PURCHASING OF LAND IN BULGARIA BY FOREIGN CITIZENS IN ACCORDANCE WITH THE AMENDMENTS IN THE BULGARIAN LEGISLATION AFTER 01.01.2007
Purchasing of land by foreign citizens is regulated in the Treaty of accession of the Republic of Bulgaria to the European Union as well as in the Bulgarian Ownership act and in the Bulgarian Constitution. Notwithstanding the amendments in the Bulgarian legislation and in the Constitution in respect of the purchasing of land by the foreigners Bulgaria kept certain restrictions in relation to land acquisition. The Treaty of accession of the Republic of Bulgaria to the European Union foresees the possibility for the new EU member state to keep in force the restrictions for the foreign buyers for period of five years after the accession of Republic of Bulgaria to the European Union.
The restrictive clause stipulated in the Treaty concern the acquisition of the ownership of land for the purpose of “second home” for the citizens of EU member states or of member states under the European economic states. There is no legal definition about the term “second home” in the legislation, but in our opinion this clause should be broadly interpreted such as to include various structures – apartments, houses, villas as well as other types of buildings, part of building, built upon a land, which does not have the status of agricultural land or land included in the forestry fund. About the agricultural land or lands included in the forestry funds the restrictions are in force within the period of seven years after the date of accession.
The above mentioned clauses does not apply to citizens of EU member states or of member states under the European economic states who have a permit for long – or temporary term residence in Bulgaria. Therefore for these residence are applicable the same clauses and procedures which are in force for the Bulgarian citizens.
In regards to the ensure equal opportunities for investment for the citizens of all the EU member states the Treaty foresees the above restrictions to be revised after expiry of tree years from the date of accession of Republic of Bulgaria to EU and may be eliminated with an absolute majority of the members of the European Council.
It is important to be noticed that the foreign buyers could free acquire an ownership of the buildings or parts of buildings or limited property rights over the building plots (right of build, rights of use) as it was predicted in the Bulgaria legislation up to the date of the accession of Bulgaria to EU.
The Ownership Act, amended and supplemented, SG No. 24/20.03.2007 in relation to the conditions of the Treaty of accession of the Republic of Bulgaria to the European Union, states that citizens of EU member states or of member states under the European economic states agreement may acquire the right of ownership of land in accordance with the requirements in compliance with the Treaty of accession of the Republic of Bulgaria to the European Union. The above citizens who do not reside permanently in Bulgaria may acquire land only for a “second home” after expiry of the time limit stipulated under the Treaty concerning the accession of the Republic of Bulgaria to the European Union, which is five years. In this respect “first home” is the property, which a physical person own on the territory of the EU member state.
Bearing in mind the above comments related to the limitations for foreigners concerning acquiring of land in Bulgaria, the practice in Bulgaria is still establishing a company in respect of buying a land by foreigners. It is because the legislation does not explicitly numerate the documents, which should be presented before the Notary Public as a proof that the buying land could be considered as a “second home” for the foreign citizens from EU member state. The emptiness in the law causes many problems for the Notary and practically the Notary Public refuse to realize deals related to the acquiring of land by foreign natural persons.
In our opinion the establishing of companies is the most appropriate way for acquiring of property, including land, in Bulgaria, bearing in mind the fact that the new Corporate Income Tax Act, amended and promulgated in December 2006, introduced significant changes in the area of corporate taxation with one of them being the reduction of corporate income tax from 15% to 10%, which is expected to be a significant business development boost. Moreover according to the new VAT Act the transferring of ownership right over the land, establishment or transfer of limited rights over land as well as leasing or renting are exempt from taxing, whet the deal are carrying out by local legal entities.
This article was created by Valova&Angelova law firm.