|
 What makes
Bulgaria currently the top country for property investment?
Bulgaria is a country that not only has weather
comparable to Spain and other top holiday destinations, but also
property prices that are less than a quarter of their Spanish
counterparts.
Over 150 days of sunshine a year, with average
summer temperatures of 26ºC (79ºF) and occasionally climbing to a
sizzling 35ºC (95ºF).
Beautiful Blue flag beaches for the summer
holidaymakers and top ski resorts for winter holidaymakers only a few
hours away.
Flights are only two and a half to three hours
from the UK or Ireland. Low-cost airlines are entering the market and
the number of direct flights is increasing.
Bulgaria is fastest growing holiday destination in
the world. Major tour operators such as Thompson and first choice have
recently added Bulgaria to their brochures and site it as one of their
top sellers.
The cost of living is significantly lower than
other European countries, with a dinner for two costing about 7 Euros (5
pounds sterling) and a pint for 0.70 Euros (50p).
Bulgaria is a full member of NATO and is due to
join the EU in 2007.
The currency (Lev) is pegged to the Euro, making
it stable and less volatile. Most property can be bought and sold in
Euros.
Bulgaria is politically stable, with government
bonds being of investment grade.
Land prices are flying, with the average cost of
land on the Black Sea Coast at 150 Euros per square meter, which is
predicted to rise to over 400 Euros in the next three years.
In the last two years property prices have risen
by over 50% in some regions and is expected to grow at the same rate as
has seen with the recent boom in the Spanish market.
Highly profitable rental returns are achieved
through holiday rentals.
Property Purchase Procedures
Restrictions on Property Ownership by
Foreigners
Foreigners are allowed to gain
ownership of buildings and premises within a building, as well as
limited property rights (i.e. the right of use, construction and
servitudes).
There are restrictions upon
foreigners acquiring the ownership of land in Bulgaria. However, they do
not apply to foreign or local companies registered in Bulgaria. Thus
foreign people can acquire full land ownership rights, including
ownership rights on agricultural land, by setting up or joining a
Bulgarian registered company.
The Bulgarian government is planning to liberalize
the property law for foreign ownership in light of the country’s
upcoming EU accession.
The purchase process is as follows:
- A reservation deposit is paid to hold the
property. (Usually 500 - 1000 Euros)
- If the property is a re-sale or land then a
Bulgarian company must be formed to own the land.
- An initial private purchase contract is then
signed (checked first by your lawyer) and an initial payment is due (usually
10% - 30%, depending upon whether a re-sale or off plan).
- The Notary Act is then signed in front of a
Bulgarian Notary, either in Bulgaria or in the Bulgarian Embassy. In
the case of an off-plan development the Notary Act is signed once the
building is complete.
The time each stage takes place depends upon the
type of sale. In the case of an off plan development, private contract
is usually signed within weeks of reservation.
Relevant fees and taxes
- Legal fees – between
€900 – €1500 (including handling fees for setting up a company)
- Stamp duty – 2%
- Notary fees – usually
less than 1% (depending on the property purchase price)
- Land registration tax –
0.1%
- Annual property tax – 0.15%
- Capital gains tax – 15%
(0% if buyer sells prior to property completion or after 5 years of
property ownership)
Stamp duty - Transfer Tax
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 real property is
situated.
Annual propety tax
The owner of a building or a plot is obliged to pay a real 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 real property tax, owners also pay waste-collection
fees.
Rental income
The basis of the taxable income of a company,
investing in Bulgarian real property is the gross income derived from
the property less tax-deductible, 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. A Municipal Tax at a rate of 10% of profits is due. This is
then deductible in calculating taxable profits which are subject to a
corporate tax rate of 19.5% (15% in 2005).
Value Added Tax (VAT)
All other real estate transactions are subject to VAT at the uniform
rate of 20%. The buyer/lessee is entitled to a VAT refund, provided that
it is registered for VAT purposes.
Mortgage - the Facts about Financing a
Bulgarian Purchase
|
Currency |
EURO |
|
Current Interest Rate |
7.5%, variable |
Loan to Value |
Up to 70% of the valuation price |
Term |
5-15 years |
Minimum Amount |
EUR 40,000 - No maximum (Generally) |
Status |
Full status only |
Fees
Arrangement fee
|
Approx 1% |
Building Insurance
|
Fire, flood and earthquake
|
Contents Insurance
|
Recommended |
Life insurance
|
Not required |
Fees
|
Borrower subject to legal
fees, costs, as well as admin and valuation fees. In addition,
the maximum Notary fee ever payable is €1,500. |
Recommended Documents
- For Proof of Income:
- Copy of your passport(s)
- Last 3 months pay slips
- Last P60 and letter from employer confirming
annual salary and length of service
- Bank reference letter
- 3 months bank statements
- Breakdown of assets and liabilities and monthly
commitment to borrowings
- Self-Employed borrowers:
- Previous years tax return
- Last 3 years accounts
- Letter from accountant confirming your profit
figure and taxes as up to date
- Proof of income is required in all cases and
can be made up of earned income, pension, investment or rental income.
Please note however, the lender will not always take all or part of
this income into account when determining the maximum loan available.
- Non-status / self-certificated or limited proof
of income loans are currently not available.
Other Procedures
You must ensure you have the full title to the
property upon completion and the appropriate documents must be available
for your lender. Finance will be granted only for completed apartments
where the State Acceptance Commission has issued a valid “Use Permission
Certificate”.
You may choose to use the lender’s solicitor in Bulgaria as your own
representative. If this is the case, you will need to specify this in
the mortgage application. Your relationship with the solicitor will be
totally separate from that of the lender and the solicitor.
The completion of a Bulgarian mortgage takes place
in front of an appointed Bulgarian Notary officer and all
representatives of the parties to the mortgage need to be present. A
power of attorney will need to be presented to the lender in good time
before completion – a draft document will be provided by the lender.
If you intend to be present at the completion to
sign all the relevant documents and you do not understand the Bulgarian
language, a translator will be required to respond to the Notary. The
translator will also be required to sign the notary deed.
Vit Klima
|
604 568 553 |
