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					The law on foreigners owning property in Bulgaria
According to the Bulgarian Constitution, foreign individuals can buy buildings but not
land. Therefore the most common method for foreigners buying property in Bulgaria
where they also wish to own the land is to set up a company which then owns the
land and the buildings. The law is expected to change on this within the short to
medium term with the expected entry of Bulgaria into the European Union (2007). This
historic restriction is one of the reasons why property in Bulgaria is so competitively
priced compared to Western and Central Europe. Current amendments to the
constitution will allow citizens of countries with which Bulgaria has agreements on land
sales to buy land in 2007 when the amendments would come into effect, while EU
citizens will have the right to buy land in 2014. In the meantime a company is still
required for land ownership.

If your purchase includes land a Limited Liability Company (OOD) will need to be

Who can form a Limited Liability Company & how?
A foreign or Bulgarian person (judicial or physical). The company owners will be liable
for the company's obligations to the value of his/hers share in the company's
registered capital. Articles of Incorporation are prepared & signed by all shareholders.

A company 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 up
at least one third 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 the
application to the district court:

1. Articles of incorporation;
2. Memorandum for appointment of 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 within which all Bulgarian legislation is
published. 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. The process of forming your company can take anywhere between a few
days to a few weeks. Finally, your new company will need to register immediately with
the National Tax Register Authority. The costs involved are: 3,500 leva = 70% share
Administrative costs (payable to the state & registration court) are 250 leva (just over
£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.
Allow betwen EUR 500 - 700 for charges relating to the formation and registration of
your company.

Real Estate Tax Summary
Apart from corporate tax, 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 BGN 3,500. In addition, 2% of the market value
of the property is paid to the municipality in which the property is situated upon
completion. This is a little like the UK equivalent of Stamp Duty.

Local taxes and rates

The owner of a building or a plot is obliged to pay a 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 property tax, owners also pay waste-
collection fees. These fees are determined when you register your ownership with the
municipality, which should be done within 60 days of completion. Small fines are
levied where this registration is done after 60 days.

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% assuming that the seller is VAT registered. The buyer is entitled to a
VAT refund, provided that it is registered for VAT purposes.

Please note that the information contained in this document is to be used as a guideline only and does not constitute
advise. PropertyQC make the best endeavours to ensure that the information contained is up to date and accurate
at time of writing, but this should not be relied upon. We recommend that a qualified lawyer is appointed.

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