Practical Advice:
There are important laws, precautions and even frustrations to keep in mind when considering property purchase in Bulgaria. First, the buying process for purchasing property in Bulgaria depends upon whether the sale is with or without land. Off plan developments can be owned by foreigners, however foreigners need to register as a Bulgarian company (the fee is about €500 to €700) to buy property with a plot of land. The law regarding land ownership is expected to change, until then it is relatively easy to form a company that will officially own the land and the property.

Also important to be aware of is the precaution one needs to take during the closing of the property sale. Specifically, many sellers insist on declaring a lower price in the title deed to avoid paying tax. In order to reduce their tax liability, some sellers will state the tax estimation price in stead of the selling price. Not only is this type of tax evasion highly unethical, penalties are severe.

You need to insist that the selling price be stated on the deeds; if you allow the tax estimation price to be stated then decide to sell the property in the future, you will be faced with a large capital gains tax liability. Survival Books’ Living in Bulgaria reveals other common frustrations experienced by property buyers in Bulgaria. For example, buying property for investment purposes, for example to rent out in the summer, and being unrealistic about the income. It is very important to do your research well. If possible talk to neighbors to find out their experience. Look at the trend in the market, is the property you are looking to buy in a well known “hot spot” or even an anticipated one. Another frustration can result from not having a survey done on an old property. While surveys are not common in Bulgaria, it should be seen as a necessity for a property older than five years. Even if your real estate agent offers to conduct the survey, you should ask your lawyer to be responsible. The survey will verify all licenses and permissions to buy and sell are in place, as well as ensure there are not any outstanding debts against the property. You should also have them confirm structural soundness and build quality to make sure there are not any major problems before the contracts are drawn up.

Tax Highlights:

Municipal Tax
Similar to stamp duty, a municipal tax of 2 per cent of the purchase price of the property is paid to the local council.

Property Tax
Property tax covers the cost of registering the title deeds with the municipality and is equal to 0.15 per cent of the purchase price.

Value Added Tax
Sale of property for residential purposes and residential property rental are exempt from value added tax (VAT). Commercial property transactions are subject to VAT at 20 per cent, although VAT-registered entities are entitled to a refund.

Income Taxes at Fixed Rates
Income from dividends, interest, royalties, rents, capital gains and others paid to foreign residents is subject to a 15 per cent withholding tax.

Credits & Mortgages:
Traditionally the Bulgarian financial system has not been very advanced or a common method used in getting a mortgage from a bank to buy property. However, this has begun to change as more and more Bulgarian banks are offering mortgages both to Bulgarian citizens and foreign citizens. With that said, it is still usually less expensive to acquire a mortgage abroad by securing it against your property at home. Some promoters are beginning to offer pre-arranged mortgages which result in an easier process; however, it is still important to compare it with what you could get in your home country and even other Bulgarian banks.

A Bulgarian bank will typically cover about 60 to 70 per cent of the property value. The payback time is ranges from 10 to 20 years, and the interest will generally be amid 6 to 8 per cent. Keep in mind, the cost of acquiring a mortgage is roughly 1 to 2 per cent of the total mortgage plus about 300 Euros for the valuation of the property. Applicants need a clean credit record to qualify for a mortgage from a Bulgarian bank, and the monthly mortgage payment cannot exceed 20 per cent of their monthly income. Those interested should apply in advance, given that the mortgage process in Bulgaria can take up to 3 months.

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