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Problems for Buyers Owning Companies in Bulgaria

Due to the legal prohibition for purchasing land in Bulgaria by foreign citizens most of the buyers (mainly UK citizens) have established Bulgarian limited companies for that purpose.

As result the main role of the companies is "just to own the land"; most do not have any business activity and usually have been established with minimum capital. By law the companies are separate legal persons from their owners and have public obligations, including submitting an annual tax return in the local tax office and publishing the annual financial report at the Commercial register. For that purpose the buyers need to use the services of local accountants and lawyers who must consult and support them for fulfilling of all the obligations.

However, it appears that most of the buyers actually have no idea what is happening with their companies and are not in contact with Bulgarian accountants/lawyers after purchasing the land and establishing the companies. People think that as the company has no activity it is not necessary to pay additional costs for accountants, lawyers, state fees. It is a fact that many people have no any accountancy and tax documents for their companies, they do not know, for example, if the company has submitted the tax return for the prior financial year or if the annual property tax fee has been paid. Respectively, if they decide to close the companies and to transfer the properties included in it, it occurs that they have big tax debts and must be fined. But as many do not live in Bulgaria and usually have no local contact person for communication for delivering official messages, sometimes the local tax offices start an executive procedure against the properties owned by the companies as it is the only way to receive any amounts from such companies. Of course, it is the worst case scenario that may happen, but foreign people have to know that they have duties to their companies and to the state.

The other group of owners authorize with POA the real estate agents and relies on the support of their team of accountants and lawyers. However, the agent is not bound to maintain the company if he is not paid for that. In some cases the agent is not interested and the final result is the same: the company misses deadlines for the tax obligations, has no regular accountancy and the owners risk the properties.

In order to avoid the above problems we would like to advise all foreign buyers who have purchased land in Bulgaria through limited companies to collect all relevant financial (tax and accounting) documents for their companies. Plus, to be in contact with local professionals who are able to advise them correctly and accordingly and to care about keeping the respective obligations. Otherwise, they will not be able to close down the companies (with liquidation); they risk being subject of revision by the National Revenue Agency for non completion of compulsory obligations.

This article was written by "Valova & Angelova" Law firm, www.nyd-law.com