Buying Property

Terms and Conditions

I. PURCHASE OF REAL ESTATE WITHOUT LAND
I. The purchase of real estate (a flat, an office, a studio, a house ), BUT WITHOUT LAND, can be done by a foreign national directly, without additional requirements. The foreign national has to make a choice of an estate and personally or through an authorized lawyer to finalize the transaction (purchase ) for the estate before a Notary. When a concrete estate has been chosen, a preliminary contract for selling-purchasing is made between the seller and the buyer, which has the same clauses as the title deed. The term of this contract is till signing the final transaction (title deed) before a Notary. The preliminary contract is only signed by the seller and the buyer and a legalization by a Notary is not required. The purpose of this contract is to engage the parties to conclude a final contract as several days are needed for the preparation of the documents for the final contract. On signing the preliminary contract the buyer deposits a small amount (5-10% of the selling price) as a down payment, which is entered in the preliminary contract. The preliminary contract stipulates also the date for concluding the final contract before a Notary. The necessary documents for concluding the final contract are prepared during the period between the signing of the preliminary contract and the date specified in it for concluding the final contract before a Notary. The total payment of the price is done on signing the title deed before the Notary, through a bank or in cash - as the parties wish, and the down payment made is deducted from the total price. All activities related to the purchase of real estate, such as encumbrance checks (mortgage, partition and others, tax assessment, a sketch, ownership, declaring ownership of the new owner and others ), preparation of documents are done by the authorized lawyer who bears the entire responsibility for his/her activities on the transaction. The - foreign national could appear before the Notary in person for concluding the final contract, but if he/she does not have the time to stay in the county after having chosen an estate, another authorized person can appear on his behalf.
2. After the selection of an estate by the foreign national, the time needed for finishing all activities on realizing the transaction, after an already chosen estate, is about 5 -6 working days. On the next day after the selection of an estate and reaching an agreement about the price with the seller, a preliminary contract can be signed, and within 5-6 working days more all remaining activities related to concluding the final contract before a Notary can be completed. In case the foreign national does not have enough time to wait for the completion of all activities related to the transaction, he/she would have to stay in Bulgaria for at least as long as he/she needs to inspect and choose an estate, and all the other activities can be done by the authorized lawyer, who would then undertake the obligation to send to him/her all documents related to the purchase of the real estate.

PURCHASE OF A REAL ESTATE WITH LAND OR ONLY LAND
I. When the buyer -a foreign national wants to buy LAND (LOT) WITH THE PURPOSE TO BUILD, A HOUSE WITH LAND (A YARD), Bulgarian legislation requires that the buyer would be A BODY CORPORATE UNDER THE COMMERCE ACT. Therefore the foreign national has to incorporate a firm in accordance with the Commerce Act in Bulgaria -a sole proprietorship limited, and that firm becomes owner of the estate, while the foreign national is the owner of the firm. All other activities and manner of purchase are the same as the ones described in points 1 and 2, but the buyer, instead of the foreign national, is the firm itself, represented by the foreign national. At the same time, this firm can do any business permitted by law, if the owner would so desire, either personally or through an authorized person in Bulgaria. But the law does not oblige the firm to have any business activity. It can only exist and does not require any current expenditures. A change in legislation is expected related to purchasing land by foreign nationals, which would give an opportunity at a later stage for transfer of ownership of the land from the firm to the foreign national (owner of the firm).

INCORPORATION OF THE FIRM
2. About the incorporation of the firm under the Commerce Act, described in point
3. The form (type) of the firm is sole proprietorship limited (LTD.). The foreign national has to be present in Bulgaria in order to sign all necessary documents for the incorporation of the firm. Compiling and signing of these documents is done within 2 working days. The firm, in accordance with the law, has a minimum capital of 5 000 BGN. 70% of that amount, i.e. 3 500 BGN, on incorporation in court, are deposited in a bank account in the name of the foreign national, in a Bulgarian bank of his choice. After the incorporation of the firm in court, i.e. 6 -7 working days after submitting the documents in court, by using the document for incorporation of the firm by the court, the bank account is closed and the 3 500 BGN are withdrawn and used for personal needs. The money is to be withdrawn in person or by a person explicitly authorized by the owner of the firm. The incorporation expenses amount to 490 Euro, with all taxes and lawyer's fee included.

4. EXPENSES RELATED TO THE REAL ESTATE TRANSACTION
The expenses related to transfer of the real estate and signing a title deed before a Notary (taxes and lawyer's fee) are determined, according to the Notary Act and the Regulation on Lawyers' Fees, depending on the price of the estate being transferred.

Note: The explanations above are in compliance with the legislation of the Republic of Bulgaria by 15/11/2004

(Lawyer Margarita Gospodinova and Lawyer Alexander Alexandrov, Plovdiv 15/11/2004)

VAT
1. The text of this article "1" applies only for cases when the property is owned by a body corporate, while if owned bya natural person, a common citizen, then you have to refer to article "2". Bodies corporate are grouped in two: companies registered under the law on VAT and companies not registered under the law on VAT .VAT is charged and paid to the government only by companies .c., ;f1 registered under the law on VAT .This means that if the seller is not registered -under the law on VAT he cannot charge VAT and buyer does not pay any VAT . '~i. If the selling company is registered under L VAT then 20% VAT is charged on the agreed selling price and then paid to the government. If the selling company is not registered under L VAT then it sells the property without charging VAT on the selling price and pays no VAT to the government.
2. If the buyer is a company registered under L VAT and provided he has paid 20% VAT when buying property, he is allowed to deduct the value of these 20% VAT from the total amount of VAT due to the government for any transactions struck by this company.
3. If the buyer is a company not registered under L VAT or if he/she is a natural person, then he/she has to pay VAT for the property if the seller is a company registered under the L VAT , but he/she cannot reclaim this VAT since he/she is not registered under the L VAT nor can he/she deduct it from any outstanding VAT since he/she does not owe such to the government (VAT is a9 indirect tax).
4. When the SELLER is a NATURAL PERSON regardless of his/her citizenship, then VAT is not paid by anybody. Such is the case most often met with in practice.
5. You have to keep in mind that there are some goods and properties which, though owned and sold by companies registered under the L VAT , VAT is not charged for at the time of the sale. This applies for land plots. VAT is NEVER charged for purchase/sale of land. VAT is charged and paid for buildings as described above, regardless what kind these are of.
6. The tax evaluation certificate is a document issued by the tax authorities and the value specified therein is used for basis to determine the charges and fees to be paid for the deal. BUT, if the price at which the property is sold is higher or lower than the tax evaluation then charges and fees are due for whichever is the higher one. In general, the value accessed for taxation purposes is always lower than the real selling price this is why deals with real property are usually said to be stricken at a price equal to the tax evaluation so that charges and fees due for the deal would be lower. If the selling price is declared to be lower than the tax evaluation then charges and fees are calculated on the basis of the value accessed for taxation purposes.

(Lawyer Alexander Alexandrov 27/03/2006)