THE Property Buying Process property in Bulgaria
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THE Property Buying Process property in Bulgaria
Buying property in Bulgaria
We have simplified the explanation of the buying proces to the following:
1. You find the property you want to buy on our website.
2. Place a deposit to reserve it or arrange a viewing.
3. Sign a preliminary contract.
4. Set up a company (you don't have to set up a company if you are buying an apartment).
5. Checks are carried out on: Title Documents, Licenses and Permissions, Debts on the Title, Terms of Contract.
6. Sign the Notary Act.
7. You are the new owner of the property!
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. Bulgarian Property Advisors Ltd have teams of local builders who will do any type of work required.
Many new developments are being offered under construction (mostly on the coast), where properties may be purchased 'off plan'. In this case every vendor (normally a construction company) provides some extra terms of sale in addition to Imoti BG Ltd terms of sale. They are normally set out in the preliminary contract.
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. The law is expected to change soon as Bulgaria is to enter the European Union in 2007. This historic restriction is one of the reasons why property in Bulgaria is so competitively priced compared to Western and Central Europe.
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Forming 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 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.
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 ¦pound;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.
The process of forming your company can take anywhere between a few days to a few weeks.
For a fee of EUR560.00 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 BGN3,500 (about EUR1,750). In addition, 2% 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 the property but the standard rate of corporate tax (15% in 2005).
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.
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% (take in mind that the minimal amount of it is around EUR 500.00) 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 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.
All deposit funds must be paid into our BG bank account: Imoti BG Ltd.
We will not be responsible for deposits paid into a different account number!!!
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.
The Notary Act
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 amd Municipal taxes must be paid, the full amount paid to the vendor and the title deed will be transfered into your company name.
Congratulations! You are the proud owner of your new Bulgarian property.
We suggest that you should arrange property insurance.
| Your broker Tatyana Surcheva |
 surcheva@imotibg.com  +359/2/9335935  +359/888/375877 |
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