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Property in Bulgaria offers a good investment considering the long term prospects for the country.
Whatever your budget, real estate in Bulgaria offers considerably better value for money than in other European destinations.
The majority of people who are buying property in Bulgaria are looking for holiday/second homes often with a view to retirement in later years although there are an increasing number of investors who are simply buying property with a view to making a capital gain in the short or long term. This increasing interest, along with other factors such as the rise in tourist numbers, better awareness and EU entry on the cards for 2007 is gradually pushing prices higher.
Although purchasing property in Bulgaria is not too dissimilar from buying anywhere else (it is just as stressful there as in the UK for example) there are some differences and we hope we have covered most of the more important points for you to bear in mind below.
What Is Available?
An average villa close to the sea can be purchased for around £35,000 with rural properties being offered for even less. Do bear in mind though that properties appearing by our standards to be very cheap will almost certainly require work doing to them to bring them up to western standards. Obviously the less expensive or even 'better value' properties will be older style and perhaps more remotely located.
There are an increasing number of new developments under construction, in particular on the coast, where properties may be purchased 'off plan' either direct with the developer or via a host of brokers.
What is the law on foreigners owning property in Bulgaria?
According to the Bulgarian Constitution, foreign individual persons can buy buildings but not land. Therefore the most common method for foreigners buying property in Bulgaria is to set up a company which then owns the land and the buildings. The law is expected to change within the short to medium term as Bulgaria opens its doors fully in line with its expected entry into the European Union (2007). This historic restriction is one of the reasons why property in Bulgaria is so competitively priced compared to Western and Central Europe.
The most popular form of engaging in business in Bulgaria is via a Limited Liability Company (OOD).
Who can form a Limited Liability Company & how?
A foreign or Bulgarian person (judicial or physical). 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 5,000 leva. Shareholders at time of registration must have paid at least 1/3 of their respective shares. It is required that at least 70% (3,500 leva) of the capital is raised at time of registration.
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 court decision for the incorporation. The following documents must be available at the time of the submission of registration application to the district court.
1. Articles of incorporation;
2. Memorandum for appointment of Director/ Directors;
3. Proof that each shareholder has paid at least one third of its interest, but not less than 10 leva;
4. Proof that at least 70 per cent of the registered capital has been paid.
The Bulgarian State Gazette is the official paper of Bulgarian State. All Bulgarian legislation is published there for the law to take effect. Publication of the company entry in the Commercial Register does not complete your company formation, it announces to the general public the act of formation.
The process of forming your company can take anywhere between a few days to a few weeks.
Finally, your new company will need to register immediately with the National Tax Register Authority.
The costs involved are: 3,500 leva = 70% share capital. Administrative costs (payable to the state & registration court) are 250 leva (just over £70). This is the minimum capital that you need to raise for registration. Once the entire share capital has been paid up these funds can be accessed and withdrawn.
Allow betwen EUR 500 - 700 for charges relating to the formation and registration of your company.
Real Estate Tax Summary
Transfer taxes
Apart from corporate tax, 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, with the maximum being BGN 3,500. In addition, 2% of the market value of the property is paid to the municipality in which the real property is situated upon completion.
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 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.
Estate Agents Charges
Fees charged by brokers for introducing you to a property that you subsequently purchase vary enormously, as do the levels of service you can expect to receive from one to another! The buyer can be charged anything from 3% of the purchase price to as high as 10%! More often than not a 'minimum' commission is charged regardless of the purchase price of between EUR 500 - 1,000.
You will also find that many agents in Bulgaria will want to charge you to go on viewings (refundable if you actually purchase), whereas some will just charge you for the taxi fare should you not have your own transport.
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