Bulgarian citizenship by investment – 2019 fast track bonds option


Bulgarian citizenship by investment – 2019 fast track bonds option

Bulgarian citizenship by investment has never been easier to obtain following 2017 latest amendments to the Foreigners in the Republic of Bulgaria Act and to the Bulgarian Citizenship Act, adopted by the National Assembly. These amendments allow non-EU citizens to practically buy Bulgarian citizenship by investing certain own or loaned amounts in the economy of the country. Current legislation offers various Bulgarian citizenship ‘for sale’ options depending on the size and type of the made investment.

The easiest and most secure fast track Bulgarian citizenship option is buying government bonds. Purchase of government bonds of nominal value BGN 1 000 000 (EUR 511 292) grants directly Bulgarian residence permit to the investor. Investing another EUR 511 292 during the second year from obtaining the residence permit grants citizenship. Thus a non-EU citizen can get an EU permanent ID card for less than 6 months and an EU passport for approximately two and a half years.

At a first glance, the amount of the investment seems huge (over EUR 1M within two years) but this straightforward option has great advantages compared to any other options offered by Bulgaria and other EU member states.

Firstly, the money is tied up for a period of  4-5 years but not actually spent. The purchase of Bulgarian government bonds is one of the lowest risk investments. By buying bonds the investor actually lends money to the state for a certain period of time for which the investor receives an interest in the form of a coupon paid up to him at regular intervals before the maturity of the issue. Presently (2017) interest rates are very low, gravitating around zero, but they are still positive and a better solution considering the fact that since 2016 most European banks offer negative interest rates on deposits and securities. At maturity, the investor gets the principal. If bought at the right time and then sold at the right time bonds can even generate income to the investor. The advantage is that bonds can be sold any time before their maturity date on the bond market. The interbank bond market is open and banks list their quotations every day so anyone willing to sell or buy can do that freely. The bond market is very conservative as a whole and the flotation of interest rates are small.

A further advantage of this fast track Bulgarian citizenship option is that the applicant is involved with bureaucracy procedures at a minimum. Almost everything can be settled from a distance via a power of attorney given to a Bulgarian immigration lawyer. Of course, if the applicant prefers to sign the bank documentation personally, no problem, banks are very flexible and friendly to large investors and formalities can be arranged within a day or two. So with the assistance of a local lawyer everything can definitely be arranged in advance so that a short visit to Bulgaria will be quite enough for the investor to sign all papers. If the investor prefers not to make this first visit, the whole process from making the investment to obtaining Bulgarian citizenship requires no more than two trips to Bulgaria and a couple of visits to any Bulgarian embassy in the world depending on the applicant’s current residency. The fact that the procedure is consuming a little time and effort on behalf of the applicant makes it a preferred option by well-to-do businessmen who don’t have time to spend in sluggish administrative procedures.

Applicants are required to have an address in Bulgaria though, but this requirement is common for all countries which offer EU citizenship for sale. Bulgaria’s advantage is that rental prices of real properties are very low as compared to other European countries. Anyone can rent a  one-bedroom apartment for approximately 150 -200 Еuros per month which definitely costs less than a night stay in a decent hotel in Europe. Last but not least, foreigners who apply for Bulgarian citizenship by investment are not required to learn the Bulgarian language or to stay physically in Bulgaria either during the period of their application or afterward.

As you can see according to the latest amendments in Bulgarian immigration laws any foreign citizen may now obtain Bulgarian (hence EU) citizenship in 2 years against an investment amounting to a little more than € 1M. This looks even better knowing that the investment is in Bulgarian government bonds as this is a very low-risk investment. The straightforward investment program is quite simple to understand – you buy Bulgarian government bonds worth 2M Bulgarian Levs (a little more than 1M Euros) and after 2 years you become a Bulgarian citizen.

The program described above is simple and 100 % perfectly legal and secure but obviously there are only a few who can afford it. No doubt this is an expensive option but this was exactly the idea of Bulgarian authorities when they launched the program. The fast track Bulgarian citizenship option is deliberately intended for wealthy investors, people from high societies from non-European countries who wish to have second citizenship in the European Union for themselves or their families. This option is for people who can prove the origin of their funds and who have more than € 1 million in bank accounts or other assets.

Recently there have been a lot of inquiries from potential investors from all parts of the world looking for an alternative to the option described above. Probably in response to this big demand different Bulgarian investment consultants started to offer the so-called ‘financed investment’ option for Bulgarian citizenship.

These offers are under the same program described above but especially intended to those who cannot afford to invest such a big amount of money or to those who do have the money but cannot prove the origin of funds or just prefer not to invest their own money. There are many leverage offers circulating on the internet for such financed investment options but unfortunately none of the offers in circulation describes the legal and financial mechanism.

Financed investment options offered on the Bulgarian citizenship market can be divided into two.

The first one can be classified as a reasonable leverage of the investment. In this option you need to have a little more than half a million Euros available. The leverage mechanism is the following: you buy Bulgarian government bonds worth BGN 1 million and immediately after the purchase you can take a loan from the bank that sold the bonds to you by placing the bonds as a security for the loan. Bonds are connected to low risk and banks can grant a loan at very low interest – around 1 %. Banks can give as a loan up to 90 % (in some cases even 95 %) of the market value of the bonds. This is the so-called repo deal. Thus the investor will have the bonds and match the Bulgarian citizenship criteria and at the same time will have the money free to work with it and to invest it in real business and generate income from the same money. Many people would think, well, if such an option is legal and working – why should they use the straightforward option instead of this financed investment option. The answer is – yes, this option is legal and it is working but unfortunately most banks do not offer it to clients – physical persons. Repo deals must be rolled once a month or once every three months as their maturity is short, they involve paperwork, monitoring of the bond market, etc. That is why, if you decide to use this option, you will need an investment intermediary or in other words a financial broker to stay in the middle between you and the bank. Actually the bank will lend the loan to the broker and the broker will lend to you and manage your investment.

Different brokers offer different terms and conditions for commissions, interest rate, etc. but in the common case roughly estimate, the fees you will pay for the repo deals and for the management of the portfolio will be approximately EUR 10 000 per year. To summarize, repo deals can be used as a form of reasonable leverage of the investment so as not to lock your money in Bulgarian government bonds for five years. If you have an alternative to invest the same money in a business that will give you let’s say 20 % profit per year, for five years you will earn another half million, therefore we call this option reasonable if the related expenses are lesser than the potential profit you can generate.

However, there are leverage offers circulating on the internet which cannot be classified as reasonable, although they are also theoretically possible. A lot of companies offer loans for the purchase of Bulgarian government bonds but this type of financing is much riskier than the one described above because in the above-described case the client purchases the bonds with his own money. The non-refundable part in this case is considerably higher.

Our legal and financial consultants advise all potential applicants to study all possible leverage mechanisms before indulging in the investment. There is always more than one option for Bulgarian citizenship by investment.

This article was curated from Business Immigration Bulgaria


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