Brief analysis of future amendments to the Bulgarian Citizenship Act

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With the forthcoming amendment to the Bulgarian Citizenship Act, the possibility of acquiring citizenship status in exchange for investment will be abolished. The proposal has been made by the Council of Ministers (“Council of Ministers”) by Decision No. 12 of 14 January 2022 and the above-mentioned innovations are aimed at bringing the regulation in this area in line with the European Commission’s report of 23 January 2019.

Currently, there are three countries in the EU that apply the regime of acquiring citizenship on preferential terms in exchange for investment – Bulgaria, Cyprus and Malta. On this occasion, the European Commission issued the above-mentioned report on 23 January 2019 to the European Parliament, the Council of Europe, the European Economic and Social Committee and the Committee of the Regions. It raises concerns about the citizenship and residence regimes in exchange for investment and, more specifically, that they threaten EU security, create conditions for money laundering, corruption, and tax law violations. The institute of citizenship is significant for the EU because of its well-known duality – a person who is a citizen of a Member State is also a citizen of the EU. His or her status as a citizen of an EU country gives him or her a number of rights and privileges, such as the right to move freely within the Union. In this line of thought, although the issue may appear to be a national one, it is actually relevant to the security of all Member States.

It is also important to note that, according to the concept adopted by Article 20 of the Treaty on the Functioning of the European Union  (“TFEU”) and Article 2, paragraph 2, letter  “a” of the European Convention on Nationality, the institute is regulated as the legal relationship of the natural person with the state and not economic or financial conditionality.

The current Bulgarian legislation allows investors and their family members to benefit from the provisions of the Bulgarian Citizenship Act and to acquire citizenship in exchange for investment, under simplified procedures and often without requiring effective prior residence on the territory of the country. This is possible in the hypothesis of Article 40, paragraph 1, item 5 of the Law on Foreigners in the Republic of Bulgaria. The said provision lays down the rule that the right of residence is revoked for foreigners who have not established themselves within 1 year of the issuance of the permanent residence permit on the territory of the country. The same provision also contains an exception for the people who have made the investment required by the legislation in order to obtain permanent resident status.

In practice, since the adoption of Article 12a and Article 14a of the Bulgarian Citizenship Act, which enabled the acquisition of Bulgarian citizenship through investments regulated in Article 25, para. 1, items 6 and 7 of the Law on Foreigners in the Republic of Bulgaria, violations of various nature have been found. For example, at the time of submission of the application for acquisition of Bulgarian citizenship, it has appeared that the investment is not available, as it was a subject of a disposition transaction before the completion of the administrative proceedings.  In addition, the verification by the State authorities of the investments made, which serve as the basis for acquiring citizenship, is difficult and at times completely impossible due to banking and tax secrecy. In the motives to the draft amendment to the Bulgarian Citizenship Act, approved by the Council of Ministers by Decision No. 12 of 14 January 2022, it is highlighted that there is a need to repeal Articles 12a and 14a of the Bulgarian Citizenship Act, as they have not led to real investments in the Bulgarian economy. According to the above-mentioned opinion of the Council of Ministers, the current legal situation does not bring with it any serious benefits for the country’s economy, as no jobs are created.

Prior to the introduction of this Bill, the Council of Ministers attempted in 2019 to induce a change in the regime for the acquisition of citizenship in exchange for investment by removing the possibility of granting citizenship to people who have obtained a permanent residence permit on the basis of Article 25, para. 1, items 6 and 7 of the Law on Foreigners in the Republic of Bulgaria. This attempt proved unsuccessful, as the 44th National Assembly adopted a different approach – it retained the meaning of Article 12a and Article 14a of the Bulgarian Citizenship Act, but increased the possibility of control over investors.

As a result, a new letter was sent from the European Commission in June 2021, reiterating that when a Member State exercises its competence to grant citizenship, it is obliged to ensure that it does so without undermining the essence, value and integrity of this fundamental status as set out in Article 20 TFEU. In order to resolve the above-mentioned problems, the present Council of Ministers adopts and submits to the National Assembly the new draft Law on the Amendment of the Bulgarian Citizenship Act.

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