Bulgaria is considered as one of the fastest growing tourism and property markets, attracting the tourists with beautiful beaches, resorts and stunning mountains. The state is a popular holiday destination and the fact is most suitable for the foreign investors of commercial property in Bulgaria. Apart form the afore mentioned reason, Bulgaria also has a stable economy, great capital growth and EU membership, making it the most sought out place for property investment.

The liberal foreign investment laws in Bulgaria are encouraging more and more people to invest in the commercial property. According to the law on property ownership rights, foreign investors can buy buildings but not land and the easy solution for them is to set up a company which can own the land for them. The extent of foreign participation in companies is not limited and they can have any number of accounts in any Bulgarian bank.

Buying Commercial Property in Bulgaria

When buying a hotel, an office, a shop or a warehouse in Bulgaria, the buyer should take into account some basics of getting a good legal title, as well as have knowledge of the legal system of the country. The basics include a view into the property, its price and conditions of purchase, title investigation, preliminary contract and title transfer followed by the registration of the property.

Setting up A Company

A company is an association of a defined number of persons for effecting commercial transactions with joint means. Companies should be legal and can be of the following types: general partnership, limited partnership, Limited Liability Company, Joint Stock Company and partnership limited by shares. The companies set forth in this Act can only be established. Also, banking and insurance activities may be carried out only by Joint Stock Companies or cooperatives. The founders of the company should be Bulgarian or foreign nationals (legal persons) possessing capacity. Multiple participations in companies by an individual are permitted to the extent of their compliance with the law.

Selling commercial property in Bulgaria will require a lot of legal issues to be settled, along with contemplating tax and business law consequences of the sale. Property rental contracts, mortgaging of the property and shares should be done legally.

Transformation of Agricultural Land to Industrial Land

If the land purchased is agricultural, the legal status of the land will have to be transformed from agricultural to industrial. The regional directorates “Agriculture and Forests” can be contacted for the purpose, if the requested area is up to 5 hectares and the land is located in the land areas of the settlements on the territory of that region. For the remaining cases, Commission for the Farm Lands would suffice. In the presence of all required documents, the decision will be taken by the commissions for change of the designation of the land within 14 days from filing. The state fees are decided by the Council of Ministers, complying with the Preservation of Agricultural Lands Law, to be paid by the investor.

Off-Plan Property

If a property is bought off-plan, the formal completion of the project is notified by the Bulgarian government. The Bulgarian system is based on regular inspections and certifications of the structure during the construction period. The certificate “Act 15” signifies overall completion of work while “Act 16” signifies a readiness to use, in case of newly built or reconstructed buildings.

Statutory Fees for buying a Property

The statutory taxes and fees cover municipal taxes for property acquisition (2%), Notary public fees and fees for registration of the title deed in the Registry Agency. The entire sum amounts approximately to 3.5% of the purchase price.

Bulgaria has liberal foreign investment laws in the region regarding Bulgarian real estate and foreign investors. Property in Bulgaria is growing fast with the increase in property prices, placing the country among property price growth leaders on a global scale. The country has been politically stable with a developing economy.

The preferential conditions for foreign investors have generated exceptional business opportunities and investment growth potential. The real estate prices are lower in Bulgaria as compared to other destinations in Europe and that makes the country attractive and profitable.

Bulgarian Law

According to the Bulgarian constitution and legislation, only Bulgarian citizens and legal residents can own land in Bulgaria. However, foreign investors can invest in real estate in Bulgaria either directly or through a local company. They can acquire buildings but not land and can purchase land by setting up a company, which would then own the land for the investor. Limited Liability Company is the type of organization for foreign investors and the extent of foreign participation in companies is not limited by law.

Forming a Limited Liability Company

A foreigner or Bulgarian resident can form the company. The setting up of a company can be done by a Bulgarian lawyer in about two week’s time. To register a Limited Liability Company, a deposit of at least 70% of the company capital amount is required as a legal requirement. The money however remains available for use once the company is registered. The law allows using the company for the purpose of renovation and improvement of property according to the investor’s wish. Foreign organizations can open bank accounts and the company stake is not limited.

Real Estate Tax

The transfer of property levies corporate tax. No other tax is levied on it and the transfer is subject to notary and municipal fees. The notary fee is paid at varying rates depending on the market price of the property. 2 % of the market value of the property is also paid to the municipality upon completion.

Local Taxes and Rates

The people owning a building or a plot are obliged to pay a property tax. If the building is built on a municipal plot, the value of the plot will also be included in the tax. However, arable land is exempted from local taxes. Waste-collection fees should also be paid along with the property tax which is determined after registration of the ownership with the municipality. The registration should be done within 60 days of completion, failing which, small fines can be levied.

Value Added Tax

Transactions regarding land and lease of property for residential purposes are exempted from Value Added tax. Other real estate transactions are subject to the tax at the rate of 20%. The buyer can be entitled to a VAT refund if it is registered for the purpose.