What do you need to know!

According to the Bulgarian Constitution, foreign individuals can buy buildings but not land. Therefore the most common method for foreigners buying property in Bulgaria is to set up a limited company which then owns the land and the buildings. This historic restriction is one of the reasons why property in Bulgaria is so competitively priced compared to Western and Central Europe.   

Please have in mind that properties appearing by the UK standards to be very cheap will almost certainly need work to be done to them in order to bring them up to western standards. Obviously the less expensive properties will be older style and perhaps more remotely located. Many of the cheap properties have their toilets built outside the house. We can arrange teams of local builders who will do any type of work required. 

Setting up a company:

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 2 leva.

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 1 leva;

4. Proof that 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.

Finally, your new company will need to register immediately with the National Tax Register Authority.

The costs involved are: 2 leva. Plus administrative costs (payable to the state & registration court). 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.

The process of forming your company can take anywhere between a few days to a few weeks.

For a fee of  250 € we can set up a company and complete all the above details on your behalf.

Real Estate Tax Summary

Transfer taxes
Apart from corporate tax (15% in 2005), 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 (about 1790 € ). 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.

Reserving the property

After you have made the decision to buy a certain property you need to place a deposit in order to reserve it. The deposit is 10% of the selling price. 

Please note that our comission of 3% but not less than 500 €  must be paid together with the reservation deposit and it is non refundable.

Upon receipt of cleared funds we will take the property off the market for a period of 30 days. During this period of time you need to start the purchase and pay the rest of the property price. 

The reservation deposit of 10% is refunded when you complete on your purchase.

If you put a deposit for a particular property and decide to pull out of the deal then you will not receive the deposit back.
If the vendor pulls out of the deal the reservation deposit can be transferred to another property we sell, but if you decide not to buy then no refund will be made.  

You can also reserve the property by paying a deposit equal to the the full price. This amount will be treated as a reservation deposit and the reservation deposit terms will apply. Please see the previuos paragraph!

Signing the preliminary contract

Upon receiving cleared funds our solicitors will draft a preliminary contract containing all of the agreed details, money paid and setting out the terms and conditions of the deal. You will need to sign the contract in order to proceed with the purchase.

Important facts, you should know, before proceeding with a purchase!

Before making an investment in the Bulgarian Real Estate Market you should first carefully consider several important factors.

Trading in Bulgaria is slightly different as it is in every country. The Bulgarian Legislature almopst yet entirely unified with the other European countries Legislature or the EU regulations. The Bulgarian State is regularly issuing new laws which gradually synchronize our legal system with that of the European Union.

Until then for example every vendor will have the right to promote his property with the help of as many agencies as he/she wants. In a result, there is an immense interest from many clients in one and the same property. The clients are all competing with each other if they decide to proceed with reservation. Sometimes during the process of paying the money for the reservation of a property, which takes up to 5 days the property can be bought by someone else who has managed to reach first the vendor. It is the way the market in Bulgaria is developing.

However, we will quickly proceed with the reservation, but there is always a risk of somebody competing unfairly and stealing the deal.

Our company is not responsible for any deal lost through competition with other agencies. The money already paid into our bank account for the reservation of the “lost” property/properties can be transferred for the reservation of other properties offered by us or can be transfered to your bank account. It will be your decision.

Other reasons for “losing” a deal are the difficulties of reaching the vendors simply because the areas chosen for investment are very rural and not many vendors have cell phones. This practice takes time, although we do our best to get to the vendors as quickly as possible.

In any case, the vast majority of properties for sale on the Bulgarian Real Estate Market in Bulgaria are in the rural farming areas near towns and cities which means that the properties need full renovation and redecoration and sometimes they have structural damages.

All of these Bulgarian properties have similar characteristics and need similar amount of money for renovation so if you lose one deal you can always choose another.

We recommend our clients to be ready to pay the reservation deposits for the properties they like as quickly as possible in order to avoid any disappointments.
 

For more information and questions, please do not hesitate to contact us