Buying Property in Bulgaria
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 persons (including such owned by a foreign person) can obtain the ownership of Bulgarian land.
At the present time, a Constitution amendment is introduced in procedure of approval from the Bulgarian National Assembly, which will allow foreigners as persons to obtain the ownership of Bulgarian land. This amendment is still not a legal regulation in force.
Therefore, the most popular and preferred by non-residents ways to become the real estate owners are:
• As far as, flats and limited ownership rights (the right of use, the right to build a house, etc.) are concerned, you can in some of the cases directly purchase them as a person.
• When talking about Bulgarian real estate with land, you set up a Bulgarian 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 and we can provide this service.
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;
Foreigners have the right to open bank accounts denominated in a Bulgarian or foreign currency. Moreover, there is a special regime of respect towards the foreign investors on the part of the Bulgarian legislative system, which is a gesture of tolerance to those, who are interested in Bulgaria and are willing to benefit from its future. Last 2 Bulgarian governments are doing their best to attract foreign investors to our economy, inclusive such that want to buy Bulgarian real estate.
Important Information to Consider When Buying Property in Bulgaria
The 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. For this purpose, they should ask the assistance of the real estate company in due term and not expect the property to be empty right after signing of the final contract.
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 of the 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 but we do not bear responsibility for that.
Deposit and Costs
As a foreigner, to buy a house with land you need to set up a Bulgarian Ltd. company. This company will buy the property and will own the land. You will be the owner of the company and, respectively, of the land.
The whole process from viewing to purchasing lasts for about 40-60 days.
The costs for a company registration in Bulgaria are:
- 500 Euros – registration fee for setting up of the LTD. company
- 3 % of the purchase price for other expenses - Stamp duty, notary taxes and all legal fees for checking and transferring the ownership;
As well as some other fees which you pay to the real estate agency in Bulgaria:
- Agency commission of 3% or minimum 500 EUR ( if you buy a house)
- When going to Bulgaria, you will need to cover the transport expenses of 0.20 Euro cents per km. if you decide to use the company car for viewings and transportation.
WE, SOPHIA INVESTMENTS LTD – IRELAND DO NOT CHARGE ANY FEES! WE ARE YOUR MEDIATORS, BETWEEN YOU AS CLIENTS AND PURCHASERS AND THE REAL ESTATE AGENCY IN BULGARIA YOU DECIDE TO BUY WITH.
TAX IN BULGARIA
(BLEVINS FRANKS TAX ADVISORY SERVICE)
The following is an extract from the booklet, Legal, Financial & Property services in Bulgaria, written and published by solicitor John Howell of John Howell & Co.
The tax year in Bulgaria is the calendar year. Residents of Bulgaria are subject to taxes in Bulgaria on their worldwide income and gains. Non-Bulgarian residents are taxed on income and gains derived from Bulgarian sources only.
You are treated as resident in Bulgaria if either: you are permanently domiciled in Bulgaria; or you spend more than 183 days in Bulgaria within any 365 day period ending in the tax year in question. Foreign experts are taxed on their Bulgarian source income alone regardless of the amount of the number of days they spend in Bulgaria.
Permanent Resident's Permit
A permanent resident's visa is available to individuals who have lived permanently in Bulgaria for more than 10 years. This is reduced to six years if you have business interests in Bulgaria. Spouses and children of holders of permanent resident's permits are also eligible.
From 2005, the following allowances are available against taxable income, depending on the number of children the taxpayer has:
1 child BGN 360
2 children BGN 780
3 or more children BGN 1140
Income Taxes at Fixed Rates
For residents of Bulgaria, withholding taxes of 15% are levied on dividends, and 20% on taxable interest.
Income from dividends, interest, royalties, rents, capital gains etc paid to foreign residents is subject to a 15% withholding tax.
Rental Income A flat 20% deduction is available against the rental income received. If the rental income is paid to a non-Bulgarian resident, 15% tax is withheld at source.
Tax Returns and Compliance
Tax returns should be filed by 15th April following the tax year in question. Taxes are payable within 30 days of filing the Return.
Capital Gains Tax
Capital gains are usually taxed as income, however the following assets are exempt:
• The taxpayer's main residence provided it has been his/her main residence for at least 3 years
• Two properties which have not been the taxpayer's main residence, if owned for more than 5 years
• Any number of agricultural and forest estates provided they have been owned for at least 5 years
• Cars and other road vehicles, aircrafts and vessels owned for at least one year
• Assets received by inheritance or gift
• Certain types of movable property, including shares in a Bulgarian quoted company
There are no wealth taxes in Bulgaria.
Real Estate Tax
Owners of real estate in Bulgaria are liable to pay an annual tax on the value of the real estate. The rate varies depending on whether the real estate is used for residential or commercial purposes. The rate for residential property is fixed by the local authorities. For commercial buildings, the rate is 0.15%. The tax is payable at the beginning of each year. These taxes are usually up to the equivalent of ˆ150 per year, and are lower in rural areas.
VAT is chargeable on the sale of real estate in Bulgaria at a rate of 20%. This is usually included in the purchase price of the property.
Restrictions on Foreign Ownership of Real Estate in Bulgaria
A foreign investor can invest in property in Bulgaria either directly or through a Bulgarian company. Only individuals resident in Bulgaria can acquire title to land.
Foreign residents may be required to obtain permission from the Council of Ministers in Bulgaria to buy real estate in border areas or in high security zones, as defined by the Government.
Inheritance and Gifts Tax
Residents of Bulgaria are liable to inheritance tax on property situated in both Bulgaria and overseas. Non-residents of Bulgaria are liable to inheritance tax on property situated in Bulgaria. It is the recipient who pays the tax.
From 2005, inheritances received by the surviving spouse and direct relatives will be exempt. Brothers, sisters, nieces and nephews who inherit will pay inheritance tax of 0.7% on amounts received above BGN 250,000. All other beneficiaries pay inheritance tax at rates of up to 20%.
Gifts tax is payable at fixed rates depending on the relationship between the donor and the donee. Spouses and direct line inheritors are exempt. Gifts between brothers and sisters are taxable at 0.7 %, and 5% for all other beneficiaries.
Social Security and Healthcare Contributions
Employees are liable to pay social security contributions at a rate of 8% and employment fund contributions at a rate of 1%. In addition, healthcare contributions are payable at a rate of 1.5%. Contributions are payable monthly and are calculated on employment income only, up to a limit of around BGN 850 per month
If you want to see the Operational costs in Bulgaria, please click on link below: