How to Buy Property in Bulgaria
Bulgaria is one of the new boom countries for property investors - property is relatively
inexpensive compared to neighbouring countries and certainly much better value than
the developed economies of Western Europe.
Buying property in Bulgaria is a relatively straightforward procedure. We've broken
the process down into a few simple steps - follow these and you'll soon be the proud
owner of a new property in Bulgaria!
1. Find your property
OK this is the fun bit - at www.property-abroad.com
you can find an amazing range of Bulgarian property on offer from budget apartments
in Bansko to grand residences. Browse our site to find the property that suits your
needs best but bear in mind the following:
If the property seems cheap by UK standards, it may indicate that it:
- Requires significant refurbishment.
- Is built in an older style
- It's located in a remote area
- Only has an outside toilet
Many new developments, especially on the coast, are sold "off plan" which means
that they are currently under construction. You need to ensure that the relevant
terms and conditions are included in the preliminary contract - ask your legal advisor
2. Set up a limited company:
Foreigners are permitted to buy buildings in Bulgaria but not land. If you are not
a Bulgarian national, we recommended setting up a limited company that will then
own both the real estate and the buildings on the land. If you are buying an apartment,
it may not be necessary to form a limited company - check with the property agent
whether a direct purchase is permitted.
While this law is expected to change when Bulgaria enters the EU in 2007, it is
also the reason why Bulgarian property
is currently so inexpensive compared with other European countries.
What is a limited company?
As shareholder in a limited company you are liable for the company's financial commitments
up to the value of your share in the company's registered capital ie: if the company
incurs any expenses or debts your liable is limited to the full amount of your investment
in the company.
Who can set up a limited company?
Essentially anyone can form a limited liability company in Bulgaria - you do not
have to be Bulgarian to do so. This enables foreign nationals to purchase Bulgarian
How do I set up a limited company?
Before signing any agreement you should agree with all the other shareholders what
commercial activities the company will be involved with and agree the structure
of the company.
Once you have all agreed on the nature of the business, the relevant documents for
incorporation will be prepared by your legal advisor and signed by all the shareholders.
Next you will need to open a dedicated company bank account to collect all share
The minimum share capital necessary to form a limited company is 5000 leva, of which
a minimum of 70% (3500 leva) is required at the time of registration. As well as
your share capital you will be required to pay administration costs for the registration.
Don't forget you will still have the money in the company.
Your limited company will officially exist as soon as it is added to the Commercial
Register of the district court, in the region where the company will be based.
This entry is made as soon as the district court make a decision to permit the incorporation
of your company.
When you submit your registration application you will need to provide the following
o Proof that each shareholder has paid into the company at least one third of the
total amount of his or her financial interest, amounting to no less than 10 leva.
- Proof that at least 70 per cent of the registered capital has been paid.
- Articles of incorporation
- A memorandum relating to the appointment of directors
In order for any law to take effect, all Bulgarian legislation has to be published
in the official Bulgarian state newspaper, the Bulgarian State Gazette. Publication
of your company's entry in the commercial register is a public declaration of your
Finally, you will need to register your company with the National Tax Register Authority
to complete the process of formation.
Following registration, once you have paid your entire share capital you can withdraw
funds from the company to make your property purchase.
Now you've formed your company you can get on with buying your property.
3. Make sure you know about the taxes
In Bulgaria, as with pretty much everywhere else, property transactions are subject
to tax. It's important that you factor these charges into your financial planning.
- Corporate tax (15% in 2005) is the only direct tax on the transfer of property.
Because you are buying the
property with your company you are liable for corporate
- Notary fees are payable on the transfer - rates vary but the maximum is around BGN3500.
- Municipal fees of 2% of market value are also payable on completion.
- Capital Gains Tax
- There is no Capital Gains Tax on the profit when your company sells the property.
- Local taxes and rates
- Property tax is payable by anyone who owns a building or building plot. This is
charged at 0.15% of the list
value of the property.
- If the building is on a municipal or State-owned plot, the value of the plot will
also be included when tax is
- Local taxes are not payable on arable land
- All building owners must also pay fees for waste collection
- Value Added Tax
VAT of 20% is payable on all real estate transactions except with land and lease
of property is for residential use.
The buyer or lessee can claim a VAT refund provide they are registered for VAT.
4. Put down a deposit on your property
Once you've found the property you want, you will need to place a deposit to reserve
it. The deposit is usually 10% of the selling price and is refunded on completion
of your purchase.
At this you will usually pay a commission to the property agent who will then take
the property off the market while you begin the purchase. Check with the property
agent regarding their fees and the terms and conditions they apply.
5. Sign an initial contract of sale
When the property agent receives all their cleared funds their solicitors will draft
an initial contract, which contains details of all the relevant terms and conditions,
monies paid and any other information relating to the property transaction.
Once this contract is signed, searches are carried out to make sure that the titles
deeds are valid, that any relevant licenses and permissions are taken into consideration,
that any debts on the title are brought to light, and that the terms of the final
contract are agreeable to both buyer and vendor.
6. Sign the Notary Act
The last step in the buying process is to sign the Notary Act - essentially an official
declaration that you have agreed to buy the property. At this point any state and
municipal taxes must be paid and any outstanding balance of monies must be paid
to the vendor.
The title deed of the property is then transferred into your company name.
Congratulations - you're now the owner of a Bulgarian property!
Property Abroad always recommends using a
Solicitor or Lawyer
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