FATCA agreement between Bulgaria & USA

Bulgaria/December 2014

An Agreement between the Government of the Republic of Bulgaria and the United States of America was signed earlier in December. From the Bulgarian side it was signed by Vladislav Goranov, Bulgarian minister of Finance and fro the US side by H.E. Marcie Ries, the US Ambassador. With this agreement, Bulgaria shall become a part of the worldwide  exchange of information in compliance with the the Foreign Account Tax Compliance Act (FATCA).

FATCA was voted and passed by the US Congress in 2010 and it is a tool for the Internal Revenue Service (IRS) to control and prevent cross border tax evasion from citizens of the US through off-shore accounts and with financial assets abroad.

It is recommended that Bulgarian taxable persons analyze their FATCA status to verify if they belong or not to the category of the so-called intergovernmental agreements (IGA). The IGAs, or IGA in general form the framework between the relevant country’s government and the USA about the implementation of the rules that will be set up. The intergovernmental agreements are of two types – according to the first type, institutions report directly to the IRS on their clients, while the second type – the institutions report to their governments, and then, the respective governments hand over that information to the IRS. If the result of the analysis shows that a certain institution belongs to the category of a reporting Bulgarian financial institution, then the entity should undertake the following measures: register with the IRS system before 1 January 2015, review its clients list in order to identify financial accounts of US persons and entities that are controlled by US persons, submit annual reports according to the instructions in the relevant IGA.

It is more than evident that the signed agreement between the governments of Bulgaria and USA will certainly have a positive role with the valuable contribution to enhancing the international banking business and, of course, tax transparency, as well as to prevent and effectively fight tax evasion.

Rossitza Koleva
Eurofast Global, Sofia Office
Tel.: +359 2 988 69 78