The purchase of a property in Bulgaria as a non resident, and being a resident there, involves a series of fiscal obligations which must be met:

V.A.T.

The Value Added Tax Act (VAT Act) currently in force is effective as from 1 January 2007.

In principle VAT is chargeable on the sale of real estates in Bulgaria and is at the rate of 20% of its value. However this is usually included in the purchase price of the property, so this should be taken into consideration when looking at the total cost of purchasing a property in Bulgaria.

TAX FOR THE ACQUISITION OF REAL ESTATE

It is payable once, when acquiring the property. The rate is 2% of the purchase price as stated on the Title Deeds (tax value if more). It is paid before the Notary public certifies the deal.

TAX ON REAL ESTATE AND FEE FOR HOUSEHOLD WASTE

A. Owners of real estates in Bulgaria are liable to pay an annual tax on their real estates. The tax shall be determined for the tax valuation of the real estate in extent of 1,5 per thousand. The amount of this local tax varies and depends on the tax valuation of the real estate.

Basically the amount of the tax valuation varies depending on whether the real estate is used for residential or commercial purposes, where it is situated, what is its area etc.

The amount of tax valuation of real estates for residential purposes shall be determined by the local authorities. The tax valuation of immovable properties of companies shall be their accounting value.

This local tax is payable at the beginning of each year.

The tax is usually up to the equivalent of 100 € per year, however can be lower in areas out with large cities.

B. The fee for household waste shall be paid for the services for collecting, transport and making harmless in depots or other facilities of household waste as well as for keeping the territories for public use clean in settlements.

The amount of this fee is subject to a decision of the respective municipal council of the municipality the property is situated wherein.

This fee is paid annually.

WEALTH TAX

INCOME TAX FOR INDIVIDUALS

In Bulgaria there is no separate tax specifically levied on the sale of real estate assets like the “Capital gains tax”.

The income as described above is subject to a final tax amounting to 10% and it is payable in Bulgaria.

The following real estates shall be non-taxable:

а) one immovable housing property, regardless of the date of acquisition of the property;

b) up to two pieces of immovable property, or agricultural property and forest land plots regardless of the number thereof, providing that the time elapsed between the date of acquisition and the date of sale or purchase is more than 5 years.

CORPORATE TAX

• A limited liability company may be formed by one or more persons who shall be liable for the company's obligations with their contributions to the company's registered capital. Shareholders in OOD may be both individuals and companies.

• The registered capital of a limited liability company shall be not less than BGN 5 000, with minimum nominal value of BGN 10 a share.

• At least 70% of the capital must be paid up front before registration.

• An annual shareholders' meeting must be convened at least once a year.

• A Manager of the company must be appointed.

2nd. 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 Manager of the company.

3rd. A joint stock company (with the suffix AD)

• A joint stock company is a company the capital stock of which is divided into shares. AD can be found by one or more individuals or companies.

• The minimum value of the capital of a joint-stock company shall be 50 000 levas. For banks, the minimum value is 10 millions levas.

• The minimum share value is BGN 1.

• At least 25% of the registered capital must be paid up front before registration.

• An annual shareholders' meeting must be convened at least once a year.

• The company is managed by a ‘board of directors’ (one-tier system), or by a ‘supervisory board' and a ‘board of management' (two-tier system).

4th. A joint stock company with a single shareholder(with the suffix EAD)

• The company is owned and controlled by a single shareholder.

For all kinds of commercial companies it is compulsory to file an annual balance sheet with the tax authorities.

TAX ON DIVIDENS

Company dividends are recognized by Bulgarian legislation as an income of the shareholders so there is a tax withheld at source due at a rate of 5%. Tax deducted at source in respect of foreign residents is subject to the Double Taxation Prevention Treaty.

INHERITANCE AND GIFTS TAX

The Bulgarian Law distinguishes between residents and non residents.

RESIDENTS: are liable to pay inheritance tax on property in both Bulgaria and overseas.

NON-RESIDENT: are liable to pay inheritance tax only on properties in Bulgaria.

In both cases, it is the recipient who pays the tax.

From 2005, inheritances received by the surviving spouse and direct relatives will be exempt.

Brothers, sisters, nieces and nephews who inherit will pay inheritance tax from 0.7% to 1,4% per portion in excess of BNG 250,000. The specific rate of the Tax is determined by the Municipal Council of the respective Municipality.

All other beneficiaries pay inheritance tax at rates from 5% to 10% per portion in excess of BGN 250 000. The specific rate of the Tax is determined by the Municipal Council of the respective Municipality.

Gifts tax is payable at fixed rates depending on the relationship between the donor and the beneficiary. Spouses and direct line inheritors are exempt. Gifts between brothers and sisters are taxable from 0.7% to 1.4% and from 5% to 10% for all other beneficiaries. The specific rate of the Tax is determined by the Municipal Council of the respective Municipality.

REPORTING DATES AND PAYMENT

The tax year in Bulgaria is the year ending on December 31st.

A limited company files an annual report by March 31st. An individual must file an annual report by April 30th.

Companies that finished the previous year with a profit pay 12 monthly advance payments in the following year.

New companies make 4 quarterly advance payments.