PAYMENT OF DIVIDEND

The tax base and the time limits for payment of the tax withheld at source for income from dividends paid to local natural persons

The general assembly of the company makes decisions on the distribution of profit and for its payment in the form of dividend pursuant to Art. 137, para. 1 of the Commercial Law /CL/.

Income from dividends and liquidation shares in favour of local natural persons from a source in Bulgaria is subject to final tax pursuant to Art. 197 of the Corporate Income Tax Act.

Tax is calculated on the basis of the gross amount, which is determined by the decision for distribution of dividend.

Tax shall be paid pursuant to Art. 202 of the Corporate Income Tax Act and the deadline for payment is the end of the month following the month of accrual of income.

The enterprises which have paid income provide a statement for the income paid to natural persons during the year - /Art. 73 of the Income Taxes on Natural Persons Act/.

The statement shall be filed in the National Revenue Agency by 30 April of the following year - /Art. 73 of the Income Taxes on Natural Persons Act/.

The natural person recipient of the dividend shall not file an annual tax return.

In the event of allocation of a dividend from one legal entity to another, tax shall not be withheld. Tax shall be withheld only when paying dividend to a natural person.

The annual financial statement published at the Registry Agency shall state the fact of payment of a dividend in the protocol for the acceptance of Report of the General Assembly of the company.

 

REGISTRATION UNDER THE VAT ACT

(VAT REGISTRATION IN BULGARIA)

It is compulsory and optional

Any taxable person established within the territory of the country and effecting taxable supplies of goods or services shall be registered under this Act.

Any taxable person who is not established within the territory of the country and who effects taxable supplies of goods or services other than those for which the tax is chargeable from the recipient shall also be registered under this Act.

1. Compulsory registration when reaching a certain turnover

An obligation for registration arises when a taxable person reaches a taxable turnover of BGN 50,000 or more for a period not exceeding 12 (twelve) consecutive months preceding the current month (Art. 96, para. 1 of the VAT Act). This does not mean that the period of twelve months has to be necessarily expired to arise the obligation for registration. Taxable person could make taxable turnover of BGN 50,000 for one month. This means that in the next month an obligation for registration will arise for him.

Тaxable turnover is defined in Аrt. 96, para. 2 of the VAT Act. It shall include the tax bases of the effected taxable supplies, not the actual income of their effectuation, i.e. it shall be established whether there is a taxable event pursuant to Art. 25 of the VAT Act, not only whether a payment has been made by the recipient. The taxable turnover shall include:

- taxable supplies, including supplies liable to tax at the zero rate (until now the latter were included only in the turnover for voluntary registration);

- advance payments (in full or in part ), with the exception of advance payments received before the occurrence of a chargeable event in case of Intra-Community supplies (Art. 96, para. 4 of the VAT Act). If the supplier is not registered for the purposes of the VAT Act, thus the supplies effected by him may not be defined as Intra-Community supply, the provision means that taxable turnover shall not include advance payments made by a counterparty registered under the VAT Act in the other Member State for supply of goods, considering the provision of Art. 7, para. 5 of the VAT Act, which excludes some of the supplies of goods from the Intra-Community supplies;

- supplies of financial and insurance services which are exempted supplies. This is a new point in the VAT Act, which has no fiscal focus, as far as pursuant to Art. 96, para. 3 of the VAT Act under this procedure only persons whose main activity is financial and insurance shall register. This practically means that, as far as of now these are exempted supplies, these persons shall not use tax credit and shall not charge VAT. The purpose of this provision, which is transposition of European law, is to provide comparable information for this category of persons, as far as the European Union provides for the inclusion of these supplies in the chargeable supplies.

The taxable turnover shall not include any supplies of financial and insurance services which are not related to the core activity of the person, any supplies of tangible or intangible fixed assets employed in the activity of the person. The taxable turnover shall not include any supplies for which tax is executable by the recipient under Art. 82, para. 2 and 3 of the VAT Act. In the previous version of the Act, these were cases in which not the supplier but the recipient is liable to pay the tax under chapter eight of the VAT Act in connection with Art. 12, para. 2 of the VAT Act. This meant that in fact supplies under Art. 82, para. 2 and Art. 4 of the VAT Act were included. Regarding the cases of Art. 82, para. 3 and Art. 84 of the VAT Act, the tax would have not be executable by the recipient, since the supplier is not registered under the VAT Act and accordingly there is no tripartite operation within the meaning of Art. 15 of the VAT Act, respectively Intra-Community acquisition pursuant to Art. 13 of the VAT Act. The new version aims to remove the ambiguity, but it is not quite appropriate, as far as the above said applies in respect of Art. 82, para. 3 of the VAT Act, and namely practically tripatrite supplies could not have been effected within the meaning of Art. 15 of the VAT Act, since this requires all participants in the tripatrite operation to be registered under the VAT, and in this case obviously one of the participants will not be a registered person and therefore the supply effected shall not constitute a tripartite operation. The conclusion is that this makes sense only if the persons are registered under the VAT Act on other grounds. However, they will not monitor the turnover for compulsory registration, as far as they are already registered under the VAT Act. Hypothetically, such a case could be only if the person registered on the grounds of Art.99 of the VAT Act effects supplies under the terms of Art. 15 of the VAT Act. Practically, however, this could not happen, as far as in the case of a non-taxable person, this person will not carry out an independent economic activity, and in the case of a taxable person, this person will always prefer optional registration, as far as if registered for Intra-Community acquisition, he will not have the right to use tax credit for the acquisitions effected.

We have to mention that the supply of goods to counterparts from other member states is not a supply liable to tax at the zero rate, and by virtue of Art. 17 of the VAT Act will be with place of transaction within the territory of the country and will be a taxable supply.

Determination of the taxable turnover shall give consideration to the tax treatment of the supplies as of the date of occurrence of the chargeable event or as of the date of the payment prior to the occurrence of the chargeable event for the supply.

The application for registration on this ground (Art. 96 of the VAT Act) shall be submitted within 14 days after the lapse of the tax period during which the taxable turnover of BGN 50,000 has been reached.

Pursuant to Art. 73, para. 1 of the Rules on Implementation of the VAT Act, all taxable persons after expiration of the calendar month shall be obligated to calculate, regarding the previous 12 months before the current month, their taxable turnover within the meaning of Art. 96, para. 2 of the VAT Act.

Compulsory registration shall not apply to persons for whom the following conditions are simultaneously fulfilled:

- they supply services electronically to recipients who are non-taxable persons, who are established or have a permanent address or usually reside within the territory of the country;

- they are not established within the territory of the European Union;

- they are registered for VAT purposes in another Member State for the activity supplying services electronically to recipients who are non-taxable persons, who are established or have a permanent address or usually reside within the territory of the country.

Art. 96, para. 8 of the VAT Act sets a general condition for compulsory registration under the VAT Act, namely notwithstanding Art. 99, para. 1 of the VAT Act, the revenue authority may refuse to register a person to whom the revenue administration has terminated or refused registration in pursuance of Art. 176 of the VAT Act, before the lapse of grounds for such registration refusal, grounds for deregistration, respectively, or before the lapse of 24 months from the beginning of the month following the month of deregistration or refusal of registration. With the amendments of the VAT Act effective since 1 January 2010 the revenue authority at his discretion may refuse to register a person to whom the revenue administration has terminated or refused registration in pursuance of Art. 176 of the VAT Act, while the version effective before 1 January 2010 stated that this is an absolute reason for refusal of registration. The objective of the new version is not to allow persons to place themselves outside the scope of the VAT Act intentionally, and practically to implement taxable supplies without charging tax for them.

Pursuant to Art. 176 of the VAT Act competent revenue authority may refuse to register or may terminate the registration of a person who:

1. cannot be reached at the mailing address specified thereby according to the procedure established by the Tax and Social-Insurance Procedure Code;

2. changes the mailing address thereof and does not provide notification according to the established procedure;

3. fails systematically to fulfil the obligations thereof under the VAT Act;

4. incurs public liabilities whose total value exceeds the value of the assets thereof less the liabilities thereof.

This means that as long as the person does not take action to overcome the negative prerequisites for registration under the VAT Act, under item 1, item 2 and item 4 of Art. 176 of the VAT Act, registration under the VAT Act will be refused regardless the lapse of 24 months, i.e. the person should pay his tax liabilities, notify about the change of his mailing address, be reached at the mailing address by the tax authorities. However, it is not so with respect to item 3 of Art. 176 of the VAT Act. The taxable person could not delete by any action a systematical failure to fulfil the obligations thereof under the VAT Act. With view of that, possibility for registration will occur after the expiry of 24 months from the beginning of the month following the month of deregistration or refusal of registration, where registration has been refused for that reason. The latter case would be if the person was deregistered on the grounds of Art. 176, item 3 of the VAT Act, and accordingly filed an application for registration before the expiry of 24 months from the beginning of the month following the month of deregistration. In this case 24 months will be counted from the subsequent refusal of registration.

The provision of Art. 96, para. of the VAT Act has the same sense and systematical place, as Art. 100 of the VAT Act, which concerns voluntary registration, and in practice is a penalty for misconduct of the taxable person and is intended to discipline the persons. The role of Art.96 of the VAT Act is the same - to expell from the list of registered persons mala fide traders and to prevent their re-registration before they have started to comply with the provisions of the VAT Act.

2. Compulsory registration for supply of goods with assembly and installation

Art. 97, para. 1 of the VAT Act provides for compulsory registration under the VAT Act of a person who is established in another Member State and who effects taxable supplies of goods which are assembled or installed within the territory of the country by or for the account of the said person. The application for registration shall be submitted not later than 7 days prior to the date of occurrence of the chargeable event for the supply.

Such registration shall not be done when the recipient of such supply is a person registered under the VAT Act on other grounds. The reason for this is that in this case pursuant to Art. 82, para. 2, item 4 of the VAT Act, the tax is chargeable on the recipient.

3. Compulsory registration in case of distance selling of goods

Obligation to register in case of distance selling of goods – Art. 98 of the VAT Act.

Any taxable person who effects a supply of goods whereof the place of transaction is within the territory of the country under the terms of distance selling shall be registered under this Act.

The obligation for registration arises not later than 7 days prior to the date of occurrence of the chargeable event for the supply by which the total value of distance selling during the current year exceeds the amount referred to in the Act – BGN 70,000.

Pursuant to Art. 98, para. 1 of the VAT Act, any taxable person who effects a supply of goods whereof the place of transaction is within the territory of the country under the terms of distance selling shall be registered under the VAT Act, pursuant to 14 of the VAT Act. The obligation to submit an application for registration arises not later than 7 days prior to the date of occurrence of the chargeable event for the supply by which the total value of distance selling during the current year exceeds BGN 70,000. The persons shall submit an application for registration not later than 7 days prior to the date of occurrence of the chargeable event for the supply or prior to the receipt of the advance payment.

Pursuant to Art. 73, para. 3 of the Rules on Implementation of the VAT Act, all registered persons who effect supplies of goods under the terms of distance selling shall:

- specify currently the total sum of the supplies of goods under the terms of distance selling separately for each Member State;

- specify for each of the two calendar years prior to the current one the sum of the tax bases of the supplies effected under the terms of distance selling separately for each Member State;

4. Compulsory registration in case of Intra-Community Acquisition (ICA)

Pursuant to Art. 99 of the VAT Act, the registration requirement applies to each non-taxable legal person and taxable person who is not registered in pursuance of Art. 96, 97, 98, 100, para. 1 and 3 and Art. 102 of the VAT Act and who effects Intra-Community Acquisition of goods. This obligation shall be fulfilled when the total value of taxable Intra-Community acquisitions for the current calendar year exceeds BGN 20,000.

The application for registration shall be submitted not later than 7 days prior to the date of occurrence of the chargeable event for the acquisition by which the total value of taxable Intra-Community acquisitions exceeds BGN 20,000. This value shall be the total sum of taxable Intra-Community acquisitions, with the exception of the acquisition of new means of transport and of excisable goods, net of the value added tax payable or paid in the Member State from which the goods were transported or dispatched.

This type of registration shall not apply in respect of persons, referred to in Art. 99, para. 5 of the VAT Act. Such are persons referred to in Art. 168 of the VAT Act, who acquire new means of transport, persons referred to in Art.2, item 4 of the VAT Act. These are cases of acquisition of new means of transport as in this case the tax shall be paid pursuant to Art.168 of the VAT Act and for acquisition of excisable goods, which are chargeable pursuant to Art.91, para. 2 of the VAT Act. This is the reason these persons to be excluded from the scope of the persons obligated to register for Intra-Community acquisition according to the procedure established by Art. 99 of the VAT Act.

A person, who is registered pursuant to Art. of the VAT Act and for whom obligations for registration arise under Art. 96, 97 and 98 of the VAT Act, or for optional registration under Art.100, para. 1 and 3 of the VAT Act, shall register according to the procedure and within the time limits for compulsory or optional registration.

Pursuant to Art. 73, para. 2 of the Rules on Implementation of the VAT Act all taxable persons and non-taxable legal persons who effect Intra-Community Acquisition of goods shall:

- specify currently the total sum of taxable Intra-Community acquisitions for the current year, with the exception of the acquisition of new means of transport and of excisable goods;

- specify for the previous calendar year the sum of the tax bases of taxable Intra-Community acquisitions, with the exception of the acquisition of new means of transport and of excisable goods;

5. Compulsory registration as result of transformation

Registration under the VAT Act shall be compulsory for any person who in case of no supply of goods or services (Art. 10, para. 1 of the VAT Act) acquires goods and services from a registered person. This registration shall be effected by submission of an application for registration within 14 days after the recording of the circumstance referred to in Art. 10, para. 1 of the VAT Act in the Commercial Register, and the date of registration is the date of such recording of the circumstance. The registration inventory for the assets available (excluding the assets received pursuant to Art. 10 of the VAT Act) shall be drawn up at the date of registration and shall be submitted up to the 14th day inclusive after that date.

6. Registration of a non-resident who is not established within country

A non-resident person who has a fixed establishment within the territory of the country from which the said person carries out economic activity and who satisfies the conditions of the VAT Act for compulsory registration, shall be registered through the agency of an accredited representative, with the exception of branches of non-residents which shall be registered according to the standard procedure.

The above applies also for non-residents established within the territory of the country but effecting taxable supplies whereof the place of transaction is within the territory of the country and satisfying the conditions of the VAT Act for compulsory registration. Registration shall be effected according to the procedure established by Art. 101 of the VAT Act at the National Revenue Agency territorial directorate as per the registration of the accredited representative (Art. 72, para. 3 of the Rules on Implementation of the VAT Act).

This type of registration does not apply to non-resident persons supplying services under Chapter Eighteen of the VAT Act, insofar as there is a specific procedure for registration.

Upon dissolution of the person who is an accredited representative, or upon occurrence of other circumstances which lead to an impossibility for such person to fulfil the obligations thereof under the VAT Act, the non-resident person shall be obligated to designate a new accredited representative within 14 days after the date of occurrence of the new circumstances.

Pursuant to Art. 135 of the VAT Act, accredited representative of a non-resident person can be a natural person capable of performing juridical act with permanent address or permanently residing in the country, or a local legal person who is not subject to liquidation proceeding or has not been adjudicated bankrupt and does not incur chargeable and unpaid tax liabilities and liabilities for social-insurance contributions collected by the National Revenue Agency. Permanently residing in Bulgaria are foreigners who have received permission pursuant to Art. 25 of the Law for the Foreigners in the Republic of Bulgaria.

The amendments of the VAT Act, promulgated in State Gazette, issue 95 of 2009, effective since 1 January 2010, provide that when a non-resident is established in another Member State or in a third country with which our country has legal instruments for assistance (e.g. bilateral contracts), the registration shall be effected under the general procedure. In that case the non-resident is not obligated, but has the option to specify an accredited representative. Respectively, in case that the person has assigned an accredited representative, upon dissolution of the person who is an accredited representative, or upon occurrence of other circumstances which lead to an impossibility for such person to fulfil the obligations thereof under the VAT Act, in the general case the non-resident person shall be obligated to designate a new accredited representative within 14 days after the date of occurrence of the new circumstances.However, the rule, shall not apply when the non-resident is established in another Member State or in a third country, with which our country has legal instruments for assistance, as far as for such a non-resident the use of accredited representative is only a legal option.

Respectively, the accredited representative in these cases, is not jointly and unlimitedly responsible for the obligations under the VAT Act of the registered non-resident when the non-resident is established in another Member State or in a third country with which our country has legal instruments for assistance. This is so, insofar considering the legal options for engaging liability of the non-resident, collection of receivables will be attempted accordingly.

There is also an option in which the revenue authority can register under the procedure of Art. 102 of the VAT Act a non-resident who meets the conditions for registration, including when an application for registration has been submitted within the time limit, but has not designated an accredited representative. The objective is to avoid chicaning in order to avoid registration under the VAT Act through not designating an accredited representative.

7. Registration in case of receiving and supplying services with place of transaction within the territory of the country or within the territory of another Member State.

With the amendments of the VAT Act, promulgated in State Gazette, issue 95 of 2009, effective since 1 January 2010, Art. 97a of the VAT Act provides for new grounds for compulsory registration. Pursuant to this provision, the registration requirement under the VAT Act shall apply to each taxable person who receives services whereof the place of transaction is within the territory of the country which are chargeable and for which tax is executable by the recipient under Art.82, para. 2 of the VAT Act. Who the taxable persons are is determined by Art.3, para. 1, 5 and 6 of the VAT Act. The value of the services does not matter. The obligation of registration is not related with value thresholds and arises in every case where service is received for which the tax is executable by the recipient.

Mirrored of the above obligation for registration is the obligation for registration regulated in Art. 97a, para. 2 of the VAT Act.

Pursuant to this provision, the registration requirement under the VAT Act shall apply to each taxable person established within the territory of the country who provides services to another taxable person with place of transaction within the territory of another Member State. The place of transaction shall be within the territory of another Member State, when the recipient is established for an independent economic activity in another Member State. In the case when these services are supplied at a fixed establishment which is located at a place other than the place where the recipient independently carries out economic activity, the place of transaction is the place where this site is located, i.e. it is possible that the place of the independent economic activity of the recipient and the place of transaction to be different in the event that the services are supplied at a fixed establishment. Therefore, it is possible that the recipient is established for an independent economic activity within the territory of Bulgaria, but if the services are for fixed establishment within the territory of another Member State, then the place of transaction will be there, and the supplier of services will be obligated to register, respectively. When there is no place of establishment of an independent economic activity or fixed establishment, the place of transaction of the supply is the place of the permanent address or the habitual residence of the recipient.

A taxable person registered for a reason that he is a recipient of services for which he shall pay value added tax is considered as registered as a supplier of services with place of transaction within the territory of another Member State for which the tax is executable by the recipient and vice versa. This shall mean that once registered on one of the grounds, if for the person another reason for registration under the Art. 97a of the VAT Act arises, it is not necessary to submit a new application for registration.

But in case that some of the other reasons for registration provided under the VAT Act arise, notwithstanding optional or compulsory registration, the person registered under Art. 97a of the VAT Act shall register according to the procedure and within the time limits pursuant to the VAT Act, i.e. shall submit a new application for registration.

The obligation for the persons to submit an application for registration arises in the event of grounds under Art. 97a of the VAT Act not later than 7 days prior to the date on which the tax for the supply becomes chargeable (advance payment or taxable event), and the tax base of the received service is subject to taxation.

The reason for this obligation for registration is the ammendment of Art. 21 of the VAT Act. The amendment is a result of a change in the European legislation. Directive 2008/8/EC of the Council changes the main rules which apply when determining the place of transaction for the supply of services. The general rule effective up to 1 January 2010 was that the place of supply of services is where the supplier is established. With the acceptance of the new amendments, the place of supply of services shall depend on the status of the customer, i.e. when the services are provided to a taxable person, acting as such, the place of supply of such services will be where the customer has established his economic activity. When the services are supplied to a non-taxable person, the old rule shall apply - the place of supply is where the supplier has established economic activity.

Advice for people buying property in Bulgaria, including information on legal advice, fraud, residence requirements and more.

Introduction

This guide sets out essential information for men  considering buying property in Bulgaria, including obtaining legal advice, how to submit any complaints and more.

Since 1 January 2012 all EU and EEA (European Economic Area) citizens are allowed to buy land in Bulgaria. This applies to houses with gardens, all plots that are within the zoning of the settlements, apartments coming with shares of the land, offices and other commercial properties.

Legal Advice

It is strongly recommended that you choose an independent lawyer who is specialised in Bulgarian property law. ‘Independent’ in this regards means that they will work on your behalf only and are not also looking after the interests of the agent or developer.

If your lawyer is based in Bulgaria, check that he/she is registered and practicing with the Bulgarian Bar Association by asking for their registration number and verifying this through the Bulgarian Bar Registers.

You should exercise extreme caution if an estate agent, promoter or lawyer urges you to cut corners to save money or time.

A Bulgarian notary public will be involved in preparing the contract of sale and issuing the public deeds. As the purchaser, you have the right to choose which notary you use. The notary is a public servant who has a duty to provide you with free and impartial legal advice on all aspects of the contract before you sign. It is a good idea to seek advice from the notary early on. A full list of registered notaries public in Bulgaria can be found here.

Translators

If you do not have a good understanding of Bulgarian, make sure that you get all contracts and relevant documentation translated by an independent translator. Make sure that any translations are true and legal. You can find a list of accredited translators and interpreters in Bulgaria on the Bulgarian Ministry for Foreign Affairs website. Please note that only the Bulgarian version of the contract is valid in a Bulgarian court.

Mortgages

Do your homework: you should analyse and compare a range of different products and services offered by different banks. If you have any doubts about the terms and conditions, ask the lender to clarify.

Look for the mortgage which is most appropriate for your capabilities and needs. There are a range of mortgages on offer and you should pay special attention to the interest rate and repayment period, fees for setting up the mortgage as well as early repayment and cancellation fees.

If you cannot keep up the mortgage repayments, the Bulgarian bank could repossess your property in Bulgaria. If the value of the property is less than the total debt outstanding (you are in negative equity), the bank may pursue your other assets to recover the mortgage shortfall using a European Enforcement Order.

Make sure you fully understand the mortgage agreement you sign. If you have any doubts, check with the bank and with your lawyer. If for any reason you cannot keep up the mortgage repayments, you should speak to your bank immediately (before defaulting on repayments) to discuss the options available.

Taxation

The Bulgarian tax authority is the National Revenue Agency. It provides some information on its website in English.

Fraud

Bulgarian authorities

Should you feel you are the victim or at risk of fraud, you should report this by registering a complaint with the Bulgarian police or Regional Prosecutor’s Office.

In Bulgaria cases involving property fraud usually fall under civil law and therefore are settled as private disputes held by a mediator or in court. If serious fiscal frauds have occurred (such as payments taken without receipts), the controversy is likely to fall under penal law. The Bulgarian police should deal with all fraud allegations once they are brought to their attention.

Complaints against the legal system

If you believe your lawyer has been negligent and has not met their obligations, you should complain to the regional bar association with which they are registered or to the Supreme Bar Council. Complaints should be in writing and in Bulgarian. A full list of the bar associations around Bulgaria can be found on the website of the Bulgarian Bar Registers.

If you have a complaint about the way a court has handled your case, you can present a complaint to the Supreme Administrative Court in Bulgaria or to the Supreme Judicial Council.

If you have a complaint against a notary public, this should be directed to the Notary Chamber of Bulgaria.

Visa/residence requirements

If you intend to stay for longer than 3 months, you will need to apply for a long-term residence permit from the Migration Directorate of the Bulgarian Ministry of Interior.

British nationals who have resided legally in Bulgaria for a period of five years on the basis of holding a consecutive long-term residence permit are entitled to a permanent residence permit.

For further information and feedback, please contact your local Migration office or call +359 (2) 982 4808, email: migration@mvr.bg.

Purchaser’s checklist

Before you complete your property purchase you should make sure that:

you have seen the Land Registry extract (кадастрална скица), available from the local Town Hall and checked the following details:

the property and land for sale match the details registered and the sellers are the registered owner(s)

there are no debts or charges, such as a mortgage, on the property and/or there are no legal proceedings initiated against the property for contravention of land planning law

For properties which are not included in the Land Register (not available for all areas) a Municipality Sketch (регулационна скица) is issued.

you have checked that planning permissions (виза за проектиране) are in order and the property is a legal build. This is particularly important and relevant when buying off-plan or direct from a developer. The Town Hall can inform you whether the building has all licences and permissions and provide details of the type of land. If the property is built on rural land or land that is not classified for construction, additional confirmation should be sought from the regional government offices as to whether they have authorised the construction

you have checked the latest town plan to see whether or not the plot you wish to buy has any building restrictions, is in a green zone or includes a public pathway or similar. This can be viewed at the town planning department of the local Town Hall

you have carried out a property survey. Whilst this is not obligatory, it is wise to get a chartered surveyor (независим оценител) to check the property

You know the cadastral value of the property and how much purchase tax will be due. Cadastre is the official public register showing details of ownership of the real property in a district, including boundaries and tax assessments. Be aware that tax is charged on the council’s evaluation of the property as opposed to the amount of the sale.

Make sure you have seen the following documents:

a paid-up receipt for the previous owner’s annual property tax . It is also wise to get a certificate from the town hall proving that there are no unpaid taxes from previous years

the Cadastral certificate giving the exact boundaries and square metres of your land. The Cadastral record will be linked to the Land Register record by a cadastral reference which will be included in both. You should ensure that the property and land description contained in both records matches the Use Permit (Act 16) which is issued by the Town Hall for new buildings or restructured ones and certifies that the property is habitable. You will need this document to connect to electricity and water companies receipt to prove all utility bills have been paid by the previous owner.

It is wise to require the seller of the property to provide evidence for absence of any liabilities concerning the property (taxes and other statutory costs and fees) or its use (consumable expenses) Ask the property agent for information regarding any costs the owner has not paid. It is strongly advisable to ensure that you have a copy of an affirmation stating that the previous owner has no debts the title deed – it is important to check that there is an accurate description of the property in the deeds if you are buying an off-plan property, confirm that there is an architectural plan for the property approved by the local municipality. Ensure that the developer/constructor has the necessary insurance to cover any build defects.

On completion, the public deed should reflect an accurate description of the property. It is advisable that you register the property in your name with the Land Registry as soon as possible to ensure full protection of your rights. The notary can even send advance notification to the Land Registry once the public deed is signed.

Buying property off-plan

Buying off-plan property inevitably involves higher risk than buying re-sale property. If you are considering buying off-plan in Bulgaria there are a number of points to consider.

There are statutory stages of construction of an off-plan development which are certified by certain documents specified in the law. The most important documents are:

planning permission/Visa for design (виза за проектиране) – it entitles the developer to prepare architectural design and construction plans for the development in accordance with certain statutory parameters for height of the building, density of the construction, layout of the building, etc

construction permit (разрешение за строеж) – it entitles the developer to start construction process as per the approved architectural, construction and other technical plans for the property

opening of construction site and determining of construction line and level (Protocol for commencing of construction)

certificate for completion and approval of rough construction (Act 14)

certificate acknowledging the compliance of the construction with the statutory rules (Act 15)

use permit (Act 16)

It is not advisable to buy off-plan development for which no construction permit is granted.

In practice, a usual transaction for buying off plan development has two stages: the signing of preliminary contract; and the signing of public deed before a Bulgarian Notary (Notary deed). The transfer of the property is made under the notary deed.

It is advisable for the payment for the purchase of off plan property to be made in instalments each of which is made after the completion of the relevant construction stage and obtaining of a statutory certification document.

Before signing the preliminary contract you should:

Check with the Land Registry to make sure the land which is going to be built on is registered to the developer you are doing business with.

Confirm that there is an architectural plan for the property approved by the local municipality. Ensure that the developer/constructor has the necessary insurance to cover build defects.

Make sure you obtain a copy of the Cadastral certificate giving the exact boundaries and square metres of your land. (Cadastre - an official public register showing details of ownership of the real property in a district, including boundaries and tax assessments)

It is also advisable to obtain a certificate regarding the planning situation of the plot you wish to buy from the Town Planning department of the Town Hall. This will include other information such as whether the plot has any building restrictions, is in a green zone, includes a public footpath or if there are any current plans to build a motorway or other infrastructure builds etc.

Once construction has finished, and before you sign the title deed, ask for all documents from the seller to show that the construction has been finished in accordance with the plans.

Make sure you have the Use permit (Act 16) which is issued by the town hall for new buildings and certifies that the property is habitable. You will need this document to connect to electricity and water companies.

Consider asking a chartered surveyor to check the property. This is not obligatory but it is wise to obtain a professional opinion on the property before you complete. The Chartered Surveyors Chamber has contacts for all registered chartered surveyors.

Should the developer not build your property within the timeframe stated in the contract, or services and utilities are not completed and connected to standard, or the habitation certificate cannot be issued, you are legally entitled to either:

rescind the contract and have the deposits returned plus interest

or extend the deadline, allowing the developer to complete the property

If you want to rescind the contract, it is advisable to seek independent legal advice. Once you have consulted a lawyer, the first step is to write to the developer to explain that due to non-compliance with the contract, you want to rescind the contract and request that the deposits paid so far are returned, as well as the accrued interest. You should include any relevant documentation (e.g. a copy of the contract, copies of payments made, copy of the bank guarantee) and state a timeframe by which you want the amount to be reimbursed.

If you believe you have been a victim of fraud and you have neither a bank guarantee nor an insurance policy from the developer, you should seek independent legal advice regarding taking criminal legal action through the courts and register a statement with the police.

Condominium Management Contracts

If buying an apartment in a block of flats or a closed residential complex, investors are usually required to sign a secondary contract relating to the management of the condominium, e.g. paying costs associated with the communal management of the apartment block and maintaining the property.

Sometimes developers require signature of the management contract at the time of buying the property and will not sell it otherwise. You should pay extra care and ask your legal adviser to check the property management contract carefully as sometimes there may be exorbitant costs attached to it. You should also make sure that your contract has the same terms and conditions as for all other owners. It is not an uncommon practice for foreign owners to be offered a different management contract compared to Bulgarian nationals.

Under the Bulgarian Condominium Act all expenses for the management and maintenance of the common parts under the condominium ownership arrangement should be equally shared by owners, users and residents.

Repair, renovation and reconstruction of common parts or replacement of common facilities and equipment should be carried out after an agreement is reached at the General Meeting of owners. The General Meeting of the owners or the Owners Association establishes and maintains a Repairs and Renovations Fund.

Expenses for repairs, renovation, reconstruction and rehabilitation of the common areas, referred to in the respective decision of the General Meeting of owners are distributed among the owners of the individual units proportionately to the shares of the common parts of the building held by each individual owner.

Renting out your property

Short-term lets

If you want to let your property to tourists on a short-term basis, you must ensure that you are doing so in accordance with Bulgarian law. The regulations on letting tourist apartments and holiday homes to tourists will vary depending on the region where the property is located.

If you are planning on making a return by renting out your property on a short-term basis, it is best to seek independent legal advice and check what the rules are at the local town hall or the tourist department of the regional government before you buy.

If you are planning to buy an apartment which is part of a residential block, you should also check whether there are any rules set by the committee of owners that prohibit or restrict short-term letting. You may want to consider hiring a Bulgarian letting agent to assist with finding tenants, drawing up rental contracts and managing the property on your behalf.

Long-term lets

Owners who let their properties on a long-term basis are free to do so within the terms set out by the national rental law. However, it is worth seeking professional advice to make sure that you are complying with Bulgarian legislation and that you are using the correct rental contract.

Letting taxes

You must ensure that you declare your rental income to the Bulgarian tax authorities whether you are resident in Bulgaria or not. Taxation is a complex issue, and it is advisable to seek the advice of an accountant or professional tax adviser with comprehensive and up to date knowledge of both the UK and Bulgarian tax regulations.

Other sources of advice

In November 2012 the Bulgarian government launched the Property in Bulgaria website, containing useful first-hand information on buying and selling property in Bulgaria and on property maintenance and the different fees and taxes involved. The website also offers a contact facility for answering inquiries from the public.

Expat forums and talking to local residents including other nationals who have already made the move can really give you a feel for an area and give you the inside track on any local problems.

The Bulgarian Ombudsman is responsible for defending the fundamental rights and civil liberties of citizens by monitoring the activity of public authorities. If you have a complaint about any public authority, you can submit a complaint to either the regional or national ombudsman.