LAW / LEGAL REGULATIONS

Property for foreigners
There are no obstacles for foreigners to get title for buildings, as well as limited real rights (right of use, right of constructions). Up to now there is just one restriction: it is forbidden by the law for foreigners to become owners of the land under the buildings they had bought. They are no allowed to buy agricultural lands as well (this is a Constitutional prohibition). This is true for physical persons. All restrictions become irrelevant if foreigners set up or join a company in corporate under the Bulgarian legislation, which can acquire full land ownership rights including ownership rights on agricultural land. Therefore the most common method for foreigners buying property in Bulgaria is to set up a company which then owns the land and the buildings. It is considered that in Bulgaria a real free market for land will be established for foreigners seven years after we become part of EU. And then the foreigners will be permitted to buy land for housing or administrative buildings. This historic restriction is one of the reasons why property in Bulgaria is so competitively priced compared to Western and Central Europe.

Legal treatment of foreign investors in Bulgaria
- There are several guarantees for foreign investment in Bulgaria:
- National Treatment
- Most Favored Nation Status
- Priority of International Treaties
- Legal Guarantees against Adverse Changes in the Law -the provisions of the Law that have been effective at the moment of making the investment, should be applied for any foreign investment executed before the changes of the legislation setting up legal normative restrictions for the foreign investment
- Protection Against Expropriation - real estate property owned by a foreign person can be expropriated only on lawful grounds, for especially important purposes of the State that can not be satisfied otherwise

Regulations for the import and export of currency by foreigners
Foreigners may export and import Bulgarian banknotes and coins in circulation to the amount of up to BGN 10,000 (about GBP3500). Sums exceed in this amount may be imported and exported only with a permit by the BNB (Bulgarian National Bank), valid for a period of up to90 days of its issuance date. The foreign persons may export convertible (hard) currency in amounts that do not exceed the amount of the foreign currency they had imported and declared.

Preferred types of business organizations with foreign investment
Foreign nationals are not able to own land in Bulgaria directly - this law is liable to change in the next few years. Meantime this obstacle can be
overcome by incorporating a business in Bulgaria and owning the land as an asset of the business.
The most common form of organization for foreign investors is a Limited Liability Company. Other types are General Partnership, Limited Partnership, Joint Stock Company, Sole Proprietorship, Joint Venture, Holding, Cooperatives, Branch, and Representative office. The extent or amount of foreign participation in companies is not limited. Limited liability companies, unlimited partnership, public limited companies, limited partnership and cooperatives are legal entities.

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REGISTERING A PRIVATE LIMITED COMPANYIN BULGARIA

Who is entitled to setup a Limited Liability Company?
A foreign or Bulgarian person (judicial or physical) can form a Limited Liability Company in Bulgaria. Private Limited Company (a limited liability company) - OOD - it is a commercial company with share capital owned by its members whose liability is limited to the amount of the capital subscribed. A private limited liability company may be founded by one or more persons, including foreign natural or legal persons.

Capital needed for setting up a Limited Liability Company
A bank account must be opened in order to deposit the company capital and to attend to the company needs. The minimum required capital is BGN 5 000 (EUR 2500). It is required that at least 70% (BGN 3500) of the capital is raised at time of registration. Once the entire share capital has been paid up these funds can be accessed and withdrawn.

Administrative costs for setting up a Limited Liability Company
The administrative costs - payable to the state and registration court and lawyer fees are 500 euro.

Time needed for setting up the Limited Liability Company
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.

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TAXES AND CHARGES

Transfer Fees
Legal and running costs in Bulgaria tend to be lower than those in the rest of Europe. There are notary and municipal fees, connected to the process of buying property in Bulgaria.
2% municipal fee on the market price or book value is paid to the municipality, where the property is located.
The notary fee is paid on the higher of the market price or book value of the property on varying rates, specified in a special notary chart. The maximum fee is 3000 BGN (1500 EUR).

Notary chart

In addition a notary fee of 0.1 % of the value of the property is payable on registration.

All foreign buyers purchasing real estate properties must be aware that in Bulgaria there are such terms as "tax estimation tax" an "purchase price". The tax estimation price is for the purposes of real estate taxation and is much lower than the actual selling (purchasing) amount. When you re-sell your property convention in Bulgaria is the new buyer pays the full transfer taxes.

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. Transactions with land and lease of property for residential purposes are exempt from Value Added Tax.

Rental Income Taxation
The basis of the taxable rental income of a company, investing in Bulgarian real property is the gross rental income derived from the property deducted with property-related expenses and depreciation. Such expenses include repairs, maintenance, renovation and similar costs and interest on loans used for the acquisition of the property. The flat corporate tax rate is 15%.

Depreciation
Land itself is not depreciable, but any immovable property affixed there to is, provided that it issued for the business activities of the company and is booked 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 purpose of re-selling it 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 un clear in which situations a property should be treated as an "investment property" rather than as a fixed asset.

Local taxes
For the properties owners there are 2 kinds of tax:
- Real estate tax, which is paid annually based on 0.15% of of the book value of the property - the valuation is made from tax department and it depends on the place where the property is located. The most expensive area is the capital Sofia.).
The real estate tax applies to land (but not to agricultural land and forests) and buildings. The tax is payable regardless of whether the immovable property is used or not. The tax liability is on the owners of the immovable property.
- Annual waste - collection fee, which is calculated based on value of the property and depends of place and municipality - vary from 1.6 to 5 per 1000.

Arable land is exempt from local taxes.