Finding a treasure

In the recent news, Bulgaria came up as the country holding the second largest amount of Bitcoins in the world. The surprising statistics relate to the fact that the Bulgarian government owns at least 213.000 Bitcoins. At the current rates, the value of those Bitcoins is over 804 million US dollars. If accessed and converted, the Bulgarian Bitcoin wallet would be good to cover a large portion of country’s GDP. The Bulgarian government came into possession of the significant treasure after Bulgarian law enforcement authorities seized the Bitcoins during an operation related to identifying cyber-crimes committed by an international group of hackers. The largest amount of Bitcoins on the globe belongs to the person who created Bitcoin, hiding behind the name Satoshi Nakamoto. It remains unclear what is the destiny of the Bitcoins owned by Bulgaria. The Bulgarian government may decide to auction the Bitcoins (as it is often done in the US) or use them for any other purpose.

Crypto businesses in Bulgaria

Bulgaria is an active participant in the FinTech sector entailing trade in crypto currencies. In addition to a number of firms operating in the field of crypto currency exchange, international crypto conferences take place in Bulgaria and the country holds two two-way crypto currency ATM machines in the capital Sofia, which allow selling and purchasing virtual currencies, including Bitcoin, Ether, and Litecoin. The users wishing to buy Bitcoin can simply deposit cash in euro, US dollars and Bulgarian levs.

Bulgaria is an attractive destination for online businesses as it offers not only affordable well-educated workforce (Bulgarian developers are well-known as providing excellent services for reasonable fees) but also an extremely competitive taxation environment – the country levies the lowest corporate and personal income tax in the EU (10%).

What about the regulatory framework?

At present, there is no comprehensive regulatory framework governing country’s growing FinTech sector and transactions using crypto currencies, such as buying, selling, and paying with Bitcoins, are not subject to licensing requirements. However, in the near future, we can expect a set of laws and regulations from the Bulgarian government that will facilitate the registration of companies operating in the crypto sector.

To address the regulatory gap, the Bulgarian Financial Supervision Commission has recently published a strategy for boosting crypto businesses in the country. The strategy is based on 4 key pillars, namely, (1) managing cyber security risks, which aims to ensure a safe cyber space for trading crypto currencies, (2) creating licensing procedures allowing to establish and supervise companies that offer financially innovative products and services, including crypto currency exchanges, (3) establishing innovation hubs and testing environments, and (4) establishing a comprehensive regulatory framework and supervisory mechanisms.

How are crypto currencies taxed in Bulgaria?

In Bulgaria, the trade using crypto currencies is treated in the same way as other financial assets in terms of taxation. Thus, any profits realised from Bitcoin transactions will be subject to a 10% tax, the lowest corporate tax rate in the EU. As clarified by the Bulgarian National Revenue Agency, taxable events subject to taxation include conversions of crypto currencies to fiat currencies (e.g., Bitcoin to EUR) and crypto currencies to crypto currencies, which should be reported to the financial authorities annually.