Property transactions through a Bulgarian limited company

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Bulgarian property legislation consists of many different acts and regulations, some of which unfortunately have not been synchronized with European legislation. All property transactions are registered by Bulgarian Registry Agency and made in a notary form by a notary public.

Furthermore, buying real property as a company asset requires knowledge not only of property laws but also of accounting and tax regulations. Therefore property transactions of any kind (sales, purchases, rent, lease, etc.) by legal entities (i.e. companies) must be handled by experienced real estate solicitors working independently from real estate agencies and property developers.

If you are considering buying real property in Bulgaria through a limited company, here are a few things you should have in mind.

To begin with, be sure that the company has enough finance ‘on paper’ to buy the property. Many businessmen mix their personal assets with the assets of their company. Before making the deal, consult with your accountant and ask how much money exactly your company has as per the ledgers. If finance is not enough, you cannot just pay from your personal savings or from the bank account of another company you have. Passing money from one pocket to the other can be made legally by signing a loan agreement at interest not less than the minimum prescribed by law.

In most cases payment of purchase price must be made by bank transfer. Cash payments in property transactions are forbidden unless the price is under BGN 15000. Of course bank transfers are recommended even in low cost deals as cash payments are risky. Actually it is recommended an escrow account to be used, usually a special account of the notary public who will witness the deed. This is the most secure way of payment.

Acquiring real property through a limited company definitely has its advantages: you will make deductions for any expenses for renovation, furnishing, you will deduct depreciation of asset every year, etc. On the other hand, companies pay higher annual property tax and waste fee, and you should think carefully about your company credit status. If the business goes down and company has creditors or becomes insolvent, the property could be lost.

If you are the company owner, but you have another person appointed as manager, you should know that it is actually the manager who has the power to complete the any property deals and sign title deeds and lease contracts. Generally it is possible to restrict the powers of the manager by including special limitation clauses into your Company’s articles. In such cases, consulting with your corporate lawyer before undertaking any serious property investment is absolutely mandatory.

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