In Bulgaria, the use of companies can be an essential part of legal tax optimisation schemes involving real estate transactions. Below, we discuss two such schemes, namely, (i) a company selling a property to an individual and (ii) a company selling a property to another company.
A company selling a property to an individual
In certain situations, Bulgarian law allows companies not to register for VAT purposes. More specifically, only Bulgarian companies having income equal to or exceeding BGN 50,000 during a period of 12 consecutive months are obliged to register for VAT purposes.
If a company that is not registered for VAT purposes owns a property, it may sell it to an individual without the need to pay VAT. The standard VAT rate in Bulgaria is 20%. However, a lower rate of 9% applies to supply of certain touristic services.
A company selling a property to another company
Under Bulgarian law, if a company sells a property to another company, the transaction may not be subject to VAT. A tax investigation conducted by the Bulgarian tax authorities in 2010 indicated that 70% of the luxury properties in Bulgaria were owned by companies.
To avoid legal issues with regard to the use of tax optimisation techniques, it is necessary to always declare correct information and comply with all applicable laws. The information provided above is for guidance purposes. If you need advice tailored to your specific situation, please contact us.