Bulgaria: Buying Guide

Bulgaria: Buying Guide

How high are realtors’ and lawyers’ fees in Bulgaria? What about other property purchase costs? TRANSACTION COSTS Who Pays? VAT 20% buyer Municipal Tax 2% buyer Notary fees 0.1% - 1.5% buyer Registration fees 0.1% buyer Agent's commission 1.25% - 1.5% 1.25% - 1.5% buyer seller Costs paid by buyer 22.73% - 24.66% Costs paid by seller 1.25% - 1.5% ROUNDTRIP TRANSACTION COSTS 23.98% - 26.16% See footnotes How difficult is the property purchase process in Bulgaria? Acquiring property in Bulgaria is a simple and straightforward process. But foreign non-residents cannot acquire freehold land directly, but only purchase a structure (apartment, a condo unit, etc.) on a plot of land. However on November 2, 2006, the Bulgarian cabinet decided that foreigners in Bulgaria will be able to buy and inherit property. The changes will take place seven years after membership into the EU in January 2007, i.e. in 2014. Citizens of the EU States are exempted from the 7-year suspension period and are entitled to acquire land, provided that they fall into any of the following two categories: if they reside continuously in Bulgaria or if they are self-employed persons having permanent residence in Bulgaria and carry out agricultural activity in the country. At present, there is an alternative option – to form a Bulgarian registered company, with the buyer as sole owner and director (the buyer could choose to add other directors, e.g., his spouse). The Corporate Route To set up a company to acquire property is not unusual, and there are realtors who offer this as part of the package. The steps are as follows: 1.       When you have found a property you like, make a preliminary enquiry to get answers to your questions and address initial issues. When you’re sure you want the property, negotiate. 2.       Upon reaching an agreement, a preliminary contract is drawn up and signed by the vendor or a representative, and at the same time you are expected to place a 10% deposit to secure the property. 3.       The title search then begins, and at the same time, your realtor begins to set up a company for you. 4.       When the company has been set-up and the title “cleared” a “contract of purchase” (notary act) is signed by both parties, while you pay the existing balance from the purchase price and the ‘keys’ handed over to you. You are now a proud owner. To register a Private Limited Company (OOD) you must:1.       Come up with a unique company name, and reserve it. 2.       Draft the articles of association, or memorandum of association 3.       Appoint a managing director (or board of directors) 4.       Deposit at least 70% of the authorized capital, and obtain a bank deed confirming the deposit.  The minimum foundation capital is BGN 5,000 (€2,605.38). 5.       Register at the commercial register, acquire any needed permits, and then wait for publication in the State Gazette. The company registration is technically complete at this. There are however a few more steps to take: 6.       Within three days of the registration, register the company at National Statistical Institute and obtain a BULSTAT number. 7.       Register at the National Social Security Institute and the local tax office. You now have a legal company. Note: In Bulgaria there is a Tax Estimation Price that is similar to UK’s “ratable value”. This value is usually several times lower than the sale price. For various reasons most vendors prefer that this lower price should appear in title deeds rather than the real sale price. Because of this, there might be discrepancies between the price you are paying and the price written in title deeds. Below is a schedule of notary fees charged in Bulgaria. NOTARY FEES   PROPERTY VALUE NOTARY FEE under BGN 100 (€51.48) BGN 15 (€7.72) BGN 100 - 1,000 (€51.48 - 515) BGN 15 + 1.5% for amount over BGN100 BGN 1,000 - 10,000 (€ 515 - 5,148) BGN 28.5 + 1% for the amount over BGN 1,000 BGN 10,000 - 50,000 (€ 5,148 - 25,742) BGN 118.5 + 0.5% for the amount over BGN10,000 BGN 50,000 - 100,000 (€25,7412 - 51,483) BGN 318.50 (€164) + 0.2% of the surplus over 50,000 (€25,742) above BGN 100,000 (€51,483) BGN 418.00 (€215) + 0.1% for the surplus over 100,000 (€51,483); but not more than BGN 3,000 (€1,545) It takes an average of 19 days to complete the nine procedures needed to register a property. FOOTNOTES TO TRANSACTION COSTS TABLE     The round trip transaction costs include all costs of buying and then re-selling a property – lawyers’ fees, notaries’ fees, registration fees, taxes, agents’ fees, etc.       VAT: The VAT due is 20% value after discounting the taxes and registration fees paid for the transfer. Sales of land are exempt from Value Added Tax. The buyer is entitled to a VAT refund, provided that it is registered for VAT purposes.       MUNICIPAL TAX: Paid to the municipality in which the real estate is located.       REGISTRATION FEE: Fee for registration in the Real Esate Register is 0.10% of purchase price or tax valuation, whichever is higher value.       REAL ESTATE AGENT'S FEE: There are cases that the buyer shoulders the whole burden of the fee. Hence, the buyer is advised to ascertain whether the vendor expects you to pay or share the fee.

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