Monthly Highlights

  Right to land acquisition in Bulgaria by aliens – a prerequisite for our country’s EU membership

The rules valid for the European Union, should be valid for Bulgaria too
          Interview with Velislav Velichkov

Legal treatment of the option for acquisition of title over immovable property by foreigners in the european union members states

CHAPTER 4 FREE MOVEMENT OF CAPITAL




CHAPTER 4 FREE MOVEMENT OF CAPITAL

LEVEL OF NEGOTIATIONS

The negotiations on Chapter 4 Free Movement of Capital began in November 2000 and were provisionally closed in July 2001 after reaching all agreements.

Bulgaria has undertaken the commitment by the date of membership to eliminate all restrictions before the free movement of capital with the exception of the agreed transition periods, to bring its legislation in the field of payment systems and money laundering in line with the acquis communautaire and to ensure the necessary administrative capacity for its implementation.

In the course of negotiations two transition periods have been agreed in respect of land acquisition by foreigners:
- seven years as from the date of accession for acquisition of ownership on agricultural land and forests in the country;
- five years as from the date of accession for acquisition of land for second residence.

Self-leased farmers that wish to reside in the country are excluded from the transition period scope.

Bulgaria has undertaken the commitment by the date of accession to change Art. 22 of the Constitution, to eliminate the general prohibition for purchase of land by foreigners and by the date of membership to give the opportunity:
- to EU farmers to buy land in Bulgaria for the purpose of their activities;
- to EU companies and citizens, willing to reside in the country, to buy land in Bulgaria for the purpose of their business activities or their profession’s needs.

HARMONIZATION PROCESS

The Chapter covers three basic areas:
- free movement of capital;
- payment and settlement systems;
- measures against money laundering.

Free movement of capital includes: direct investment, acquisition of ownership over realties, transactions with securities, transactions with current and deposit accounts in financial institutions, physical import and export of financial assets, financial loans and credits, etc.

According to European legislation any restrictions to movement of capital and payments between states are prohibited.

European legislation in the field of payment systems and securities settlement systems aims to unify the technical standards and to establish uniform rules both for internal and for cross-border transfers and payments which will facilitate and encourage free movement of capital.

The movement of capital full liberalization creates conditions for using the financial system for laundering of money, obtained through criminal actions. This requires common coordinated measures and actions to be undertaken to prevent the use of financial systems for money laundering, without in any way affecting free movement of capital or the freedom to provide services, which underlie the internal market liberalization.

Bulgaria has achieved considerable harmonization of its legislation with the acquis communautaire in this field.

In the area of capital flows liberalization two laws were adopted in 2000:
- Foreign Exchange Act;
- Public Offering of Securities Act.

The Foreign Exchange Act adopts the general principle that all transactions between residents and non-residents can be conducted freely, provided not otherwise stipulated in the law. Only a limited number of transactions should be registered with the Bulgarian National Bank before being conducted. The import of national and foreign currency in cash by residents and non-residents is free, while the export of amounts exceeding BGN 20,000 or their equivalent in foreign currency requires authorisation by the Bank.

The Public Offering of Securities Act, which determines all the rules to be followed by the market players, applies equally to residents and non-residents. This Act exclusively allows the offering of foreign securities on the Bulgarian capital market.

Amendments to the BNB ordinance on payments in July 2000 and November 2001 introduced up-to-date payment infrastructure.

In respect of money laundering Bulgaria is party to the Convention of 1990 and adopted Measures against Money Laundering Act in 1996, but considerable amount of work needs yet to be done in order to achieve efficiency of the system in practice.

The amendments and supplements to the Measures against Money Laundering Act, in force from January 2002, reflect the reorganization of the Bureau of Financial Intelligence into an agency.

ADMINISTRATIVE INFRASTRUCTURE

The Bulgarian National Bank and the Ministry of Finance are the bodies responsible for the implementation of the provisions of the Foreign Exchange Act.

The Bureau of Financial Intelligence, which since 1998 has been responsible for the implementation of the money laundering legislation, has been restructured into an agency, an independent administrative structure reporting to the Ministry of Finance.

Procedures are being set for cooperation between the Bureau of Financial Intelligence Agency, the General Tax Directorate, the Insurance Supervision Agency and the Gambling Supervision Agency.

The coordination and cooperation between the specialized institutions, the Bureau of Financial Intelligence Agency and the Police Service responsible for detecting corruption and heavy economic crimes, is improving.


RECOMMENDATIONS OF THE EUROPEAN COMMISSION

The following issues require additional attention:

- strengthening and improvement of the already built administrative capacity for implementation of the adopted legislation;
- final elimination of the restrictions in respect of acquisition of realties by foreigners (non-residents);
- completion of the adoption of the legislation pertaining to cross-border credit transfers, settlement and securities settlement transaction systems and the instruments for electronic payment in compliance with EU law;
- adoption of amendments and supplements to the Foreign Exchange Act to replace the verification procedure with a declaration procedure in respect of export of capital;
- establishment of a system for out-of-court redress, which to deal with the settlement of complaints between banks and their clients.





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