Investing in property in Bulgaria

Q: Is it possible to obtain permanent residency by property investment? If so, how about the additional requirements?
A: Permanent residency and long-term visas are options for property buyers. The regular scheme is to obtain visa D, which is a 3-month single entry visa for Bulgaria and when they arrive here, they apply for extention of this visa into a 1-year multiple entry visa. After that they continue to extend the visa. However, there are no guarantees that one will be granted a visa if they have a property in Bulgaria - it all depends on the particular person.

Q: What is the procedure for real estate purchase by foreign investors?
A: The procedure is as follows
1. The chosen property needs to be reserved and taken off the market. After the unit is selected as a rule the buyer has to pay a deposit in the amount of 1,000-2,000 EUR. Only after that will the property be marked as reserved on the site and will be no longer available for sale.
2. After paying the deposit a preliminary agreement with the owner is signed within 30 days. The agreement settles the basic conditions which will later be copied to the Notary Deed. The conditions include a description of the property, the price, conditions and terms of payment, and for off-plan properties – the term for finishing the property.
3. Drawing up of the Notary Deed (same as Title Deed in the UK) which is considered the legal document certifying the ownership of the property. It is drawn up by the local notary public in the presence of the buyer and the seller.
4. The notary public certifies the deed and registers it with the Registry Agency. This is also noted in the notary deed.
5. Only for legal persons: a week after receiving the Notary Deed the lawyers of BULGARIAN PROPERTIES enter the legal person - buyer of the property - in the system of the Bulgarian National Statistics Institute. The property owner (legal person) will then receive a card with a unique BULSTAT number (ID number) under which all issues related to the property will be accounted. Within a two-week period our lawyers will also register the property and its owner (the company) in the tax office.
The purchase process usually takes 2 months - from reserving the property to its final purchase.

Q: Are there any additional benefits for foreign investors who own property?
A: There are no particular benefits for property buyers, apart from the possibility to use the property ownership as a basis for visa application. However, the visa is not granted automatically, provided that you have a property in Bulgaria. You need to apply and be approved. There is a regime for prime investors in Bulgaria, which receive long-term visas but they need to invest more than 500 000 Euros in Bulgaria in order to get this benefit.
Foreign property owners can also rent out their properties. Rental returns usually amount to 2-5% per annum.

Q: What is the outlook for the real estate industry?
A: The real estate market in Bulgaria has been seriously hit by the economic crisis and the prices of properties have fallen with 40-50%, in some areas and segments even more for the past 3 years. So, now we can say there are very attractive prices, without competition in any other European country. The outlook is positive if we look in the medium and long-term. In the short run we cannot say for sure as the economic perspectives for Europe are not very good for 2012 and 2013 and the economic growth and attraction of foreign investments influence the property market. When the economy starts to recover, we will see a steady increase in sales and a positive price growth. As the market is at the bottom for about a year now, it is a good time to buy properties in Bulgaria. There is a rich supply, great prices and the buyers have the time to choose.

Q: What are the associated charges for purchasing real estate and potentially obtaining permanent residency via property investment? (e.g. notary fees, broker fees, application fees, the legal and state fees for residency process)
A: The ususal charges are:
- the prices of the property
- agency commission is 3% ot the price
- notary fees, stamp duty, etc - 4-6% of the price

If it is a house with land or a plot of land, a Bulgarian limited company should also be registered, which costs 300 Euros. This is because the Bulgarian Law doesn't allow foreigners to buy land in Bulgaria. So, this is surpassed by registering a Bulgarian company, which is 100% owned by the foreign buyer and the company owns the property.

If it is an apartment, in most of the cases company is not needed as foreigners are able to buy on their own names.

After the purchase, the buyers may want to insure the property or arrange for some after sale services, which are additionally paid. E.g., these are payment of utility bills, etc.

Q: What is the tax policy? (personal income, capital gains, dividends)
A: The tax system is very favourable and the tax rates in Bulgaria are among the lowest in Europe. Personal income tax is 10% flat rate. Corporate tax is 10% flat rate also and the dividends tax is 5%. So, if a buyer, who has an apartment bought on their name sells the apartment with a profit, they need to pay 10% on the difference between the purchase and the sales price. If the property is owned by a Bulgarian company, a 10% tax is also paid on the company profit from a sale of a property, however, with the companies all the expenditures are also subtracted from the profit to estimate the tax basis. There is a tax free income for private persons for 1 sale of an apartment per year. This apartment must have been held for more than 3 years before the sale.

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