legislative act. The Bulgarian program is stipulated in the articles of two important Bulgarian laws, namely the Law for Foreigners in the Republic of Bulgaria and the Law for the Bulgarian Citizenship.
Art. 25 (1) of the Law for Foreigners in the Republic of Bulgaria states that a Permit for permanent residence may be obtained by a foreigner who:
has invested over BGN 1 000 000 or increased its investment by this amount by acquisition of:
(b)1 bonds and treasury bills, as well as derivative instruments issued by the State or the municipalities, with a residual term to maturity of not less than 6 months.
1 there are also other investment options beside the most frequently utilized bond purchase. For more information, please read the Bulgarian Citizenship by Investment Program section.
Art 14a of the Law for the Bulgarian Citizenship states that a Person who is not a Bulgarian citizen and meets the conditions of Art. 12, para. 1, items 1 and 3 i.e. over 18 years of age and has no criminal record, may acquire Bulgarian citizenship by investment if:
1) not later than one year ago has been granted a permanent residence in Bulgaria on the grounds of Art. 25, para. 1, item 6 or 7 of the Law for Foreigners in the Republic of Bulgaria and:
(a) has increased its investment under the same terms of the law to a value of not less than BGN 2 million.
The eligible investments, namely concerning the mix of investments, which is no longer allowed
Up and until 2019, the Bulgarian authorities didn’t object if the citizenship candidate used different investment categories (ie bonds and shares) in order to fulfill the legal requirements and to reach the total investment threshold (1 or 2 million Bulgarian Lev). Many of our clients, after purchasing sovereign bonds in the first stage, were opting to invest in Bulgarian stocks in order to spice up their returns. The legislative texts are a bit vague as to whether this is acceptable, however common sense indicated that this should be allowed (and so it was). Starting from 2019, it appeared that such mixture of financial instruments, albeit all of them allowed for the participation in the fast-track citizenship program can not be utilized anymore. If you have already invested in Bulgarian bonds and have obtained your permanent residency, the second investment tier has to be again in the same category, namely bonds. Likewise, in case your initial investment is in shares or other instruments, the second investment needs to be from the same financial category.
Dual (or multiple) citizenship
Because of recent amendments in some Bulgarian legal acts, most importantly the Bulgarian tax codes, all citizenship applicants are legally obliged to declare if they have multiple citizenships upon opening of a bank account in Bulgaria. In many cases, the bank will not accept a mere verbal declaration that the applicant doesn’t posses citizenship if its current passport differs from his place of birth or origin (ie name). An applicant with a Russian name and birth place with a passport of Dominica for example will be certainly asked to explain the status of his assumed Russian citizenship. We remind our clients that declaring false circumstances may lead to criminal prosecution and is certainly not a thing to even consider doing during the citizenship application process.
The new requirements about the certificates of no criminal record (lack of criminal convictions)
After a series of controversies at the end of 2018 about Bulgarian citizenship candidates who appeared to be either investigated or even sentenced for criminal convictions and have still managed to submit their Bulgarian citizenship applications, the Bulgarian authorities made the necessary adjustments in order to put a hold on this possibility. As from 2019, it is now required from all citizenship applicants to provide a certificate of no criminal record that is issued by their home country as well as by their country of current residence. This will have an effect for example to an applicant who is convicted of serious crime in his home country, but is currently living in another state.
List of restricted nationalities who can (not) apply for Bulgarian Citizenship by Investment as from 2019
Although Bulgaria doesn’t impose restrictions on candidates, based on their nationality, the Bulgarian banks and financial institutions will refuse to open bank accounts to nationals of some countries. If that is the case, we will provide guidance as to how to buy the investment products through either a bank in the candidate’s home country or through a bank located in an international financial jurisdiction. The purchase of the investment products from a non-Bulgarian bank is perfectly legal. It will add some additional costs for translation and legalization of the documents, but this is only a minor obstacle that should not have any detrimental effect.
Shortened time to obtain Bulgarian Citizenship by Investment
Prior to 2019, some of our clients were experiencing a delay of up-to 3-5 months for their citizenship interview to be appointed. This is now resolved by the Bulgarian authorities and the submission of the application and the interview is to take place at the same time. This is great news for the candidates for Bulgarian Citizenship by Investment as it effectively shortens the overall process by at least 3 months.
Stricter policy on the infamous "financed option"
With the legal framework still allowing financing of the investment for the CIP (ie buying bonds on margin, etc.), the banks in Bulgaria have started, gradually from 2018 onwards, to reject applications to finance monetary instruments that are being used for the Bulgarian CIP. Most banks in Bulgaria will now either reject such requests or will provide financing conditions that are so unfavorable that are de-facto a show-stopper. What is even more important is the extremely negative stance of the authorities towards any attempts to finance the investment. With money in Bulgaria now in large supply, the government officials deem any financing of the required investment to be an attempt to circumvent the law (although, strictly speaking, it is not). The law is believed to be too beneficial for the citizenship candidates (and in fact it is, especially compared to Malta and Cyprus) and we expect further restrictions to be imposed towards the financed option later this year.
Increase of the rate of successful applications
The success rate of the applications for Bulgarian citizenship by investment has increased dramatically in 2018. This is mainly due to the fact that the authorities are doing their utmost to prevent unscrupulous agents to act on the applicants’ behalf, something that was so widespread in pre 2017-2018 times. Currently, there are only a few players on the market who have succeeded into maintaining high standards of service and who can provide legally compliant service. The new President’s office is also actively improving its administrative facilities in order to enable faster applications’ approvals and better service. Recent data shows that the vice-President’s office has approved as many citizenship applications in 2018 as during the previous 4 years combined. This is of course mainly because of the highly increased interest of the international community for the Bulgarian citizenship, but also because of far better administrative support by the new President’s office. We on our part are proud to state that none of our pre-approved clients has had his citizenship or permanent residency application being rejected.
More information about the proof of funds and the zero tolerance Anti Money Laundering (AML) policy
While there are still no specific requirements as to what should be provided as a proof of funds, nor is residential address required in order to open a bank account in Bulgaria, the AML regulations have became much stricter in 2019. We are actively advising our clients as to the particularities of the Bulgarian legislation in this respect and how to ensure ultimate legal compliance.