General Information on the Housing Sector in the Republic of Bulgaria

71.6% of the population of the Republic of Bulgaria live in urban areas, and - 28.4% live in rural areas. In buildings up to three storeys (low-rise buildings) are located a total of 62.1% of the housing in the country, in medium height buildings (4-5 floors) are located a total of 10.9% of the housing, and in high-rise buildings (over 6 floors) are located 27.0% of the housing. The predominant type of housing is the one with two or three rooms. The structure of the housing in respect of the number of rooms in urban and rural areas is different. In urban areas the largest is the relevant share of two- and three-bedroom housing - 37.8% and 31.5% respectively. The housings in the rural areas are mainly with three or more rooms - 66.4% of all housings. The average useful area of a housing in urban areas is 64.88 square meters and in rural areas -62.43 square meters. Most housings are privately owned by individuals - 96.9% and 3.1% of the housings are public property - state, municipal properties, property of companies, public or cooperative organizations.

Living Conditions and Rights to Acquire Property

The terms and conditions under which nationals of other member-states of the European Union and their family members, as well as nationals of the member-states under the Agreement on the European Economic Area and the Swiss Confederation and their family members, enter, stay and leave the Republic of Bulgaria, are governed by the European Union Citizens and Members of Their Families Entry and Residence in and Departure from the Republic of Bulgaria Act. The European Union citizens reside in the Republic of Bulgaria for up to three months without a visa, with a valid identity card or a valid passport. After that period, they must possess a certificate of prolonged or permanent residence of a citizen of the European Union. For this purpose, they file an application to the Migration Directorate at the Ministry of Interior, Ministry of Interior Directorate in Sofia or the regional directorates of the Ministry of Interior pursuant to the European Union Citizens and Members of Their Families Entry and Residence in and Departure from the Republic of Bulgaria Act. The terms and conditions under which nationals of states that are not members of the European Union /third states/ may enter, stay and leave the Republic of Bulgaria will be determined by the Foreigners in the Republic of Bulgaria Act /FRBA/. This act also applies to family members of Bulgarian citizens who are not EU citizens. A foreigner may enter the Republic of Bulgaria if he/she has a valid travel document or other equivalent document and visa, if required. No visa is required, where this is stipulated in Regulation (EC) 539/2001 of the Council, in other binding EU acts, in any international treaties to which the Republic of Bulgaria is a party, or in any acts of the Council of Ministers. No visa is required where the foreigner is a holder of a valid permit for continuous, long-term or permanent residence in the Republic of Bulgaria. Foreigners who own property in the Republic of Bulgaria and who wish to reside in Bulgaria may apply for short-term visa for the purpose of intended stay of no more than three months in any six-month period from the date of their first entry in the Republic of Bulgaria. For more details about the documents required and the visa application procedure, visit the website of the Ministry of Foreign Affairs -  www.mfa.bg.
The real-legal regime of the acquisition and exercise of ownership right on real estate in the Republic of Bulgaria by foreigners is regulated by the Constitution of the Republic of Bulgaria (Art. 22), the Property Act (Art. 29 and Art. 29a) and a number of other regulations containing specific rules - the Ownership and Use of Agricultural Land Act (Art. 3, Art. 3a, Art. 36, Art. 10a), the Forestry Act (Art. 23 and Art. 24), the Succession Act (Art. 5), the Protected Areas Act (Art. 10), etc. The nationals of the member states of the EU or member states under the Agreement on the European Economic Area may acquire ownership right over land in accordance with the requirements specified in the law pursuant to the Treaty of Accession of Bulgaria to the European Union. By the end of 2011, foreign individuals have been restricted to possess the land of their second home. On 1 January 2012 this restriction dropped out and foreign investors are allowed to acquire the land on which their homes are built. However, the restriction is still valid in terms of ownership of agricultural land. It is expected to drop out on 1 January 2014.

Stages when buying or selling

Finding Property/Buyer

Most often, though not necessarily, assistance in finding a suitable property (or a buyer for the property) is provided by real estate agencies. Besides mediation, the agencies undertake to assist in the subsequent stages until the final closing of the deal.

Preliminary Contract

The practice established in real estate transactions, considering the usually high price, is that the parties enter into a preliminary contract which stipulates the conditions for the future performance of the formalities related to the deal at the notary’s office.

The legal framework of the preliminary contract is stated under Art. 19 of the OCA and Art. 362 to 364 of the Civil Procedure Code (CPC). The preliminary contract for purchase and sale of real estate must be executed in writing. The purpose of the preliminary contract is to prepare the execution of the final contract. It must include all material terms and conditions of the final contract, i.e. the clauses that strictly individualize the transferable property, the price, the parties, the deadlines for the conclusion of the final contract in the form of a title deed and other important conditions. Usually, the parties agree that part of the sale price will be paid upon signing the preliminary contract, usually amounting to 10% of the sale price. The preliminary contract ensures the rights of each party thereunder, since according to Art. 19, para. 3 of the COA - each party under the preliminary contract is entitled to file a claim to declare the contract final, provided that it has fulfilled its obligations under the preliminary contract. In this case, the final contract is considered concluded as from the enactment of the judgment. The court at the location of the property will have jurisdiction. In general, the real estate agencies offer to their customers standard preliminary contracts. Taking into consideration the importance of the preliminary contract, it is advisable to have it drawn up or at least checked by your lawyer experienced in real estate deals. It is recommended that the lawyer be present when signing the contract. This will greatly reduce the risks of entering into an unfavourable contract.

Performance of the Formalities Related to the Deal at the Notary’s Office

In order to perform the formalities related to deal at the notary’s office, the parties must appear before the notary to sign the title deed.

The notary public acting in the area where the property is located will have jurisdiction. The seller must submit to the notary the original documents evidencing the ownership right over the property. The notary will verify whether the property is located of the area of their jurisdiction:
The notary public verifies the identity, capacity and representative power of the persons appeared to him/her;

The notary verifies that there are no legal impediments to the transfer of the property;
The notary ensures that the presented draft title deed meets the legal requirements;
The notary verifies that the seller is the actual owner of the property;
The notary reads to the parties the contents of the draft title deed and the parties confirm their wills before the notary public, as reflected in the draft title deed;
The title deed is signed by the parties and by the notary public.
The notary provides the parties with a copy of the title deed.

Registration

On the day of the performance of the formalities related to the deal, the notary presents the title deed in the registry office where the real state is located. The Judge of Registration orders the registration of the title deed with the Property Registry at the Registry Agency, which ensures the rights of the buyer in case of possible claims of third parties. Since then the buyer has every right to dispose with mortgages, rentals, sale etc.

Declaration

According to the Local Taxes and Fees Act, any person who has acquired a new property, whether new or old construction, or whether a replacement, is required within two months of the performance of the formalities related to the deal before a notary and the registration of the transaction with the Registry Agency to file a tax declaration, levying an annual tax.

Such a tax declaration is filed not only upon the acquisition of a property, but also upon the establishment of right of use. In this case the user is the one who is required to file the declaration. The declaration is filed at the Local Taxes and Fees Department at the municipality where the property is located. In case of purchase of a building at the stage of rough construction, the owner should wait to obtain use permit and only then they must declare the property within two months from the date of the use permit. The administrative and penal provisions of the law provide for penalties if this deadline is not met. They range from BGN 10 to 400 for individuals at the discretion of the penal authority. In the same range are the fines in case the declaration does not specify or contains incorrect information resulting in determination of a lower tax or in tax exemption. The obligation for declaration of the property also applies to legal persons and in case of failure, the penalty for them ranges from BGN 100 to 1000.

In case of property inheritance, the deadline to declare is different, since it is pursuant to another provision of the law. In this case the tax declaration must be filed within 6 months. The same deadline is determined for the declarations of the inheritance tax. They are subject to the rule that the declaration filed within the set deadline by one of the heirs shall cover the obligations of the other heirs too. If the heirs, legatees, or their legal representative (for example, parents of a minor child who inherits his grandfather’s apartment) fail to file a declaration, the fine ranges from BGN 10 to 500.

This is the point to mention that tax declaration must be filed in case of changes in the property that could lead to changes in the amount of the tax. For example, luxury renovations, major rehabilitation or changes in the intended use of the property - from home to office, from primary housing (for which the owner should pay 50% of the tax under the law) to other housing, etc.

The property may also be declared by an authorized person. For each property a separate declaration is to be filed.

I. Necessary documents for the declaration of a real estate by individuals:
Declaration pursuant to Art. 14 of the Local Taxes and Fees Act (LTFA);

Document of ownership /copy/;

Use permit or certificate of commissioning /in the case of new construction/;

Certificate of Inheritance /in case of inheritance/;

Decision of the Territorial Expert Medical Commission /in case of primary housing/;

Power of Attorney /when the declaration is filed by an authorized person/.

II. Necessary documents for the declaration of a real estate by legal entities:

Declaration pursuant to Art. 17 of the LTFA /if the property is not residential/;

Declaration pursuant to Art. 14 of the LTFA;

Document of ownership /copy/;

Use permit or certificate of commissioning /in the case of new construction/;

Power of Attorney /when the declaration is filed by an authorized person/.

Taxes and Fees in Case of Purchase and Sale Transactions

The costs incurred during the sale of the property under the provisions of Art. 186, para. 1 of the OCA must be shared equally between the parties, but the parties are legally allowed to agree otherwise. The following fees must be paid upon the performance of the formalities of the deal at the notary’s office:

1. Notary fee, calculated as per the Notary Fees Tariff on the certified material interest (in case of difference between the tax evaluation and the sale price - on the higher amount) + 20% VAT.

2. Fee for the registration of the title deed with the Property Register at the Registry Agency, amounting to 0.1% of the certified material interest.

3. Tax in the case of onerous acquisition of property, amounting to 0.1 to 3 %. The tax rate for each municipality is determined by the municipal council. The tax is calculated on the basis representing the higher of the two values - the tax evaluation of the property, determined in compliance with the rates stipulated under Annex 2 to the Local Taxes and Fees Act or the agreed price. For this purpose, before the performance of the deal at the notary’s office, the owner of the property must obtain a Certificate of Tax Evaluation issued by the municipality where it is located. The total of these amounts is paid to the notary and the latter performs the registration of the title deed and pays the fees due.

Property Tax and Waste Management Fees

Unlike the requirement for the submission of a tax return upon the payment of the income tax of individuals and the corporate tax, the payment of the property tax does not require annual submission of tax declaration. The taxable persons file a tax declaration within two months following the construction or acquisition of the property. (Six months for filing a declaration is provided for the acquisition of property by inheritance.)
Later on, a declaration will be filed only in case of changes in the circumstances declared – for example, when the building is partially or totally destroyed; the real estate has changed from taxable into non-taxable or vice versa; the property has become or ceased to be a primary residence; improvements have been made in the property that will alter the tax evaluation, etc. With respect to the property tax and waste management fee the relationship between the taxable person and the municipality where the liability is paid periodically is determined by the location of the property. The principle that the relationship with the administration is based on the address or domicile of the taxable persons does not apply in this case as it is with the income taxes. The liabilities are determined on a tax basis, and with respect to waste management fee there is another possible method for deremination - for example, depending on the number of waste containers used. Revenue administration will determine the basis on which to calculate the liabilities for each particular site. For the properties owned by citizens and residential properties of businesses this base is the tax evaluation. For non-residential properties of businesses this base is the tax evaluation and the book value of the property, whichever is higher. The municipal council makes a decision to determine the rates for the respective municipality within the statutory established limits. The municipal revenue administration determines the exact amount of the liability as a ratio between the base and the rate established by the municipal council.
The amounts of the property tax and the waste management fees are communicated to the taxable persons or their legal representatives in the cases when the taxable person is incapable – under age or under guardianship. Since 2011 the property tax is payable in two equal instalments within the following deadlines: From 1 March to 30 June, and
Until 30 October of the year for which it is due. The persons who pre-pay the amount due for the whole year from 1 March to 30 April are entitled to a discount of 5 per cent. Pursuant to Art. 69 of the Local Taxes and Fees Act (LTFA), the waste management fee is to be paid in the manner determined by the municipal council. The municipality notifies the taxable persons on the respective period and payment deadlines. The fee may be paid in a different number of instalments, depending on the method adopted in the relevant municipality. Usually acceptable is the payment in two or four equal instalments. In some municipalities the waste management fee is paid in two instalments within the same deadlines as the property tax. In other municipalities the fee is payable under the scheme, valid for the property tax until 2010 – in four equal instalments – until 31 March, 30 June, 30 September and 30 November. The right to a discount of 5 per cent also depends on the particular decision of the municipality. Some municipalities provide for a discount for the full payment of the fee in the period from 1 March to 30 April, whereas other municipalities do not allow for such a discount. Pursuant to Art. 22, para. 7 of the Tax Insurance Procedure Code (TIPC), when the deadline expires on non-working day, that day will not count and the period expires on the next business day. The payments due will be paid to the municipality where the real estate is located, except for the case of concessionaire property located on the area of more than one municipality (then the payment will be in favour of the municipality on whose territory is the majority of the property). Pursuant to Art. 2 of the LTFA, the local taxes are paid in cash in the cash offices of the municipal administration or by non-cash payments. Pursuant to Art. 7, para. 2 of the LTFA, the local fees are paid by non-cash payments, in cash or by means of municipal revenue stamps.

Non-cash payment can be made:

а) by a mail transfer of tax payment in all post offices;

b) by a bank transfer under a payment order (payment slip) for payments to the budget in the approved form;

c) through Internet, provided that the municipality accepts such payments, as specified in the notifications sent by Sofia Municipality;

d) through a POS terminal with a payment card. On 1 January 2012 amendment was made to Art. 178, para. 5 of the TIPC in order to provide for non-cash payments made in this manner.
In the case of non-cash payments with payment documents, it is well to remember that it is necessary to fill in certain details in the documents in order to avoid errors so that the liability could not be reported as unpaid in the municipal information system.
Besides the location, the date of payment, the payer, the municipality where the payment is credited, the bank and the bank account, the following details must also be indicated:
Amount due;

Type of liability - property tax or waste management fees;
Code for payment. There are two different payment codes – one for the property tax and one for the waste management fee. However, these codes are the same for all municipalities. The payment codes are listed under each property on the notification sent by the municipality;
Lot number of the property, which is different for each property and will be the same only for the property tax and the waste management fee for the same real estate. The lot number is indicated at the beginning of the notification sent by the municipality;
Period to which the payment refers. If the payment is for the whole year 2012, the period from 1 January 2012 to 31 December 2012 will be specified. If the payment is partial, the period e.g. 1 January 2012 to 31 March 2012 should be specified, which is possible with the waste management fees, and the period 1 January 2012 to 30 June 2012 for the property tax. With respect to these liabilities, the second instalment may not be paid unless the first payment is paid first.

One payment order for budget payments may cover 4 liabilities, which means that the property tax and waste management fees can be paid for two properties. The payment of property tax is significant in some other cases as well. For example, par. 1 and 2 of Art. 264 of the TIPC provide that the transfer or creation of real rights over a real estate (with a number of hypotheses listed) should be subject to the presence of a certification in the tax evaluation regarding the presence or absence of outstanding tax liabilities for the property. Where the transferor has outstanding public liabilities, they must be redeemed before the transfer or the transferor must sign a statement of consent to deduct the public liability from the purchase price, and the buyer pays the due amount in the budget.

Income Tax upon the Sale of Real Estate

Under the provisions of the Bulgarian Income Taxes on Natural Persons Act, the revenue acquired during the tax year from sale of exchange of property will be taxed except for the following:
a) one residential property, provided that it has been more than three years between the date of acquisition and the date of the sale or exchange;

b) up to two properties, and any number of agricultural and forest property, provided that it has been more than five years between the date of acquisition and the date of sale or exchange.

Bills

Each owner is required to pay the utility bills on their property in accordance with the received monthly invoices/bills from the electricity/water supply/central heating companies. You should receive the invoices/bills in your name directly from the companies involved, unless you have authorized another person to deal with this issue on your behalf. If you find that your bills are too high or excessive, you can contact the respective company to produce the necessary checks. Furthermore, the owner must cover the utility bills for the common areas of the building in proportion to the shares held by it in the condominium ownership. It is advisable to request an invoice/bill, issued by the respective company for the common parts of the building in order to compare their amount with the amount specified by the maintenance company.