Bulgaria is one of the new boom countries for property
investors - property is relatively inexpensive compared to neighbouring
countries and certainly much better value than the developed economies
of Western Europe.
Buying property in Bulgaria is a relatively
straightforward procedure. We've broken the process down into a few
simple steps - follow these and you'll soon be the proud owner of a
new property in Bulgaria!
However, things may seem a little longwinded but once Bulgaria becomes
a fully fledged member of the EEU and they adopt the euro as their currency
then the process below may well change for the better and buying
a property in Bulgaria will become much easier and quicker.
In the meantime we have to work within the process below - if you
have any questions about the process then please feel free to contact
us.
OK this is the fun bit - on our website you can find an amazing range
of Bulgarian property on offer from budget apartments
in Bansko to grand residences. Browse our site to find the property
that suits your needs best but bear in mind the following:
If the property seems cheap by UK standards, it may indicate that it:
- Requires significant refurbishment.
- Is built in an older style
- It's located in a remote area
- Only has an outside toilet
Many new developments, especially on the coast, are sold "off
plan" which means that they are currently under construction. You
need to ensure that the relevant terms and conditions are included in
the preliminary contract - ask your legal advisor for assistance.
Foreigners are permitted to buy buildings in Bulgaria but not land.
If you are not a Bulgarian national, we recommended setting up a limited
company that will then own both the real estate and the buildings on
the land. If you are buying
an apartment, it may not be necessary to form a limited company
- check with the property agent whether a direct purchase is permitted.
While this law is expected to change when Bulgaria enters the EU in
2007, it is also the reason why Bulgarian property is
currently so inexpensive compared with other European countries.
What is a limited company?
As shareholder in a limited company you are liable for the company's
financial commitments up to the value of your share in the company's
registered capital ie: if the company incurs any expenses or debts your
liable is limited to the full amount of your investment in the company.
Who can set up a limited company?
Essentially anyone can form a limited liability company in Bulgaria
- you do not have to be Bulgarian to do so. This enables foreign nationals
to purchase Bulgarian property indirectly.
How do I set up a limited company?
Before signing any agreement you should agree with all the other shareholders
what commercial activities the company will be involved with and agree
the structure of the company.
Once you have all agreed on the nature of the business, the relevant
documents for incorporation will be prepared by your legal advisor and
signed by all the shareholders.
Next you will need to open a dedicated company bank account to collect
all share capital.
The minimum share capital necessary to form a limited company is 5000
leva, of which a minimum of 70% (3500 leva) is required at the time
of registration. As well as your share capital you will be required
to pay administration costs for the registration. Don't forget you will
still have the money in the company.
Your limited company will officially exist as soon as it is added to
the Commercial Register of the district court, in the region where the
company will be based.
This entry is made as soon as the district court make a decision to
permit the incorporation of your company.
When you submit your registration application you will need to provide
the following documentation:
- Proof that each shareholder has paid into the company at least one
third of the total amount of his or her financial interest, amounting
to no less than 10 leva.
- Proof that at least 70 per cent of the registered capital has been
paid.
- Articles of incorporation
- A memorandum relating to the appointment of directors
In order for any law to take effect, all Bulgarian legislation has
to be published in the official Bulgarian state
newspaper, the Bulgarian State Gazette. Publication of your company's
entry in the commercial register is a public declaration of your formation.
Finally, you will need to register your company with the National Tax
Register Authority to complete the process of formation.
Following registration, once you have paid your entire share capital
you can withdraw funds from the company to make your property purchase.
Now you've formed your company you can get on with buying your property.
In Bulgaria, as with pretty much everywhere else, property transactions
are subject to tax. It's important that you factor these charges into
your financial planning.
Transfer taxes
Corporate tax (15% in 2005) is the only direct tax on the transfer
of property. Because you are buying the property with your company you
are liable for corporate tax.
Notary fees are payable on the transfer - rates vary but the maximum
is around BGN3500.
Municipal fees of 2% of market value are also payable on completion.
Capital Gains Tax
There is no Capital Gains Tax on the profit when your company sells
the property.
Local taxes and rates
Property tax is payable by anyone who owns a building or building plot.
This is charged at 0.15% of the list value of the property.
If the building is on a municipal or State-owned plot, the value of
the plot will also be included when tax is calculated
Local taxes are not payable on arable land
All building owners must also pay fees for waste collection
Value Added Tax
VAT of 20% is payable on all real estate transactions except with land
and lease of property is for residential use.
The buyer or lessee can claim a VAT refund provide they are registered
for VAT.
Once you've found the property you want, you will need to place a deposit
to reserve it. The deposit is usually 10% of the selling price and is
refunded on completion of your purchase.
At this you will usually pay a commission to the property agent who
will then take the property off the market while you begin the purchase.
Check with the property agent regarding their fees and the terms and
conditions they apply.
When the property agent receives all their cleared funds their solicitors
will draft an initial contract, which contains details of all the relevant
terms and conditions, monies paid and any other information relating
to the property transaction.
Once this contract is signed, searches are carried out to make sure
that the titles deeds are valid, that any relevant licenses and permissions
are taken into consideration, that any debts on the title are brought
to light, and that the terms of the final contract are agreeable to
both buyer and vendor.
The last step in the buying process is to sign the Notary Act - essentially
an official declaration that you have agreed to buy the property. At
this point any state and municipal taxes must be paid and any outstanding
balance of monies must be paid to the vendor.
The title deed of the property is then transferred into your company
name.
Congratulations - you're now the owner of a Bulgarian
property!