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Destination & Buyer Guides |
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Buyer Guide | FAQ | Taxes
 Buyer Guide
Making an Offer
When you have decided on a property in Bulgaria you will need to make a verbal offer through your agent for acceptance by the vendor. Once this is done, negotiations will proceed. At this stage a lawyer should be appointed by you to formalise the agreement.
Appointing a Lawyer
It is wise to appoint a lawyer who is fluent in your language so that you fully understand all the legalities and proceedings. Our agents will gladly recommend a good lawyer in Bulgaria who will carry out all the necessary checks on the property and complete the legal requirements of the sale.
The Purchase
First of all, the buyer should sign a preliminary contract for the purchase of the estate and pay the owner a sum of 10% of the total purchase price as a down- payment. Usually these contracts are signed while the owners prepare themselves with the necessary documents for the signing of the Title Deed before a Public Notary.
After a certain period of time (usually one month), the buyer pays the remaining 90% of the purchase price and obtains a Title Deed for the ownership of the property.
Expenses For Property Purchase in Bulgaria
- 2% State Tax - similar to a stamp duty and calculated on the purchase price.
- Notary Fee - calculated in accordance with the price stated in the Title Deed. Expect to pay approx. €350.00 on a typical 2 bed apartment.
- Land Registry - 0.1% of the value.
- Legal fees - expect to pay 1% of property value in most cases.
An Example:
If the property costs €50,000, all fees (excluding legal fees) would amount to nearly €1,300. For a deal where the property costs €100,000, fees would be around €2,400, and for a property valued at €200,000 they would total around €4,500. Traditionally these costs were split 50/50 by Bulgarians, however nowadays it is a subject of agreement between the vendor and the buyer.
 Factors to be Aware of
In order to avoid paying excessive amounts of Capital Gains Tax (which can amount to as much as 30% of the real purchase price), it is likely that the current owner of the property will not want to declare the real price of the property on the Deed of Transfer. The Title Deeds will therefore display a lower figure than the actual price you paid for the property. This situation will have its financial consequences, such as not having official documents for the real money you spent plus liability for higher taxes if you decide to sell the property afterwards and declare its real value. You will need to consult your broker/lawyer on this and all aspects of the deal to avoid any eventual misinterpretations or oversights.
Financial Services
Mortgages can be arranged for your property purchase in Bulgaria. Alternatively you can request a quotation for a mortgage from our experts.
FAQ
Can foreign nationals own property in Bulgaria?
Yes, foreign nationals are free to own as much property in Bulgaria as they wish, without restrictions. However, if you purchase land, you are currently required to incorporate a business in Bulgaria and own the land as an asset of the company.
Why should I choose Bulgaria?
Bulgaria is ideally situated in Southeastern Europe and is easily accessed by direct flights from most European airports.
Bulgaria has something for everyone. A warm climate entices year-round tourism, along with a wide range of cultural and historical interests for sightseeing. Bulgaria also boasts a rich variety of natural beauty, from stunning blue flag Black Sea beaches, to beautiful mountains with ski resorts. It is small wonder that Bulgaria is the fastest growing holiday destination in the world. Major tour operators such as Thompson and First Choice now include Bulgaria in their brochures and cite it as one of their top sellers.
Investment wise, high growth figures are very achievable while land and property prices are on the increase. Over the past two years, prices have risen by over 50% in some areas and with the enormous boost to tourism currently underway, buy-to-let purchases are also proving highly lucrative.
 So Bulgaria now offers some of the best investment opportunities available worldwide and, with economic growth predicted by the World Bank to be 6% by the end of 2006 and EU membership set for January 2007, Bulgaria is a wise choice for property investment.
What is the economic and political situation?
Bulgaria’s socialist party has taken drastic and speedy measures to qualify its infrastructures for accession to the European Union in 2007.
Today GDP stands at an encouraging 5.5 per cent and the international community now views Bulgaria in a very favourable economic light. Efforts to reduce inflation have succeeded (currently around 0 per cent) and privatisation plans are being driven forward at a great pace. The World Bank director for Bulgaria & Romania has claimed Bulgaria as “a good place for investment”, highlighting the fact that in just 3 years, the country has risen from being the World Bank’s lowest rated country in this Eastern region, to being the highest.
Today, foreign investors are focusing their attention on some of the very exciting real estate prices still on offer in Bulgaria as investments in the right locations are fetching high capital returns. An enormous increase in tourism has helped create a healthy economy in Bulgaria and prompted many foreigners to invest here. Early investments will prosper as following EU membership in 2007, prices are predicted to soar.
How do we travel to Bulgaria?
Budget airlines have been running peak season flights to the Black Sea hubs of Burgas and Varna for a few years already and British Airways has just jointed them and begun direct flights to Varna.
Flights arrive at one of four international airports: Sofia (SOF), the largest of the airports, Varna (VAR), Ploudiv (PDV) for charter flights to the ski resort of Pomparovo, and Burgas (BOJ) for domestic flights and for summer charter flights to the Black Sea resorts.
What is the direct flying time from UK to Bulgaria?
Bulgaria is only a short flight from the UK (2 ½ to 3 hours) and has connections from many UK airports.
Is a visa required to enter Bulgaria?
To travel to Bulgaria for a holiday or a brief stay you do not need to have any particular visa type.
Depending on your home country you can remain for either 30 or 90 days in a six month period - we advise you to consult your country’s Bulgarian Embassy for specific details.
Taxes
 Rental Income
A company investing in Bulgarian property is taxed on its gross income derived from the property, minus tax-deductible, property-related expenses and depreciation. Tax-deductible expenses include repairs, maintenance, renovation and similar costs, as well as interest on loans used for acquiring the property.
A Municipal Tax at a rate of 10% of profits is due. This is then deductible in calculating taxable profits which are subject to a flat corporate tax rate of 15%.
Depreciation
Land itself is not depreciable, although any immovable property affixed thereto is, provided that it is used for the business activities of the company and is recorded as a fixed asset.
Depreciation for tax purposes is at a rate of 4% per annum, and is usually calculated using the straight-line method. Real estate acquired for the purpose of re-sale is considered as "investment property". As such, it is non-depreciable and is subject to annual revaluation to the market value. In practice, it is often unclear in which situations a property should be treated as an "investment property" or a fixed asset.
Loss Carry-Forward
Tax losses can be carried forward for a five-year period. Losses cannot be offset against profits from previous years.
Capital Gains
Capital gains are treated as ordinary income subject to corporate income tax.
Transfer Taxes
Apart from corporate tax, no other direct taxes are levied on the transfer of real estate. However the transfer is subject to notary and municipal fees. 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. In addition, 2% of the market value of the property is paid to the municipality in which the property is located.
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 value added tax.
Value Added Tax (VAT)
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 it is registered for VAT purposes. |
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