Tips for Buying Property in Bulgaria

Bulgaria is an economically and politically stable country, however, legislation that govern real estate are subjected to changes frequently, and of course much to the advantage of the investors.

In recent times, Bulgaria has seen a new set of people investing in real estate properties and they are none other than Irish people.

The main reason for the Irish people choosing Bulgaria is the prevalence of good appreciation in values.

As a foreign investor, you can either make direct investment or invest through local entities in Bulgaria. Regarding acquiring title over the land, only resident Bulgarians are entitled to title over land.

However, non-residents can purchase and own title over buildings coupled with few restricted rights such as leasehold or rights for construction over the land.

There are some rules that even permit non-residents to buy immovable properties with prior permission from the Ministry of Finance.

As a non-resident you are entitled to repatriate all the profits to the country where you normally reside. However, such repatriations are subjected to appropriate tax deductions by the bank before effecting transfer.

The prevailing permanent establishment law governs all direct investments in Bulgaria.

The definition of a permanent establishment under Bulgarian law is very broad. Any foreign company that owns and rents out property in Bulgaria is entitled to create a permanent establishment under domestic law.

In case any foreign company that owns property does not constitute permanent establishment in Bulgaria, then the person or the company is liable to pay only 15% tax on the rentals and capital gains.

There is also some variation in taxation for local entity and foreign entity. The tax structures are very nominal much to the favour of the investors.

Many exemptions are also allowed such as tax paid or payable, property related expenses and depreciation. Property related expenses include cost involved in repairs, maintenance, renovation, and interest on loans.

Regarding depreciation, the value of the land will not be subjected to depreciation.

However, any immovable property over the existing land, if used for business activities, can be treated as fixed assets. The rate of depreciation is calculated at 4% using straight-line method.

The currency control measures are also not very stringent. A mere registration with the Bulgarian National Bank alone is needed for a non-resident to get a loan.

Further, the interest costs not deducted in a given year can be deducted in the subsequent tax period also. Interest paid to a foreign lender is subject to a withholding tax of 15%, unless a lower rate is available under a double tax treaty.

With so much of friendly tax structure and better investment options, you can see your investment grow and appreciate well in Bulgaria.


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