Setting Up A Bulgarian Company And Purchasing Land
Non-Bulgarians cannot own land in the country directly; this means that for almost all land purchases a buyer must first set up a limited liability company in whose name the purchase may be made.
This process is actually less complicated than it sounds and your estate agent or lawyer will complete this procedure for you. Companies can be set up and registered at an approximate cost of between 500 to 700 Euro (including registration with the National Tax Registry, the Companies Register and the Social Security Institute), a process which requires the owner/owners of the company to set up a bank account and place a deposit of approximately 2,500 Euro, refundable once the company becomes a legal entity. The company is then registered with the National Tax Registry.
A limited company set up in this way can own more than one property. Furthermore, ownership through a limited liability company entitles the buyer to a substantial degree of legal protection. Once these preliminaries have been carried out, property can be bought through the company.
Having selected a property, the buyer will instruct his/her agents or lawyer to draw up a Preliminary Contract in Bulgarian and English (the Bulgarian contract is legally binding). Once the Preliminary Contract is signed by seller and vendor it is customary to pay a 10% deposit of the property’s value while the lawyer or agent, check the title deeds. This deposit is non-refundable if you withdraw from the sale, refundable if the vendor withdraws or refundable if the conditions of the sale relating to the satisfactory completion of searches and checks are not met.
Once satisfied that all checks and searches are in order, the agent/lawyer informs the buyer to that effect. Both the purchaser and the vendor meet at the offices of a NOTARY PUBLIC and sign the final contract in his presence. At this stage the transfer is complete and state and municipal taxes (between 2.5% to 3%) are paid as is the final balance of the purchase price.
As is always the case when investing in overseas property, buyers are advised to hire a lawyer who speaks the language .Agents and lawyers in Bulgaria frequently represent both sides of a transaction, but are legally obliged to be diligent and fair.
Bulgaria Income Taxes and Tax Laws
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In Bulgaria income of any individual is subject to a progressive tax. As at 2006, an individual pays a progressive tax of 10% - 24%.
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Exemptions are granted to taxpayers with specific types of income.
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The standard rate of tax for a Bulgarian corporate tax in 2007 is 10%.
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Income Tax for an Individual
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An individual in Bulgaria is liable for tax on his income as an employee as well as on income as a self-employed person. In the case of an individual who answers the test of a "permanent resident" of Bulgaria, tax will be calculated both on his income earned in Bulgaria and overseas.
A foreign resident who is employed in Bulgaria pays tax only on his income in Bulgaria.
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To be considered a Bulgarian resident, the requirements must be met of residency in Bulgaria of at least 183 days in any calendar year, and occasionally also if residency is less than 183 days, if the individual has a home in Bulgaria that is his main residence, he will be considered a Bulgarian resident.
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An employer is obligated to deduct the income tax payable as well as national insurance, immediately each month from a salary paid to an employee.
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Certain payments are deducted from taxable income as detailed below.
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A limited liability company (with the suffix OOD)
-At least 1 shareholder or more is required to set up the company. The shareholders may be individuals or companies.
-The minimum share capital is BGL 5,000, with the minimum nominal value of BGL 10 a share.
-At least 70% of the capital must be paid up before registration.
-The owners of the company are liable only for the amount of capital invested.
-An annual shareholders' meeting must be convened at least once a year.
-A director must be appointed for the company.
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A liability company with a single shareholder (with the suffix EOOD)
-This is an OOD company owned by one individual, who may be a foreign resident.
-The single shareholder may serve also as a director of the company.
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A consolidated company (with the suffix AD)
-At least 1 shareholder or more is required to set up the company.
-The minimum share value is BGL 1.
-The company must have a minimum registered capital of BGL 50,000. For banks, the minimum capital requirements are BGL 10 million.
-At least 25% of the registered capital must be paid up before registration.
-The company is managed by a board of management, or at two levels by 'a supervisory board' and a 'board of management'.
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A consolidated company with a single shareholder (with the suffix EAD)
-The company is owned and controlled by a single shareholder.
-It is compulsory to file an annual balance sheet with the tax authorities.
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