Thursday, October 13, 2011

Eurozone: Petty Greek cash escaping to Bulgarian tax heaven

Source: FOCUS Information Agency

Bulgaria is an attractive destination for Greek entrepreneurs, mainly because it offers them the lowest corporate tax in Europe – 10% and a simplified procedure for setting up a company, the Ataka daily reads.

When we speak of a ‘Greek presence’ in Bulgaria we refer mainly to Greek banks, as 1/3 of the Bulgarian bank system operates thanks to Greek financial institutions’ subsidiaries. Alpha Bank’s Country Manager for Bulgaria Evangelos Lytras commented that the reason for this was the low level of salaries paid to Bulgarian workers.

Apart from security against an eventual state default, Greeks seek higher returns for their savings in Bulgaria. The Bulgarian National Bank (BNB) statistics shows household deposits in BGN in Bulgaria have a 5.5% profitability, while these in EUR bring returns of 5%, compared to 4% in Greece. Credit interest rates are also lower in Greece and a mortgage loan could be drawn at 4.3% fixed interest. Thus some Greeks draw loans from Greek financial institutions and deposit the funds in Bulgarian banks in order to profit from the difference in interest, the Telegraf daily learned.