On 15 September 2015, the Bulgarian Council of Ministers submitted to the Bulgarian Parliament a proposal to implement the US Fair and Accurate Credit Transactions Act (FATCA) through changes in the Bulgarian Social Security Code. The proposed changes will effectively lead to the creation of an automated system for transfer of information between the Bulgarian and the US internal revenue agencies. The information to be shared relates to bank accounts held in Bulgarian financial institutions by US citizens and foreign entities controlled by taxable persons in the US.
In effect, the new provisions create the imperative obligation on financial institutions (including local banks) to collect and deliver certain information to the Bulgarian tax authorities. The information that must be disclosed includes (i) identifying features of the principal of the bank account, including its name, address, tax number and account number; (ii) available funds in the account; and (iii) information about the financial institution itself. In addition to the mandatory information sharing, the envisioned changes also impose detailed obligations with respect to the procedures financial institutions should take to determine whether the FATCA applies to an account and is subject to notification to the Bulgarian tax authorities.
This development results from an agreement on improving the safeguards of tax legislation signed between the US and Bulgaria on 5 December 2014. The draft proposal was in a preparation stage for a long time, and once it is approved it will facilitate cooperation between the US and Bulgarian government under FATCA.
In view of the forthcoming enactment, Bulgarian financial institutions should familiarize themselves with the future changes and impending obligations and begin preparing internal systems and policies in order to comply with the new provisions. It is expected that the proposal will be adopted promptly.