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In this section we would like to make the purchase of real estate in Bulgaria more comprehensive for foreign buyers. There are some specifics of the Bulgarian legislations, which every buyer has to consider when intending to make an investment in Bulgaria.
1. You can buy an apartment without any difficulty.
2. You can buy land by forming your Bulgarian company, which will actually own the property.
Generally apartments in holiday complexes are being sold without the land, on which the building is standing. Some developers are also offering villas in villa communities, which you can purchase without forming a company. This according to Bulgarian legislation allows foreign buyers a deal with an ease. You can own in your name as a physical person the apartment (villa) you have chosen.
Nevertheless, some apartments, residential in most of the cases, are being sold with ideal part of the land, on which the apartment complex has been built. This requires a company set up.
How can I form a Limited Liability Company?
A foreign or Bulgarian person (judicial or physical) has the right to form a Bulgarian company. The person/persons will be liable for the company's obligations to the value of his/hers share in the company's registered capital. The shareholders conduct preliminary discussions on the commercial activities they intend to engage in. Based on their agreement, Articles of Incorporation are prepared & signed by all shareholders.
A dedicated bank account is opened to collect all share capital. The minimum share capital required is 2 BGN (approximate equivalent in Euro is 1,02 Euro).
The company exists from the moment it is added to the Commercial Register of the district court of where the company will be based. The entry is made upon issue of a district commercial register decision for the incorporation. The following documents must be available at the time of the submission of registration application to the commercial register.
1. Application for registering a company and distribution of owners’ shares.
2. Articles of incorporation
3. Memorandum for appointment of Director/ Directors
4. Proof that the registered capital of 2 BGN has been paid
5. Specimen of signature
6. Declarations for participation in other companies
7. Declaration for lack of bankruptcy
8. Declaration for the authenticity of the stated circumstances
9. Contract for the company domicile
10. Power of attorney to the person, who will represent you for forming the company.
Publication of the company entry in the Commercial Register system completes your company formation, it announces to the general public the act of formation.
Finally, your new company will need to register immediately with the National Tax Register Authority.
The costs involved are:
1. Capital: 2 leva.
2. Administrative costs: 700 Euro. These are payable to our solicitor for preparing all company forms, taxes to the state & registration to the commercial register.
The process of forming your company can take from 2 to 4 weeks.
Real Estate Tax Summary
Apart from corporate tax (10%), no other direct taxes are levied on the transfer of real property. The transfer is, however, 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. In addition, 3% of the market value of the property is paid to the municipality in which the real property is situated upon completion.
Capital Gains Tax
There is no Capital Gains Tax on the profit when your company sells one property a year, but the standard rate of corporate tax (10%).
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.
Value Added Tax
Transactions with land, building right and lease of property for residential purposes are exempt from VAT (Value Added Tax), 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.
The Notary Act (Title deed)
After setting up a company, bank account and completing all checks and searches you will need to pay the remaining balance for the property. Now it is time for the last step. This is the final stage when you will complete the purchase and become the new owner of the property. You must confirm before the Notary Public the agreement to buy the property. The state and Municipal taxes must be paid, the full amount paid to the vendor and the title deed will be transferred into your company name.