Inside Bulgaria’s affiliate licensing shake-up

Back in August, affiliates in Bulgaria were hit by a sudden announcement: in order to continue working with licensee operators in the market, they too would need a licence.

Those with active contracts on 1 August were given until 15 August to apply for a permit and be covered under transitional arrangements. Others could apply later but would have to suspend activities until they were approved.

According to Rossen Yordanov, the founder of bookmaker-ratings.bg, rumours and media reports had swirled around in the months leading up to the change. However, affiliates themselves were largely left in the dark until the law was brought in.

“From what was actually circulating in the media to the acceptance, it was pretty quick - maybe a month or a month and a half. There was not much leeway in terms of us knowing about it,” Yordanov tells iGBA. “There were not any consultations with affiliates, at least that I am aware of, and we are the biggest affiliate in the market.”

Since then, things have continued to move fast. Bulgaria’s gambling regulator, the National Revenue Agency (NRA), has already approved a number of licences, though most have not yet been issued.

Licence or leave

The new licensing regime contains two new charges: a fixed annual fee of €6,000, plus a 10% tax on performance-based commission. Affiliates are defined as companies that generate revenue based on measurable results, such as CPA and revenue-share agreements. 

In order to qualify for a licence, affiliates must disclose their corporate ownership and submit a full list of websites, apps, social media accounts and streaming channels used for promotion.

They must have an official representative in Bulgaria, and – crucially – they may only promote operators who hold a Bulgarian licence.

The move effectively brings affiliates under the scope of Bulgaria’s sweeping 2024 Gambling Act amendments. These included tough restrictions on the advertising and promotion of gambling products, including through online channels.

In future, affiliates’ creative teams will need to be aware of - and avoid - the strict “no-gos” in the Gambling Act. This means not promising large winnings, avoiding direct calls to place bets, and not depicting gambling as a means of solving financial problems.

Mind the gap

Daniel Malbašić, a business consultant at Bulgarian LLC, believes the licensing decision can be traced back to the €7.19 billion budget deficit Bulgaria is facing this year.

“The previous government's policy was more liberal,” he tells iGBA. “Now the government sees a lack of money in the budget, and I think that is exactly why it is doing this.”

As Malbašić points out, Bulgaria’s gambling industry has seen rapid growth in recent years, making it a prime target for additional taxation.

Government estimates suggest that Bulgarian-facing affiliates currently generate untaxed revenues of around 450-500 million BGN per year: the equivalent of €230-256 million or £198-220 million. In 2026, the NRA hopes to bring in €100 million for the treasury, rising to €150 million in 2027.

However, the move is also part of the government’s ongoing fight against Bulgaria’s booming black market. While official estimates place the channelisation rate at 60%, some industry estimates such as those from Yield Sec suggest the real figure could be closer to just 10%.

However, the move is also part of the government’s ongoing fight against Bulgaria’s booming black market. While official estimates place the channelisation rate at 60%, some industry estimates such as those from Yield Sec suggest the real figure could be closer to just 10%.

“This is connected with anti-money-laundering policy,” Malbašić explains. “Bulgarian banks are not accepting many new clients, especially in the gambling industry. From now on, there will be more emphasis on control, not just collecting taxes.”

Compliance pain, market gain

Yordanov, who runs several Bulgarian-facing sites, says the black-market crackdown could be good for the industry.

“This is very likely to be a positive thing because there are provisions which should allow the promotion of unlicensed operators to be more strictly monitored and prohibited,” he says.

If an affiliate isn’t licensed in Bulgaria - or promotes illegal sites - they could face an immediate financial hit. That’s because licensed operators must withhold all payments until affiliates can prove they are fully compliant.

“There is also a possibility to restrict affiliate websites at ISP level if they are promoting unlicensed operators, which is currently not the case,” adds Yordanov. “The operators themselves get restricted at ISP level, but of course they spin up more mirror sites all the time.”

For affiliates, he says, this mode of enforcement is far more effective, since ranking online is a key part of their business.

Sting in the tail?

However, in late September, the government introduced a project-law proposing a near total ban on all advertisement of gambling, including online and affiliate websites but with notable exemptions for operators and sports sponsorships, potentially “closing us down less than a few weeks after licensing us”, said Yordanov. This is due to be discussed and voted on by 23 October. Yordanov told iGBA that he's now assembling a case against the potential affiliate ban.  

Notwithstanding the proposal, Yordanov remains optimistic regarding the prospects for large, compliant affiliates like his own, with the licensing requirement proving most damaging for international affiliates who simply spin up sites in the Bulgarian language and drive local traffic abroad.

“We are 100% legitimate and work only with licensed operators,” he says. “It should help if we can report affiliates promoting unlicensed operators and no longer face competition that is not applying the same standards and rules.”

There has also been a clear exodus of smaller affiliate sites, for whom the regressive flat fee and 10% taxation is simply too high.

“The 10% does hit immediately,” he adds. “It is painful; it is not great. But given our position in the market, if we can stop affiliates promoting unlicensed operators from being accessible and ranking, and some smaller affiliates close shop, I believe that in the end it is going to be positive for us.”

Accounting for confusion

Nevertheless, there is still a feeling of uncertainty for both operators and affiliates in the market.
By law, operators play a key role in deducting the 10% commission tax before paying out to affiliates. However, Yordanov believes that there is still confusion about how to apply this tax and how to report it in their accounting.

Meanwhile, on the affiliate side, it’s unclear if this 10% tax will be levied instead of, or in addition to, Bulgaria’s current 10% corporation tax.

If the latter is true, the tax burden on affiliates will suddenly be “substantial”, the affiliate founder explains. 

More to come?

With other governments seeking to close tax loopholes and clamp down on illegal operators, could licensing affiliates be on the agenda elsewhere?

According to Wes Himes, partner at UK-based global advisory firm Intrepid Partners, there are some good reasons for doing so.

While licensing creates extra hurdles for entrepreneurs, it also gives regulators more direct control and access to the affiliate if something isn’t right. Otherwise, B2C operators have to enforce regulation further down the supply chain.

“Some countries may decide to license affiliates because it gives them that control,” Himes tells iGBA. “It also creates a dichotomy: you know who your licensees are, and therefore you know who doesn’t have a licence. It is almost a test.”

Nevertheless, the debate on affiliate regulation has been around for a while - and many governments have already decided against it. In jurisdictions like the UK, for example, operators are charged with policing their affiliates instead.

We all stand together

With increased scrutiny, Himes believes that affiliates should take the opportunity to get organised and unified within the industry.

“There should be a permanent body that affiliates can rely on for information flow and to understand what they need to do to comply,” he says. “Those rules are not always gambling regulations; some are advertising or consumer-protection regulations.”

Early signs suggest that the affiliates in Bulgaria are indeed getting organised. According to Yordanov, there are early discussions about setting up an official trade body.

With Bulgaria at a “sensitive point”, Himes says, there’s a good case for creating this collective body to work with the government to obtain the best outcome. “Otherwise, the rules are simply going to be foisted on them,” he adds.