|
|
Buyer's Guide - Learn How Foreign Buyers Can Purchase Property and Land in Bulgaria
General Information
The real estate prices in Bulgaria are by far lower than other destinations in Europe but the recent acceptance of Bulgaria in the European Union provides unprecedented growth potential that will certainly boost the prices of real estate in the near future.
According to the Bulgarian Constitution and legislation foreign persons and companies can invest in real estate in Bulgaria either personally or through a local legal entity. Generally speaking, foreigners as persons can acquire only buildings but not land. Only Bulgarian citizens and legal entities - including such with foreign owner(s) - can obtain the ownership of Bulgarian land.
Therefore, the most popular and preferred by non-residents ways to become real estate owners are:
- As far as houses, villas, flats and limited ownership rights (the right of use, the right to build a house, etc.) are concerned, you can directly purchase them as a person.
- When talking about Bulgaria real estate with land, you set up a company that will be the owner of the property. Setting up a company in Bulgaria is very easy. All you need is a good solicitor or barrister at law.
Of course, there are other ways to do it, like:
- Establishing a joint venture with existing local companies;
- Setting up a new venture;
- Acquiring a company through privatization;
- Making a portfolio investment.
We can help you with all necessary arrangements when obtaining Bulgarian property.
The most common type of organization for foreign investors is a limited liability company. Other forms are companies limited by shares (joint stock companies), joint enterprises, business associations, general partnerships, limited partnerships, and sole proprietorships. The law does not limit the extent or amount of foreign participation in companies. Foreign companies have the right to open deposit accounts in most world currencies in the local banks.
Property TaxesTransfer taxes
The transfer of property ownership is subject to notary and municipal fees. The notary fees are paid on the higher of the market price or the book value of the property at varying rates, specified in a special chart. In addition, 2% of the market value of the property is paid to the municipality where the property is located.
Value Added Tax
Transactions with land and lease of property for residential purposes are exempt from Value Added Tax (VAT). All other real estate transactions are subject to VAT at the uniform rate of 20%. The buyer/lessee is entitled to a VAT refund, provided that it is registered for VAT purposes.
Rental income
The basis of the taxable income of a company, investing in Bulgarian property is the gross income derived from the property less tax-deductible, property-related expenses and depreciation. Such expenses include repairs, maintenance, renovation and similar costs and interest on loans used for the acquisition of the property. A Municipal Tax at a rate of 10% of profits is due. This is then deductible in calculating taxable profits which are subject to a flat corporate tax rate of 15%.
Depreciation
Land itself is not depreciable, although any immovable property affixed thereto is, provided that it is used for the business activities of the company and is booked as a fixed asset. Depreciation for tax purposes is at a rate of 4% per annum, and is usually calculated using the straight-line method. Real estate acquired for purpose of re-selling it is considered as "investment property". As such, it is non-depreciable and is subject to annual revaluation to the market value. In practice, it is often unclear in which situations a property should be treated as an "investment property" rather than as a fixed asset.
Loss carry-forward
Tax losses can be carried forward for a five-year period. Losses cannot be offset against profits from previous years.
Capital gains
Capital gains are treated as ordinary income subject to corporate income tax.
Local taxes and rates
The owner of a building or a plot is obliged to pay a real property tax. Where a building is built on a State or municipal plot, the value of the plot will also be included in the tax base. The tax is equal to 0.15% of the book value of the property. Arable land is exempt from local taxes. In addition to the real property tax, owners also pay waste-collection fees.
IMPORTANT INFORMATION TO CONSIDER WHEN BUYING PROPERTY IN BULGARIAThe usual term for the old owners of the property to move out of it after completion of the sale is one month. This could be negotiated if the buyers require a shorter term.
All foreign buyers purchasing real estate property must be aware that in Bulgaria there are such terms as "tax estimation price" and "purchase price". The "tax estimation price" is for the purposes of real estate taxation and is much lower than the actual selling (purchase) price. Most Bulgarian property owners (vendors) wish that the "tax estimation price" is written in the title deed, and not the selling (asking) price which the buyers are paying, so due to this practice there might be discrepancies between the price you are paying and the price written in the title deed. If the property buyer wishes that the purchasing price is written in the property title deed they must notify us in advance and we will negotiate on this with the vendor of the property.
Terms and procedure for permission of permanent stay in the Republic of Bulgaria List of relevant legal documents:
- Constitution of the Republic of Bulgaria - art. 26
- Foreigners in the Republic of Bulgaria Act (FRBA)- art. 8, art. 14 - 23, art. 25 - 37
- The Bulgarian Identity Documents Act (BIDA) - art. 15, art. 55 - 59
- Regulations for Application of the Foreigners in the Republic of Bulgaria Act (RAFRBA) - art. 30 - 39
- Ordinance for the terms and procedure for issuance of visas - art. 11
- Tariff No.3 for the fees collected for consular services in the Foreign Affairs administrative system under the State Fees Act
- Tariff No.4 for the fees collected in the Internal Affairs administrative system under the State Fees Act - art. 12
|
Can't find the property you are looking for? Contact us to discuss your specific needs and prepare a FREE customized list of properties for sale per your individual preferences!
|
Home