Recommendations and procedures upon purchase-sale of real estates in Bulgaria: 2. Bulgaria in the European Union 3. Guarantees of contracts of real estates purchase-sale 4. Public registers and institutions 5. Necessary preliminary documents and information Establishment of a company and entering it in the Commercial Register: approximately EUR 600. 7. Private contract of purchase-sale 8. Public contract of purchase-sale (title deed) 9. Means of performing the purchase-sale: physical person/company 10. Maintenance of a company in Bulgaria 11. Taxes and costs due upon real estate purchase-sale 12. Tax obligations upon future sale of a real estate 13. Bank institutions in Bulgaria. Financing 1. Introduction ↑ This presentation was elaborated in cooperation with Bulgarian legal and tax advisors and its purpose is not to literally quote the statutory texts, but rather give an idea about the applied side and the customary practices in contractual relationships in the field of real estate purchase-sale in Bulgaria. 2. Bulgaria in the European Union ↑ Republic of Bulgaria is a full member of the European Union since 01 January 2007 and that is why it is in a period of adaptation to various Directives and Regulations enforced in the European union as in the legislative, as well as in the taxation systems. 3. Guarantees of contracts of real estates purchase-sale ↑ In view of the statement in the preceding paragraph, it could be claimed that the real estate purchase-sale procedure in Bulgaria has all guarantees provided for that type of contractual relationships in any of the member-countries of the European Union. In this sense, here we have available all respective public institutions and registers that may provide the entire needed information on matters related to ownership, encumbrances, permits, etc., circumstances that should be taken into consideration upon real estate purchase-sale with all the necessary guarantees. 4. Public registers and institutions ↑ Like in Spain, Commercial Register, Property Register (Registry Agency), Cadastre also exist in Bulgaria, which can at any time provide updated information on the public data about any commercial company, about the executed transfers of real estates in Bulgaria, as well as real rights, encumbrances and mortgages established on such properties. 5. Necessary preliminary documents and information ↑ Before the notarial attestation of a real estate purchase-sale transaction in Bulgaria, it is obligatory an inquiry to be made concerning all data related to the title, encumbrances and permits of the estate in question. In this regard, we think it is necessary the following information/documentation to be requested:
After studying said documentation, an inquiry should be carried out, through the solicitor in Bulgaria with whom you are in contact, with the respective public registers and institutions concerning the existence of encumbrances, mortgages and other real rights on the apartment, subject of the purchase-sale. Establishment of a company and entering it in the Commercial Register: approximately EUR 600.¹ ↑ Like in Spain, it is quite common in Bulgaria to enter into a contract with option of purchase or booking of the apartment, which is of private nature, except for the cases where the parties had agreed otherwise. Pursuant to that contract, Buyer shall pay to the Seller a stop-downpayment of about EUR 2 000. In said contract, a term is stipulated that starts running since the date of its signing (approximately 1 month) for the further signing of a private purchase-sale contract, in which the payment schedule is stipulated depending on the stage of construction works completion for the apartment. Also, the regime and penalties are stipulated in case of nonappearance or refusal by any party to sign the referred private purchase-sale contract. Penalty regime consists of the following:
¹ In case of nonappearance or refusal on the part of the Buyer to sign the private purchase-sale contract, Seller shall be entitled to retain the sum received upon signing the contract with option of purchase (booking), as well as to request from the Buyer indemnity, additional sum, equal to the stop-downpayment. 7. Private contract of purchase-sale ↑ As mentioned already in the preceding paragraph, after expiration of the term stipulated by the contract with option of purchase (booking), the parties sign a private purchase-sale contract for the apartment, in which the payment schedule is stipulated depending on the stage of construction works completion for the apartment. Analogically to the contract with option of purchase (booking), the private purchase-sale contract also contains clauses regulating the penalty regime in case of nonperformance by any of the parties, including a clause stipulating the obligation to appear before a Notary Public for the signing of the title deed of purchase-sale.
8. Public contract of purchase-sale (title deed) ↑ Pursuant to the provisions of the private purchase-sale contract, the parties shall appear before Notary Public for the attestation of the purchase-sale transaction. Signing the title deed is done upon payment of the last installment defined in the payment schedule. In case of impossibility on the part of the Buyer to appear before Notary Pubic in Bulgaria, he could be represented by another person explicitly empowered to sign the title deed of purchase-sale in Bulgaria, with the possibility the power of attorney to be issued as in Spain, as well as in any other country. In order to possess executive force, the power of attorney should carry notarial attestation of the signatures and Apostille and to be translated into Bulgarian. 9. Means of performing the purchase-sale: physical person/company ↑ Any physical person or legal entity – local (Bulgarian) or foreign, may purchase an apartment in Bulgaria. Whether the purchase-sale shall be performed directly by the physical person or acting through the company, depends in each given case on the purpose or the kind of activity, for which the acquired apartment(s) shall be designated to be used. In any case, just like in Spain, establishment and maintenance of a company is related to additional expenses on the purchase-sale transaction that should be taken into consideration. 10. Maintenance of a company in Bulgaria² ↑ The costs of maintenance of the company in Bulgaria are in general as follows:
² The sums stated in items 9 and 10, as expenses on remuneration for solicitors, are tentative and calculated on the grounds of our personal experience in this type of transactions, as well as the information provided to us by the solicitors practicing in Bulgaria. 11. Taxes and costs due upon real estate purchase-sale ↑ Expenses and taxes due upon a real estate purchase-sale transaction are as follows:
After the acquisition of the title of the apartment, it is an obligation of the owner to pay the local tax, which is by the moment about EUR 200 – 300/year. 12. Tax obligations upon future sale of a real estate ↑ After the acquisition of Bulgaria to the European Union on 01 January 2007, the Personal Income Tax Act in Bulgaria is regulating the future sale of the apartments in the following way:
In case seller is a company, the received tax profit is always subject to taxation of 10%. Also, concerning VAT, since the moment the profit realized by said company exceeds BGN 50.000 (about EUR 25.000), the registration of the company under VAT becomes obligatory and further operations shall be taxed by that tax accordingly (VAT). 13. Bank institutions in Bulgaria. Financing³ ↑ There are no limitations for opening current accounts in Bulgaria by the foreign physical persons or legal entities. In regard to granting mortgage loans, we should mention that Bulgaria is showing great progress towards that direction. In this sense, bank institutions are at your disposal to grant such loans with flexible repayment schedules and terms. ³ The exact conditions of granting a mortgage loan by any bank institution may be specified after a meeting and consultancy with the bank selected by the client. 14. Other useful information ↑
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