The enactment of the Limitation of Cash Payments Act as of 25th February, 2011 enforces limitation of cash payments in the territory of Bulgaria, in the event the value of the payments is equal to or in excess of BGN 15,000 or if the value is below BGN 15,000 where the payments are part of a financial consideration under a contract the value of which is equal to or in excess of BGN 15,000. These limitations also apply in the cases of payments in foreign currencies where their equivalent in Bulgarian levs is equal to or in excess of BGN 15,000.
Outside the scope of the law are the following cases:
– cash withdrawals/deposits from/to personal payment accounts;
– cash withdrawals/ deposits from/to accounts of legally incompetent individuals or individuals with limited legal competence, spouses or lineal relatives;
– cash transactions in foreign currency by occupation;
– transactions in banknotes and coins a party to which is the Bulgarian National Bank, and the replacement by banks of damaged Bulgarian banknotes and coins;
– payments of employment remuneration in the meaning of the Labour Code.
The motive behind the amendments is the malpractice of cash payments in transactions between legal entities, natural persons and between legal entities and natural persons which remain unaccounted for in the primary accounting documents. This results in tax evasion and non-payment of the obligatory social security contributions.
The enacted law is another case of the executive authority’s effort to limit the grey sector of the economy. The government justifies the imposition of limitation on cash payments as action permissible and desired from the EU Law perspective. As pointed out in paragraph 18 of the preamble of Directive 2005/60/EC of the European Parliament and the Council of 26.10.2005 on the prevention of abuse of the financial system for the purposes of money laundering and funding of terrorism large cash payments have time and again proved to be very vulnerable to money laundering and terrorist financing. The European legislation does not impede, it in fact encourages EU member states to adopt stricter regulations to combat successfully the hazard posed by large cash payments.
As well as the exchange between the civil subjects, the newly adopted law will also influence the tax and the social security system. The budgetary enterprises whose function is to collect revenues and other accounts receivable towards the state budget, must move on in stages to the system of card payments, in an order of sequence and time limits as determined by the Minister of Finance. All banks in the country will service such payments through contracts with the Ministry of Finance, on equal terms and prices. The natural persons and legal entities will not pay bank commissions and fees. These sums will be at the expense of the state budget.
The National Revenue Agency will monitor the observation of the law on the part of the legal entities and the individuals, and will impose serious financial sanctions for the offenders.
Furthermore, amendments also to the Notary Officers and the Notary Activity Act continue this governmental policy which requires that the payments in transactions for the establishment, assignment, alteration or termination of property rights over immovable properties ( e.g. the selling, exchange, or division of real estate, establishing a right of construction, right of use, etc.) that in total exceed BGN 10,000, be made in a special bank account of the notary or in a bank account specified by the parties. These changes to the transactions against payment with immovable properties are in effect from 1st July, 2011.