PURCHASING PROCESS 

v    Firstly ensure you are with a reputable estate agent and ask to see references from previous clients who have brought through them. It is easy to check to see how long they have been registered. Ensure you see all charges up front and don’t use their personal solicitor if they have one working for them.

v    After you have selected the property you would like to buy, you will need to negotiate the price for the property. This is done by the estate agent on your behalf.

v    Once you have agreed on a price, you will be required to place a reservation fee of about 2,000 euros to secure the property for a set period or a period of normally 14 days. If no reservation fee is received the property will stay on the market and you could lose it if another buyer comes with a reservation fee.

v    It would be wise now to start things moving for forming a company – all foreigners purchasing land or houses in Bulgaria have to form a company and it is basically the company who is buying the property.

v    The solicitor will do all the paperwork for the company. You will have to decide a name for the company and who will be in the company; the solicitor will open a personal and company bank account. You are required to place 5,000 lv in your company account to start the formation – after the company is registered you can withdraw this money, it is yours.

v    The rights and obligations of the buyer and the seller will be set out in a Preliminary contract for purchase and sale of real estate. At this preliminary contract you will be required to pay a 10% deposit and the estate agents fees. After conclusion of this contract you will normally have a set period or 30 days to complete the purchase.

v    If the seller decides to withdraw from the sale during the set period or the period of 30 days, you will be entitled to twice the amount of the deposit back, and similarly, if you decide that you are no longer interested in buying the property, the seller is entitled to keep the reservation fee or deposit. These issues must all be addressed in the Preliminary contract;

v    Your solicitor will check that the current owner is legally able to sell the house, is in possession of a title deed, and that there are no outstanding debts or encumbrances on the property; The estate agent would have carried out various checks prior to him advertising the property.

v    Prior to the end of the set period or thirty-day period, you must agree on a completion date with the seller;

v    You will be required to pay the outstanding balance on the house to the seller – through your solicitor. You will also need to pay the  solicitor’s fees as well as state and notary taxes;

v    The finalisation of the deal will take place at a notary’s office (for this you will need a legal authorized translator to act on your behalf). The notary will then check that all persons present are who they say they are and go through the circumstances of what is taking place. If there are no objections to anything and all are happy the notary will ask the persons to sign all the necessary documents.

v    Later on the same day, you will be able to pick up the new title deed certifying you are the new legal owner of the property, or – more correctly – showing the property as being owned by your company, with you as the legally appointed representative of that company.  

Then the Land Registry records have to be updated and different government agency have to be notified. 

When purchasing a house, how are the fees and taxes calculated?

·       Estate agency fees – 3% + vat.
·       Notary fees and state taxes are average 3.5% of the price, estimated by the state.

Do I have to be physically present in Bulgaria to set up a company and/or to purchase a house? 

No, although it would be nice to combine buying with a holiday. However, if you undertake this procedure from abroad, authorised translations of all the paperwork must be obtained including copies of your personal documents. These documents must be sent to Bulgaria by registered post after being signed by the FCO. 

I have heard that it’s common practice to declare a lower selling price on the title deed in order to avoid paying high taxes. 

This is a very common practice carried out by most estate agents and builders who want to avoid paying tax; it is illegal.

In our opinion, the price stated on the title deed is considered “the selling/purchase price” and the government’s/ state’s tax assessment is the “tax estimation price”, which is the Bulgarian equivalent of the rateable value in the U.K.   

Do I need to submit tax returns for my company? 

Yes, tax returns are made annually. The Bulgarian fiscal year runs to the end of December and tax returns have to be filled by the end of March of the following year. If your tax returns are not submitted before the deadline, you will be fined. All the documents must be filled in Bulgarian; we have accountants who can do this for you.

If you have established the company only for the reason of purchasing a house, then you will have a non-operational company, which needs a relatively simple tax return. Since the company will not register any profits or losses, no income tax or corporate tax liability will apply; 

If I wish to buy more than one property, do I need to set up more companies? 

No, with your established company, you can purchase as many houses as you would like. However, you should be aware that VAT is payable when selling property. Each company has a threshold of EUR 25.000. Once you go over that limit, 20% VAT will need to be paid on subsequent sales, based on the selling price of the property.  

I have heard about giving Power of Attorney to people, will you explain in details? 

According to Bulgarian legislation a foreigner can assign Power of Attorney to another person. Both parties may sign the document personally before a Notary. The notary is obliged by law to ensure that all parties concerned are fully aware of what they are signing.

It depends entirely on you what powers you will transfer to another person. For instance, you may wish to have someone deal on your behalf with the utility companies while you are abroad, or you may wish to give someone the power to purchase and/or sell properties on behalf of your company. You can annul a PoA at any time. Speak to a solicitor first.