Buying Property in Veliko Tarnovo with Bulgarian Property Specialists
Buying property in Veliko Tarnovo - Bulgarian real estate specialists with the best properties for sale in Bulgaria including houses, apartments, development land and commercial property.
We offer this advice as a simple guide to buying property in Bulgaria. Please bear in mind that
all clients and their situations are different and that the circumstances surrounding any sale
or purchase can lead to modifications in this advice.
You should employ the services of a lawyer (preferably one who can communicate with you in a
language you understand). We ALWAYS recommend the use of an independent lawyer for property transactions.
Land Ownership in Bulgaria
In accordance with the Bulgarian Act on Foreign Investment, there are currently restrictions on foreigners
who wish to buy property in Bulgaria that refer specifically to buying Bulgarian land. From January 2012, citizens of
the European Union may own land in Bulgaria for non-commercial use i.e. for residential purposes, but non-EU citizens
wanting to own Bulgarian land (i.e. Bulgarian houses with a garden or a plot of land in Bulgaria)
must set up and register a Bulgarian Limited Company.
The procedure involved is fairly straightforward, currently taking around 3-5 working days if you are around to sign the documents or if not you can give the power of attorney to your Solicitor, Agent or another trusted third party, who can complete the process on your behalf. There are usually no such restrictions on foreigners who purchase apartments so long as there is no Bulgarian land involved, if there is, then the same restrictions apply and they also will have to set up a Bulgarian Limited Company.
The Buying Process
There is a choice of two types of company you may register; either a Limited Liability Company or a Sole Proprietor Limited Company.
A Limited Liability Company is formed by 2 or more shareholders. Shares in the company are distributed between these shareholders, and although normally divided equally, say between husband and wife, this decision is entirely up to you.
A Sole Proprietor Limited Company is formed when an individual solely owns the whole assets of the company. In this case there are no other shareholders or partners; however it is possible to add shareholders and to change the registered address at a later date. ( In choosing this option, please be aware that the Inheritance Laws in Bulgaria differ from those of, say USA and UK and you should seek legal advice regarding a writing a will in your own country).
To form the company the following documents are required, and will be arranged by your Solicitor:
An article of association /Constitutive deed;
Minutes of the General meeting of the company for setting up a company;
Notarised consent and signature specimen;
Declarations pursuant to Art. 142 of the Commercial Act;
Declarations pursuant to article 13, Para 4 of the Commercial Register Law;
Minutes of the General meeting of the company containing a resolution to purchase real estate in the Republic of Bulgaria and appointing an attorney to take the appropriate actions regarding the purchase.
When setting up a company in Bulgaria you will need to open a personal account at a local bank. You can open it in Euros or in Bulgarian Lev (LV); this bank account will be used for money transfers relating to property purchases. It does not need to be a business bank account even though you are buying the property through a company. The minimum deposit required to open this account is 2 Lev (LV). Once the company is registered, you can withdraw the balance and close the account if you wish, however, we would advise clients that they might like to leave the account open so it can be used for direct debits, internet banking, etc in the future. Now the company is setup, you are ready to start the process of buying property in Bulgaria and as this is a one-time procedure, you may now use your Bulgarian Limited Company to buy as many properties as you desire anywhere in Bulgaria. As a registered company, you are legally obliged to file an annual return, but if the company is not actively trading (i.e. for Bulgarian property ownership only), this is reasonably cheap and easy to do.
When you have found a property you want to buy and your offer has been accepted a preliminary contract that protects
the interests of both buyer and seller, will be drawn up by your Bulgarian Real Estate Agent who will make
the necessary checks of the title deeds to ensure that the property has a valid freehold title. You will then
have to pay a 10% deposit (non-refundable) to the Seller. You should employ the services of a lawyer (preferably one who speaks a language you understand) to handle the sale on your behalf.
When finalising the purchase of a property, the following documents must be presented by the Seller:
Original title deed
Updated plan of the property
A document issued from the Property Register with the Registry Agency to show the actual status of the property to ensure there are no burdens, mortgages, foreclosures, pending court disputes, alienation deals, rights in favour of third parties etc.
The above paperwork is required by the public notary to complete the purchase. It usually takes around four weeks for the sale to go through at which time you will be expected to pay the remaining 90%, notary fees and taxes before obtaining the title deeds for the property.
Bulgarian Property Taxes
Historically Bulgaria property sales included the common practice of under-declaring the actual value
of a property on the title deed in order for both the seller and the buyer to save on property taxes. This lower
value cannot be below the ‘tax valuation ’assessed by the tax authority but is usually considerably lower than the sale/purchase price.
Although this can appear beneficial to both parties at the time of purchase, it can actually work against the buyer at the point of any future sale of the property because the difference between the theoretical purchase price and sale price stated on the title deeds would be greater than the difference between the actual purchase price and the sale price. This would give rise to a greater perceived profit and hence greater capital gains tax liability.
There are taxes to be paid on all property transactions resulting in a profit made by a company. Private individuals may sell one property every three years, without the need to declare the profit for tax.
As it is still very much in the seller’s interest to under-declare the value, it is up to the buyer to specifically request the full valuation to be entered on the title deeds. This will usually cost a little extra in up-front taxes, but it should be more than compensated for at the time of sale.
Buying property in Bulgaria - Additional Costs/Fees to be Paid
When buying property in Veliko Tarnovo with Yantra Homes, in addition to the price of the property the following costs/fees should be taken into consideration:
The usual fee charged for setting up a Limited Company is Euro 350.00 including disbursals;
Our agency fee is 3% of the purchase price, subject to a minimum of Euro 750 (Please note: In Bulgaria it is standard practice for the buyer to pay agency fees);
Notary, stamp, court fees and property tax (legal fees) are approx 4 – 5% of the declared deed value (see Property Tax section above). (This fee is paid directly to the Notary Public);
Solicitor fees the same as the Notary fees at 4 – 5% of the declared deed value; (Paid directly to the solicitor);
Company accounting (annual tax return) approximately Euro 200;
Registering utility contracts (water, electricity, etc) usually charged at Euro 25 per contract;
Our charges for any after sales services @ the rate of Leva (LV) 20 per hour.