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Overseas Investment Property

Essential Reading

Bulgarian property - useful information about buying

Premier Apartments Bulgaria primarily seeks to facilitate investment in off-plan developments in the Bulgarian property market using the criteria detailed below.

The markets of South East Europe currently offer some of the best returns in continental Europe. We believe that these potential returns, coupled with structural and legal reform programs currently in place as a result of EU entry ambitions should lead to asset price inflation as a result of risk reduction.

The criteria used in choosing the locations are:

  • Prime strategic locations
  • Infrastructure, and
  • Current and future contingent developments

Even if your budget is small, property in Bulgaria offers considerably value for money when compared to other European destinations.

The majority of people who are buying property in Bulgaria are looking for holiday/second homes often with a view to retirement in later years although there are an increasing number of investors who are simply buying property with a view to making a capital gain in the short or long term. This increasing interest, along with other factors such as the rise in tourist numbers, better awareness and EU entry on the cards for 2007 is pushing prices higher.

Although purchasing property in Bulgaria is not too dissimilar from buying anywhere else there are some differences and important points for you to bear in mind below. We hope you find this guide both useful and informative.

The Buying Process

  1. Property Selection
    Having chosen the apartment you want and confirmed its availability; complete a reservation form and pay a 750 reservation fee. This can be done on-line on our web page www.premierapartmentsbg.com.
    Note: Your reservation fee is non-refundable. It will however be deducted from the purchase price of your property upon receipt of the first instalment.

  2. Use a Company or Not?
    According to the Bulgarian Constitution, foreign individuals may purchase buildings/ apartments but not land. Therefore the preferred option 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). Don't however hold your breath as current amendments will EU citizens to acquire land directly only in 2014. In the meantime a company is still required for land ownership.

    Hence, there are 2 methods to acquire an apartment:

    With a portion of land; or Freehold unit title (with no land).

Property Acquired with Land

First step is the establishment of a locally registered company. This is a standard process that most local legal firms offer, and takes anywhere from a few days to several weeks. Allow around €750 for legal fees relating to the company formation and €500 pa for administration costs.

Key points worth noting are as follows:

  • Articles of Incorporation must be prepared & signed by all shareholders in front of a Notary in Bulgaria; a Bulgarian Embassy or apostled in your home country.
  • A local bank account must be established;
  • The minimum share capital required is €2,600 (5,000 leva);
  • Company taxes are calculated at 15% of net profit.

Property Acquired without Land

There is no need to set up a company. The apartment is acquired freehold and is owned directly by the acquirer. There is no need for the acquisition documents to be signed in Bulgaria or at a representative Embassy.

  1. Sale & Purchase Contracts

    • Once you have selected your apartment and paid the reservation, you will receive a preliminary sale and purchase contract.

    • Check all the details are correct before signing 2 copies; we recommend the use of an independent lawyer to review the contract before you sign;

    • Return the documents to either our London or Sofia offices along with your initial instalment as detailed in the contracts within 30 days.

    • Should you wish to arrange an inspection trip, we would be more than happy to assist you.

  2. Construction & Final Completion

    • Usually there are one or more interim instalment payments to be made prior to the full completion of the property. We will notify you of the estimated payment dates.

    • Upon completion of the property and payment of the final instalment, the transfer of title may occur. In Bulgaria, the property registry system works in conjunction with local Notaries.

    • In order to take delivery of your property, you will need to sign the 'Notary Act'. This is a standard form document transferring ownership of the property into your name.

    • You will receive title deeds within 7-10 days of the Notary Act from the local council.
      Note: If you are unable to attend the Notary Act in person, your legal representative may attend in your place. This individual will need to be a qualified Bulgarian solicitor in possession of a 'Power of Attorney' agreement. We are able to liaise with you to arrange this.

  3. Additional Acquisition Costs

    Local tax
    According to the Local Taxes and Fees Act, the tax payable upon the sale-and-purchase of an apartment is 2% local tax.

    The basis for calculating the tax is the higher of:

    • The apartment's price as specified in the notary deed, and
    • The tax evaluation of the apartment.

    Such tax is payable by the purchaser, unless the parties have agreed otherwise.

    Notary fees
    The notary fees are determined in accordance with the tariff for the Notary Fees. There are various charges but you should allow €1,500 - €2,000.

    Legal fee
    Each lawyer or law firm is free to determine its fees, subject to certain constraints. There are also different schemes of determining the fees (e.g. on an hourly basis, a fixed fee etc.).

    The rates of the lawyers vary from €80 to €150 per hour. Total legal fees are estimated at €500 - €600.

  4. Other Expenses

    • Annual property taxes amount to 0.15% of the tax value of the property (usually significantly below the acquisition price);
    • Maintenance of your property is covered by the Management Contract and is charged at a fixed rate in euros per square metre per year; and
    • Waste-collection fees are determined when you register ownership with the local municipality; rates vary from region to region.

    Remember to register your new property ownership with the local authorities after completion for rating purposes. This should be done within 60 days following completion.

BUYER BEWARE

Understanding the vat implications on any property purchase in the Bulgarian property market is extremely important, given the potential mortgage and tax implications.