Registered Access to the Company Files in Bulgaria

In general the Bulgarian Commercial Register is public. Everybody is entitled to a free access to the database. Till 01/01/2013, using the search options on the website of the Registry Agency (http://brra.bg/), anybody could view and use the personal information, submitted to the register, such as names, passport details, address, date of birth, etc. This was due to the fact that the business has been required to submit certified copies of various documents containing personal data which were then scanned and published on the website.

Given the Data Protection Act and the complaints of the business that their personal data could be easily misused for various purposes, including criminal acts, pursuant to the Article 11, Par. 2 of the Commercial Register Act now the access to the company files is restricted. Currently, only the summarised basic information regarding the business details and only the title and nature of the documents submitted to the Register (such as company details, representatives, ownership and partnership, registered capital, legal standing) is publicly disclosed. The contents of the documents, certifying these facts (such as various applications for change in the company status ) and the company documents, subject to public disclosure (such as financial statements, etc.) as well as other documents, containing personal data under the Data Protection Act which could easily serve to identify people, is not public anymore. To view the particular information and the documents scanned on the company file, the users now need to register and to identify themselves by the means of a Digital signature or by a Digital certificate, issued by the Registry Agency. To obtain a Certificate for registered access one needs to apply to the Registry Agency. The state and local authorities shall obtain such certificate automatically, ex officio, under the terms and conditions, stipulated in the Ordinance on the Procedure for Granting Access to the Commercial Register and the Company Files. Nevertheless, the information obtained in such way shall not contain all the personal data but only the one, required by the law (the Commercial Act in particular). Thus, some personal data, stated in the certified copies of the documents, subject to public disclosure and submitted to the Commercial register in compliance with the current legislation, could be deleted, otherwise it is deemed that the person has agreed to grant a public access to it.

Residence documents of EU nationals (e.g.British subjects) in Bulgaria – grounds, restrictions, penalties

I. Residence documents

The EU nationals could stay freely in Bulgaria up to 3 months without any documents but their national ID. They could stay even longer if they meet the requirements of Chapters III and IV of DIRECTIVE 2004/38/EC:

Chapter III, Article 7 of the Directive:

1. All Union citizens shall have the right of residence on the territory of another Member State for a period of longer than three months if they:

(a) are workers or self-employed persons in the host Member State; or

(b) have sufficient resources for themselves and their family members not to become a burden on the social assistance system of the host Member State during their period of residence and have comprehensive sickness insurance cover in the host Member State; or

(c) are enrolled at a private or public establishment, accredited or financed by the host Member State on the basis of its legislation or administrative practice, for the principal purpose of following a course of study, including vocational training; and have comprehensive sickness insurance cover in the host Member State and assure the relevant national authority, by means of a declaration or by such equivalent means as they may choose, that they have sufficient resources for themselves and their family members not to become a burden on the social assistance system of the host Member State during their period of residence; or

(d) are family members accompanying or joining a Union citizen who satisfies the conditions referred to in points (a), (b) or (c).

2. The right of residence provided for in paragraph 1 shall extend to family members who are not nationals of a Member State, accompanying or joining the Union citizen in the host Member State, provided that such Union citizen satisfies the conditions referred to in paragraph 1(a), (b) or (c).

3. For the purposes of paragraph 1(a), a Union citizen who is no longer a worker or self-employed person shall retain the status of worker or self-employed person in the following circumstances:

(a) he/she is temporarily unable to work as the result of an illness or accident;

(b) he/she is in duly recorded involuntary unemployment after having been employed for more than one year and has registered as a job-seeker with the relevant employment office;

(c) he/she is in duly recorded involuntary unemployment after completing a fixed-term employment contract of less than a year or after having become involuntarily unemployed during the first twelve months and has registered as a job-seeker with the relevant employment office. In this case, the status of worker shall be retained for no less than six months;

(d) he/she embarks on vocational training. Unless he/she is involuntarily unemployed, the retention of the status of worker shall require the training to be related to the previous employment.

4. By way of derogation from paragraphs 1(d) and 2 above, only the spouse, the registered partner provided for in Article 2(2)(b) and dependent children shall have the right of residence as family members of a Union citizen meeting the conditions under 1(c) above. Article 3(2) shall apply to his/her dependent direct relatives in the ascending lines and those of his/her spouse or registered partner.

 

Chapter IV, Article 16 and following of the Directive:

General rule for Union citizens and their family members

1. Union citizens who have resided legally for a continuous period of five years in the host Member State shall have the right of permanent residence there. This right shall not be subject to the conditions provided for in Chapter III.

2. Paragraph 1 shall apply also to family members who are not nationals of a Member State and have legally resided with the Union citizen in the host Member State for a continuous period of five years.

3. Continuity of residence shall not be affected by temporary absences not exceeding a total of six months a year, or by absences of a longer duration for compulsory military service, or by one absence of a maximum of twelve consecutive months for important reasons such as pregnancy and childbirth, serious illness, study or vocational training, or a posting in another Member State or a third country.

4. Once acquired, the right of permanent residence shall be lost only through absence from the host Member State for a period exceeding two consecutive years.

Article 17

Exemptions for persons no longer working in the host Member State and their family members

1. By way of derogation from Article 16, the right of permanent residence in the host Member State shall be enjoyed before completion of a continuous period of five years of residence by:

(a) workers or self-employed persons who, at the time they stop working, have reached the age laid down by the law of that Member State for entitlement to an old age pension or workers who cease paid employment to take early retirement, provided that they have been working in that Member State for at least the preceding twelve months and have resided there continuously for more than three years.

If the law of the host Member State does not grant the right to an old age pension to certain categories of self-employed persons, the age condition shall be deemed to have been met once the person concerned has reached the age of 60;

(b) workers or self-employed persons who have resided continuously in the host Member State for more than two years and stop working there as a result of permanent incapacity to work.

If such incapacity is the result of an accident at work or an occupational disease entitling the person concerned to a benefit payable in full or in part by an institution in the host Member State, no condition shall be imposed as to length of residence;

(c) workers or self-employed persons who, after three years of continuous employment and residence in the host Member State, work in an employed or self-employed capacity in another Member State, while retaining their place of residence in the host Member State, to which they return, as a rule, each day or at least once a week.

For the purposes of entitlement to the rights referred to in points (a) and (b), periods of employment spent in the Member State in which the person concerned is working shall be regarded as having been spent in the host Member State.

Periods of involuntary unemployment duly recorded by the relevant employment office, periods not worked for reasons not of the person’s own making and absences from work or cessation of work due to illness or accident shall be regarded as periods of employment.

2. The conditions as to length of residence and employment laid down in point (a) of paragraph 1 and the condition as to length of residence laid down in point (b) of paragraph 1 shall not apply if the worker’s or the self-employed person’s spouse or partner as referred to in point 2(b) of Article 2 is a national of the host Member State or has lost the nationality of that Member State by marriage to that worker or self-employed person.

3. Irrespective of nationality, the family members of a worker or a self-employed person who are residing with him in the territory of the host Member State shall have the right of permanent residence in that Member State, if the worker or self-employed person has acquired himself the right of permanent residence in that Member State on the basis of paragraph 1.

4. If, however, the worker or self-employed person dies while still working but before acquiring permanent residence status in the host Member State on the basis of paragraph 1, his family members who are residing with him in the host Member State shall acquire the right of permanent residence there, on condition that:

(a) the worker or self-employed person had, at the time of death, resided continuously on the territory of that Member State for two years; or

(b) the death resulted from an accident at work or an occupational disease; or

(c) the surviving spouse lost the nationality of that Member State following marriage to the worker or self-employed person.

 

Articles 7 and following of Chapter III of the Directive set out the criteria that need to be met for registration certificate to be issued regarding continuous stay (up to 5 years). Articles 16 and following of Chapter IV set out the criteria that need to be met for a document, certifying permanent residence (over 5 years), to be issued.

When you have lived in Bulgaria for a continuous period of 5 years in accordance with the European regulations, you may apply for a document certifying permanent residence but you are not obliged to do so. Under European law, you do not need to obtain documentation confirming your right of residence in Bulgaria if you are a national of a country in the EEA:

Article 25 of the Directive:

General provisions concerning residence documents

Possession of a registration certificate as referred to in Article 8, of a document certifying permanent residence, of a certificate attesting submission of an application for a family member residence card, of a residence card or of a permanent residence card, may under no circumstances be made a precondition for the exercise of a right or the completion of an administrative formality, as entitlement to rights may be attested by any other means of proof.

 

 II. Restrictions

The Bulgarian authorities may restrict the freedom of movement and residence of Union citizens and their family members, irrespective of nationality, on grounds of public policy, public security or public health. These grounds shall not be invoked to serve economic ends. The grounds are set out in Article 24 of the EU citizens and Families Entry, Stay and Departure Act:

Article 24 of the Act

1. The residence has become groundless considering the criteria set out in  Chapter III, Article 7 of the Directive (reproduced in Article 8 of the Act);

2. It has been established that the holder of the right of residence had produced false information to obtain it;

3.  The person is absent from Bulgaria for a period, longer than 2 consecutive years;

4. The person suffers diseases with epidemic potential as defined by WHO;

5. When it is ascertained that the person causes a serious threat to the public security or there is evidence that the person conducts activities against the public security or the public policy.

 

If any of the above grounds are present, the following measures could be taken by the relevant authorities:

–          Deprivation of the right of residence

–          Expulsion from the country

–          Prohibition to entry the country

III. Penalties

Pursuant to Article 61 of the Ministry of Interiors Act the police authorities can carry out ID checks, in accordance with their control powers, to establish if your ID or residence papers are in order. The identification process includes: producing ID documents by their holder, providing information by citizens with established identity who know the unidentified person or conducting any other activities to collect reliable information.

Pursuant to Article 31 of the EU citizens and Families Entry, Stay and Departure Act subject to fine within the range of BGN 50-300 is any person who:

–          uses somebody else’s ID or residence document, if the conduct does not constitutes an offence and it is punishable more severely;

–          removes, conceals or destroys an ID document or residence document, if the conduct does not constitutes an offence and it is punishable more severely;

–          does not produce an ID or residence document upon request of the relevant authorities

Pursuant to Article 32 of the EU citizens and Families Entry, Stay and Departure Act subject to fine within the range of BGN 20-150 is any person who:

–          hinders the ID check to be carried out

–          states false information in the application residence documents, if the conduct does not constitutes an offence and it is punishable more severely;

In insignificant cases under Articles 31 and 32 of this Act the fine is up to BGN 20.

Pursuant to Article 270 of the Ministry of Interiors Act if one fails to comply with police order he could face a fine within the range of BGN 100-500.

Pursuant to Article 275 of the Ministry of Interiors Act if one unlawfully hinders the exercise of any of the police powers he could face a fine within the range of BGN 500-1000, unless the misdemeanour is insignificant or constitutes an offence.

24/01/2013

References: DIRECTIVE 2004/38/EC, EU citizens and Families Entry, Stay and Departure Act, Ministry of Interiors Act, Foreigners Act, Civil Registration Act.

 

 

 

UK Last Will and Testament Vs Bulgarian Last Will and Testament

A Last Will and Testament is a legal document by which a person (testator) decides who will manage his/her estate at death, so called “beneficiaries”. The Will comes into effect after the death of the testator and aims to amend the order of the succession. The estate includes not only all legal rights, interests and entitlements to property of any kind but all liabilities a deceased person may have at the time of his/her death no matter where they have occurred. The problem arises when these facts have occurred in different countries than the residence of the testator and there is a collision of applicable laws.

In case of life-changing events, per instance relocation to a new country such as Bulgaria, you, as a testator, have three options:

1) To change your existing Will drafted in the UK

2) To draft a new Will in Bulgaria

3) To draft two separate Wills – one for the assets in the UK and the other for the assets in Bulgaria

You may change your existing Will drafted in the UK so it conforms to the Bulgarian laws. You can amend your existing Will by creating a codicil (a formal supplement to your will) in the UK and to store it together with your initial will. The problem you may face is that you or your attorney in the UK may not always know the applicable laws in Bulgaria. You might consider as well that your Last Will will be executed in your last domicile country (Bulgaria), and as a will made abroad, the beneficiaries must prepare an authorised translation and also have an “apostille” (an official stamp verifying the signature of the judge) on the original document. This means additional work, costs and time. Having in mind the time limit for submitting an inheritance tax declaration in Bulgaria (6 months from the death event),  the beneficiaries will be waiting for the probate from the UK to be issued, and then have to make the translation and get the “apostille” before taking it to Bulgaria. In this way they may easily overrun the time limit and be in for fines. You can also make an inheritance tax saving in favour of your beneficiaries by making the right kind of Will.

If you choose to draft a new Will in Bulgaria you may destroy the previous one you drafted in the UK. You should bear in mind that the new Will may revoke partially or entirely the old one as inconsistent with your new Will. If this is your desire, you should state in your new Will that it revokes all prior wills and codicils. This will protect your intentions in the event that you forgot to destroy any originals or copies of prior wills or codicils. But then, again, your beneficiaries will face the aforementioned problem with the translation, apostille and tax inheritance if you leave some property in the UK along with your property in Bulgaria.

Therefore, it seems very reasonable to have two Wills – one for any assets in the UK and one covering your property and savings in Bulgaria. Should you decide to draft a Bulgarian Will you need to be sure that your UK Will deals with any assets not covered by the Bulgarian Law.

The rules applicable to the Last Will and Testament in Bulgaria are set out in the Inheritance Act and the Private International Law Code. Pursuant to the law, the Last Will and Testament is two types – witnessed notarial and unwitnessed holographic, both are equally valid and enforceable. The Notarial Will is drafted by a Notary Public, then read to the testator in the presence of two uninterested witnesses, and finally signed by the testator, the Notary and the two witnesses. The Holographic Will is entirely handwritten and signed by the testator only. The Holographic Will could be kept by the beneficiary, the testator or a Notary. Both the Notarial and the Holographic Will should meet the formal requirements of the Law. On the material side, in general, the testator should express his will regarding the distribution of the property upon his death considering the part of the property reserved for his heirs according to the Law. It is important to know that even if he/she harms their interests, leaving some of his properties to other beneficiaries, the Last Will and Testament is still valid but the heirs then are entitled to seek a recovery within a specified time-limit.

Buying property in Bulgaria – complications

Generally speaking, only a title deed signed before Notary (Notarialen akt, „Нотариален акт“), in the Notary’s office, could transfer the ownership over property in case of intended sale (this article excludes the other cases of acquisition – in a public auction, with an administrative order, etc. It considers the cases of adverse possession as far as they are related to the topic).

However, sometimes people are too naive or negligent and they sign documents which are different or hand out money without any papers to be signed.

There are few possible scenarios (maybe not exhaustive due to the variety of situations):

1)      You have signed a preliminary agreement in a written form, out of the notary’s office and without Notary

The preliminary agreement regarding immovables must always be in a written form and a Notary is not required but you need to know that even if you sign such, you are not the legal owner of the property yet. The preliminary agreement must consist of all the significant provisions of the final agreement, the title deed, but is not such.

If you have signed a preliminary agreement and for one reason or another it has not led to a final agreement in the form of a title deed signed before Notary, you may always claim to the Court to announce this agreement for final. Of course if you are not the faulty party, and of course, if you do it within the time, provided by the statute of limitations (5 years in the common cases) or even later if the defendant does not assert a statute of limitations estoppel (which is only a probability).

You cannot acquire ownership over property based on adverse possession for a period of 5 years (see below) because the intention and the will of the parties were for a sale indeed. You are deemed as an “ordinary, mala fide possessor, possessor in bad faith” for the purpose of acquisition of property by adverse possession (see below), but you are entitled to exercise the rest of the rights, given to the bona fide possessor as a defence to eventual eviction as listed in par.2 (see below).

2)      You have signed a title deed before Notary without having a notice of defects in the title or the outstanding rights of others but these defects/rights were discovered later

The title deed could be declared as void or voidable later on. Nevertheless, you are deemed to be a bona fide purchaser, i.e. a person who bought the property in a good faith not knowing you are buying from non-owner or that the title deed suffers from defects and you can occupy the property as a bona fide possessor. On the contrary – if one is aware that he is buying from a non-owner or is aware of the defects in the title upon signing it, he is deemed to be a mala fide possessor. The good faith is assumed till proved otherwise.

Because initially you “bought” the property on the basis of a document seemingly “suitable” to transfer ownership or you have been convinced that you are buying from the real owner, you may acquire the property by adverse possession for a period of 5 years (unlike par. 1 above) if some conditions are met.

As a legitimate possessor you may protect your right in court if you consider it has been violated. To do so you need to show that you have been in a continuous possession for more than 6 months. This claim could be lodged within 6 months deemed from the violation/your notice of it. If the property has been taken away by force or by unknown to you means, you could claim the return of the property from any person within 6 months.

The owner on the other part, could claim the return of the property, held or possessed by any person without any justification within the time, provided by the statute of limitations (5 years in the common cases), deemed from the unlawful occupation.

Rights of the possessor upon eviction:

Bona fide possessor

– Is entitled to all fruits received before the legal interruption (through service of judicial summons) – natural, industrial or civil;

– Has the right of retention until reimbursement;

– Is entitled to be reimbursed for the useful and necessary expenses made to preserve the property

– Is entitled to be reimbursed for the improvement made in the property – the owner must refund the amount of expenses or pay the increase in value which the property may have acquired

The mala fide possessor:

-Reimburses the owner for the fruits received and those which the legitimate possessor could have received;

-Reimburses the owner for the omitted future benefits he would cause to the owner;

– Is entitled to be reimbursed for the necessary expenses made to preserve the property;

– Is entitled to be reimbursed for the improvement made in the property but only to the lower of – the amount of expenses and the increase in value which the property may have acquired. If the owner was aware of these improvements and did not object them – the rules for bona fide possessor apply (regarding the improvements).

Neither the possessor in bad faith nor the one in good faith are entitled for reimbursement of luxurious/ornamental expenses.

Adverse possession

Acquiring property by “adverse possession” is the process by which a person can become owner of property after having occupied it for a specified period of time and some additional conditions have been met. This term in the Bulgarian law is slightly different in nature from the term used by the UK Land Registration Act 2002. However, the continental legal systems use the term “acquisitive prescription”.

This term means that a person wishing to claim adverse possession of property would need to continuously occupy the land for five/ ten years (five years – for bona fide possessor and ten years – for mala fide possessor!) and to meet certain conditions.

In both cases there are two elements a person needs to establish to claim adverse possession regardless the period of possession. The claimant needs to prove the following:

– The possession is factual, undisturbed, exclusive, uninterrupted, continuous, open and well-known by the public, adverse to the others, for the statutorily defined time period

– “The intention” of the claimant is to hold the property during that period as his/hers but not to hold it for somebody else.

For factual possession, the claimant may acquire possession of the property by taking possession of property that has been “abandoned” by the “real” owner in one way or another (excluding the so called “public municipal/state properties”). Any third persons must not challenge the fact that the claimant is occupying the property. If the real owner is trying to evict the possessor of the property or other third persons are claiming rights over it, then the possession is not “undisturbed, exclusive, uninterrupted, therefore the property cannot be acquired by adverse possession. The possession must not be granted under lease, licence, tenancy* or similar agreements either. There must be a sufficient degree of exclusive physical control over the property in accordance with the nature of the property and the manner in which this property is commonly used. The person in possession must have been dealing with the land as an occupying owner might have been expected to deal with it and no one else must have done so. An example would be the occupation of a “field”. The claimant would need to maintain the land and regularly cultivate the land for example by mowing the grass, tending to flowers, and cutting trees. The claimant would need to regularly use the land perhaps by growing crops on it and treat the land like their own exclusively and as the title owner would have done.

The claimant must establish that they intended to possess the property during the period of possession i.e. the claimant must intend to possess the property and not occupying it by mistake. This must be an intention to possess in the claimant’s own name, on their own behalf and to the exclusion of all others. A claimant could show they had possessed the land continuously to the exclusion of all others for example by fencing the land off or growing hedges around the land for their exclusive use. Paying taxes for the property or utility bills is not a sufficient evidence itself for this intention.

Once the above conditions are met, the claimant will then need to make an application to the Notary or to the Court supported by satisfactory evidence – certain documents (tax certificate, certificate from the municipality that the property is not municipal, etc.) and 3 witnesses who will sign a sworn statement outlining details of the claimant’s possession of the property for the requisite period of time. The result of the procedure will be a legit title deed. However, the “real” owner has a statutory period of time to challenge the adverse possession in courts, and if they do so and succeed the adverse possession title deed fails.

3)      You did not sign any papers but you paid the price of the property

This hypothesis could arise in the cases of so called “unjust enrichment” (restitution, quasi-contract).

The unjust enrichment is a general principal in the Law that no person should be allowed to profit at another’s expense without making restitution for the reasonable value of any property, services, or other benefits that have been unfairly received and retained.

Unjust enrichment is not based on an express contract. Instead, litigants normally resort to the remedy of unjust enrichment when they have no written or verbal contract to support their claim for relief or they hold the property in the name of the owner and on his behalf (lease). The unjust enrichment claim could be filed only if you do not have any other means for defence (such as the claim for improvements made by the possessor).

Unjust enrichment as a legal institute consists of four elements:

1. An enrichment

Example: The seller received the price for the property and he has more money in the bank now.

2. An impoverishment

Example: You took a loan to buy the property.

3. A connection between the enrichment and the impoverishment

4. Absence of a justification for the enrichment and impoverishment –the benefit has been received without any reason (condictio sine causa), etc.

Example: You paid for the property but you did not enter into any agreement with the seller.

In the examples above the owner needs to reimburse you the amount you paid for the property, i.e. the amount of the impoverishment.

These are some of the possible scenarios. The practice, of course, could bring into existence a lot more and a lot complicate situations. For that reason it is always highly recommended when dealing with property in Bulgaria to use the services of reliable, competent and devoted professional. Doing it yourself or with the help of friends could seem a cheaper option in the beginning but in the end, when things go wrong, it could become a lot more expensive one.

References: Ownership Act; Obligations and Contracts Act; prof. P.Venedikov, New Property Law; Ch. Goleminov, Civil Law Aspect of the Unjust Enrichment; prof. A. Kalaydzhiev, Contractual Law; Oxford University Press, Oxford Dictionary of Law; Hr. Danov, English- Bulgarian Legal Dictionary

 

Notes about Charity

CHARITY ACTIVITY

1/ Through existing company

Legal framework – Law on Corporate Taxes; Law on Maecenas; Law on Local Taxes

Donations, grants to preferential subjects /healthcare providers, institutions for social services, disabled persons, foster homes, schools, nurseries, persons with low incomes, cultural institutes, associations with socially useful objective etc./– allowance for donations up to 10% from the profit/5% of the income if person, not company/

Donations, grants to Fund medical treatment for children – up to 50%

Donations to persons, companies and associations, registered under the Law on Maecenas – up to 15%;

Computers for schools produced up to 1 year before the date of the donation

The total amount of the donation should not exceed 65% of the accounting profit.

Note: difference between donation/darenie/ and sponsorship/sponsortvo/. The donation is gratuitcus, free, the sponsorship is against publicity.

Documents needed – contract and written statement for giving and receiving the donation, signed by both parties

 2/ Through charity organisation

Legal framework: Law on Non-Trade Associations; Law on Maecenas

2a/ Under the Law on Non-Trade/Non-profit/ Associations

There are 3 organised forms of charity organizations:

Association with private objective – 3 or more persons; non-profit activity, private objectives.

Association with socially useful objective – min 7 persons or 3 companies, with socially useful objectives, public oriented, to support intellectual activities/development and recognition of the intellectual values, civil society, healthcare, science, technology, physical culture and sport, supporting the people with low incomes, disabled or people with special needs, supporting the social integration and the personal development, human rights protection or protection of the environment, etc./. It should be registered in the court, registry agency and in the Central register at Ministry of Justice. The social objective should be present in the Statute. Should have Collective Supreme body/Assembly/ and managing body/board of managers or just a manager/. For the sessions of the Collective Supreme body should be kept a book. It is subject to financial audit each year, should submit information till 31 May each year and annual report to the Ministry of Justice for the activity; It cannot be transformed in an association with private goal and this requirement should be clearly stated in the Statute, as well as the requirement that upon liquidation the property of the association cannot be distributed between its members, it could be granted to other similar associations per instance.

Advantages of associations with non-profit social objectives – if the objective is to support the culture pursuant to Law on Maecenas, there is an allowance of 15% of the profit for donations to such organisation, registered under this Law as well. Law on Corporate taxes and Law on Income Taxes stimulate companies and persons to donate to such organisations with social objectives/excl. the one under  the Law on Maecenas/ as they provide an allowance of 10% /5% of the accounting profit/ taxable income. There is a possibility of state subsidy for projects of such associations and participation in Programmes of the EU for Grant Schemes. Property bequeathed to such accusations is not taxable pursuant to Law on Local Taxes. Pursuant to the same Law these entities are not taxed for received and granted donations. Pursuant to Law on VAT free of VAT are the services and goods of such associations in relation to humanitarian aid, physical culture and sport.

Both associations are established on Constituent Assembly – decisions for the set – up, Statute, managing body should be taken. The Statute should stipulate the main issues – name, head office and operating address, objectives – non-profit, legitimate, type of activity – with socially useful objective or private, subject of the activity, how the objective will be achieved – with membership due/fees, donations, voluntary work, trade activity/only to satisfy the needs of the non-profit objective/ etc., how the property will be managed or disposed, the managing and representative bodies/the managing body should consist of min 3 persons/, rules regarding beginning and termination of membership and settlement of the property relations at membership termination, rules regarding the affiliates of the association, transformation, rights of the association’s bodies, term for which it is established/if any/, how the membership due will be paid, how the property will be distributed after liquidation and bankruptcy. For more see Law on Non-Trade Associations.

Documents needed for court registration – application, Statute, report from the Constituent Assembly, certified by notary samples of the signature of the representatives, CRB certificates of the managing bodies, document for company’s name uniqueness and receipt for paid state fee for the registration.

In 7 days time after the court registration the association with social/private objective should be registered in the BULSTAT registry at the Registry Agency.

In 2 months time after the court registration the association with social objective should be registered in the Ministry of Justice of Bulgaria. Documents required – a copy of the court decision for the registration, certificate of good standing, declarations, and rules for the social activity performance.

In 4 months time after the court registration the association with social/private objective should be registered in the Agency for Financial Reconnaissance to the Ministry of Finance. Documents needed – by-laws of the non-profit associations regarding the control and prevention of the money laundry and terrorism financing, copy of the court decision for the registration, certificate of good standing, and copy of BULSTAT card.

Foundation – granting property/money, real estate, items/ for free to achieve a non-profit goal; with unilateral document, certified before Notary or as Notary deed in case of real estate; More or less the same rules regarding the Statute and managing bodies as the associations apply. Difference with the associations – no membership, only property.

2b/ Under the Law on Maecenas

Association to support the culture is a non-profit association, registered in the Ministry of Justice/see above par.2a/

Culture – work of literature and translation, journalism, music, art, theatre, films, crafts, architecture, photography.

Maecenas – gratuitcus support for creation, preservation or making popular the works of culture directly or/and through a registered association, supporting the culture

Registration as Maecenas in the Ministry of culture required. Documents needed – copy of the court decision for the registration, certificate of good standing, copy of certificate for registration in the registry of Ministry of Justice, copy of BULSTAT card, rules for the social activity performance, application № 1 under the Law, agreement with the recipient of the donation.

Should keep registry for all the agreements for donations concluded and comprehensive records. An annual report for the activity and annual financial report should be submitted to the Ministry of Culture till 1 of March each year as well as reports pursuant to par. 2a/ above.

Some legal implications of having a registered company in Bulgaria set up only to buy a property

Re-registration – if your company has been registered till 30.05.2008 under Bulstat register you need to reregister it in the Commercial register till 31.12.2011 and obtain Unified Economic Code. If not – liquidation ex officio will be carried out and the appointed liquidator will sell your property and after satisfying all the creditors will pay you so called liquidation share if any. If the amount is not enough to satisfy your creditors bankruptcy proceedings will commence. You may end up paying the costs of these legal proceedings and without your property!
Annual financial report – all the companies, which are to be reregistered till 31.05.2011 should publish their annual financial reports for 2007, 2008, 2009 and 2010 till 30.06.2011. The companies which are to be reregistered on or after 01.06.2011 – should publish their reports in 3 months time from the company re-registration but not later than 31.12.2011. All the companies which are registered directly in the Commercial register should publish their annual reports by 30.06.2011. All the companies, registered or re-registered should publish annual financial reports for the last year by 30 June of the following year. If you fail to do this the fine is 2000-3000 BGN for the company and 1500-2000 BGN for the company manager This obligation stands for every year the company exists even if it has no business activity. The data from the Commercial register is transferred ex officio to the National Revenue Agency, you do not need to register separately for tax purposes.
Company tax return – you need to submit one till 31 March each year. If the company has no business activity the last year, you need to submit one as well. The tax return should be submitted to the Territorial department of the National Revenue Agency at the company address. Failure to do this may result in imposing a fine of 500-3000 BGN for the company and 200-1000 BGN for the company manager.
Property taxes – in 2 months time from the acquisition the owner should submit a declaration to the Tax department of the municipality where the property is located. If you fail to do this the fine is 500-3000 BGN for the company. The property tax is between 0.1 and 4.5 ‰ of the tax evaluation of the property. The exact rate is stipulated by the Ordinance of the Municipality where the property is located. The property tax shall be paid in two equal installments – from 01.03. till 30.06 and till 30.10 of the year it is due. Failure to pay is not deemed as administrative breach.

Acquisition of Ownership over Land in Bulgaria

Registering a company in Bulgaria in order to purchase land in Bulgaria is not difficult and time-consuming process now but it is a bit uncomfortable because of the imposed obligations for company management, accountancy, taxes, etc. Many nationals of members-states of the EU are not aware of the current legislation and possibilities. It is good to know that you can acquire land in Bulgaria as an EU-citizen, a physical person if you meet the following requirements:

I. Regulated land, development land or so called “UPI-ureguliran pozemlen imot”:

1. before 01/01/2012 –  if you are legally residing in Bulgaria for a set period of time and you are registered as a permanent resident:

1.1.The permanent residence is an equivalent of the UK term Indefinite Leave to Remain/ILR/, which is granted after 5 years of continuous residence in Bulgaria/excluding a temporary absence up to 6 months in an year, a longer absence for military service, etc./

OR

1.2.you are one of the following:

a/you were working continuously for an year as employee or a self-employed person, you have reached the age for pensioning or there is a reason for earlier pensioning and you have resided in Bulgaria continuously more than 3 years;

b/ you are an employee or a self-employed person, who is disabled and you have resided in Bulgaria continuously more than 2 years;

c/ you are an employee or a self-employed person, who is disabled and the disability has been caused by an accident at work or professional illness;

d/ you are an employee or a self-employed person, who has been working and residing in Bulgaria continuously for 3 years and you are working in other member state  but you keep your place of residence in Bulgaria and you are visiting Bulgaria at least one time per week.

For the purpose of applying the conditions a/ and b/, the employment in another member-state is deemed employment in Bulgaria and includes the periods of unemployment occurred in another member state. These conditions do not apply if you are married to Bulgarian citizen or in a durable relationship with Bulgarian citizen.

2. after 01/01/2012  – you acquire regulated land without being a permanent resident and without the need of  Bulgarian company if the land is meant for a secondary residence.  Secondary residence – means a residence which is different from the main, principal residence (domicile), you already have in any EU country, e.g. UK.

Note: There is a second opinion on this subject. According to some lawyers (including the Chairman of the Bulgarian Notary Chamber), pursuant to Appendix VI, Section 3 “Free movement of Capitals” of the Accession Treaty of Bulgaria and Romania, any European citizen legally residing in Bulgaria (staying up to 3 months in the country on the basis of valid ID documents) had been entitled to acquire ownership over land for secondary residence since the date of Accession (i.e. since 01/01/2007). This means that you should have been physically present in Bulgaria when buying a land, but not acquiring it by an agent through POA. The other conclusion is that there was not any need to set up a company to do so in the period between 01/01/2007 and 01/01/2012. Therefore, setting up a company had been a necessary step in the acquisition of Bulgarian land by EU national only up to 01/01/2007. The foreign citizens, who are not considered as nationals of EU member-state, still need to set up a company in order to acquire land in Bulgaria.

II. Agricultural land, forest and forest land:

1. before 01/01/2014 – if you are self-employed farmer with the intention to reside permanently in Bulgaria and you are registered in the BULSTAT register in this capacity

2. after 01/01/2014 – in any other case.

Reference: Accession Treaty of Bulgaria and Romania/Appendix VI, Section 3 “Free movement of Capitals”/, Constitution of Republic of Bulgaria/Article 22/, Ownership Act/Article 29, 29a/, EU citizens and Families Entry, Stay and Departure Act/Article 16 and following/, Act on Ownership and Use of Agricultural Lands/Article 3 and 3a/.

VAT issues:Buying property in Bulgaria through registered company is not only on paper

Buying property in Bulgaria through registered company is not only on paper. The Law treats the company as any other legal entity with the relevant rights and obligations. This includes the obligation for VAT registration and charging VAT.

Therefore tax liable person is any person carrying out independent economic activity regardless of the objectives and the results of it. Independent economic activity is the activity of manufacturers, traders and persons, providing services, as well as performing profession as freelance. Independent economic activity shall also be any activity, carried out regularly or by profession, including the exploitation of material or non-material property with the objective to receive regular income from it.

Therefore if you are buying and selling properties in Bulgaria through company as a business or you are letting them out as a business, you should register for VAT. But your company needs to meet the following requirement for compulsory VAT registration – turnover of 50 000 BGN or more, for a period, not exceeding the last 12 consecutive months prior to the current month. The application for registration under law on VAT must be submitted within 14-days term from the expiry of the tax period, during which it has reached this turnover. Therefore it is unlikely to charge VAT on the sale of your first property. For any subsequent sales you must add VAT and charge it to the buyer after your VAT registration.

The taxable turnover is the sum of all tax basis of the taxable deliveries, including those taxed with 0 rate. It excludes the deliveries which are not connected with the main activity of the person, deliveries of long term tangible and intangible assets, used in the business activity (per example office). This exempt is not applicable for properties which the person holds for sale.

Bear in mind the exempt deliveries:

1. The transfer of the ownership right over land, the establishment or the transfer of limited property rights over land, as well as its letting out or granting a lease. The land subject to the transfer of the ownership should not be development land/uregiliran pozemlen imot/, if it is – it is VAT chargeable. The establishment or the transfer of right to build is considered as exempt delivery till the moment of completing the rough construction of the building, for which the right to build is established or transferred. Till this moment chargeable could be only the building works as a service. After completing the building as a rough construction, ascertained with a protocol act 14 of the local municipality VAT should be charged on the value of the new building, because afterwards transferable is the ownership over the new objects from the building/building as a whole.
2. Buildings which are not new
3. Letting out a building or part of it for dwelling to natural person, different from the trader
4. The adjacent terrain to buildings, which are not new

“New buildings” according to Law on VAT are the buildings:

a) which by the date, on which the delivery tax has become due, are at stage of concluding “rough construction”, or

b) for which by the date, on which the delivery tax has become due, 60 months have not expired since the date, on which a certificate of habitation/akt 16/ has been issued by the procedure of the Law on Territory Planning.

“Adjacent terrain” ис the sum of the built area within the meaning of the Law on Territory Planning and the area around the built area, determined on the basis of 3 m. distance from the external outlines of the surrounding walls of the first over-ground floor or of the semi-underground floor of the building in the regulated/development/land.

In any case I highly recommend seeking an advice from a competent accountant.

Be careful buying rural property in Bulgaria – Buyer’s Guide

In any transfer of property the interest of the seller is to receive the price for his/her property. The interest of the buyer is to acquire the property. Therefore, the risks involved in the property transfers are closely related to these two interests.

A buyer of property must ensure that he/she will obtain a good and marketable title to the property; i.e. that the seller is the owner, has the right to sell the property, there is no factor which would impede a mortgage or re-sale, that there are not any burdens, mortgages, foreclosures, pending court disputes, third parties rights, etc. Every buyer must be made aware of the current condition and the defects (patent or latent) of the property. There is not any sufficient warranty against being deceived (intentionally or not) but the risk can be significantly limited if the buyer is cautious enough, asks the appropriate questions and checks thoroughly the property documents.

I. Some questions to ask when buying a house:

1. How long has the seller lived in the house (if it is a long time it is less likely that they are moving because there are problems)?
2. How quickly the seller is hoping for the sale to go through (make sure their plan marries up with yours as this can save problems later on)?
3. Is there an inner WC/bathroom (most of the old traditional Bulgarian houses do not have an inner WC and/or bathroom)?

2. Why is the seller moving?
3. How long has the house been on the market?
4. Who are the neighbours and what they know about the property?

6. What is the heating in the property (is it gas, electric or other)?
7. How old is the boiler?
8. Are there proper drainage, gutters and downpipes in the property?

10. Are the electrics up to date and if not, what needs to be done?
11. Is the house connected to the water mains?
12. What is the GSM coverage and Internet services in the area?
13. What are the local amenities?
14. Is the house freehold or leasehold? If the house is leasehold – how long is the lease?
15. What is the seller including in the sale (kitchen units, furniture, etc.)?
16. Is there a lot of work involved in bringing the house up to date?
17. How much are the council tax and the property tax?

The above list is not exclusive. Depending on your individual needs you may amend these questions. These questions may serve you to negotiate the price of the property and/or the payment terms as well.

 II. Some checks to be carried out when buying a house:

1)    Check the documents – do not compromise with the number, dimensions and size of the buildings and land plots if you spot differences in the title deed („нотариален акт“), the sketch map (skitsa, “скица”), the Tax Evaluation Certificate („данъчна оценка“) and the real status of the property. Basically the sketch map must reflect the title deed:

1.  Be cautious if there are unsettled bills for the planning („неуредени регулационни сметки“)  regarding the plot of land;
2.  Be cautious in cases of Construction Tolerance Certificate („удостоверение за търпимост“) or the lack of it;
3. Bear in mind that the admissible difference in the size of the property as stated in the documents and the real size of the property is 10%.

2)    Check the type of the plot – if the plot of land is agricultural („земеделска земя“) or residential (regulated plot of land, „урегулиран поземлен имот“, „УПИ“) and in what type spatial zone it is located;

3)    Check the type of the building – is it solid-built, semi-solid or frame-built? Bear in mind that lofts and basements are not detached properties, they are adjacent to the apartments and cannot be sold separately; check if the shop you are about to buy is listed as such (some garages could be converted into shops but it is likely this change have not been entered in the Cadastre Office);

4)    Check the legal status of the sellers:

1. If the property is hereditary – are all the heirs present in the succession certificate and upon signing the preliminary/final agreement;
2. Is the property held in community of property regime and if so, is the other spouse present upon signing the preliminary/final agreement? Did the other spouse give his/her consent in cases of individual property sale;
3. Check the representative powers – is there a valid POA in case of private property sale? Who are the legal company representatives and is there a company decision for the sale of company property;

5)    Are all documents valid and up-to-date;

6)    Are there any burdens, mortgages, foreclosures, pending court disputes, third parties rights, etc. regarding the property?;

7)    Are there any outstanding liabilities regarding the property such as taxes, utility bills, etc.

The above list is not exclusive. Additional checks may apply to your particular circumstances.

Legal News Update

Important changes in Bulgarian legislation regarding property issues:

Pursuant to the Constitution of Republic of Bulgaria and the Law on Ownership foreign nationals can not acquire ownership rights upon land in Bulgaria. This protective clause may easily be evaded with registering a company under the Bulgarian Law which will be the legal owner of the land on behalf of the persons. The registration process does not take long and it is not so expensive. The problem then occurs with the current changes in the Bulgarian Law regarding pre-registration of the existing companies.
If the companies do not pre-register in the Trade register the consequences are crucial, i.e. the companies:
– can not carry out their trade activity
– can not claim and apply for writ of execution
– can not sell or make any other arrangements with their property
– can not manage their funds and payments except to pay off taxes and other state takings and salaries.
The deadline was set on 31.12.2010 but the Parliament extended it to 31.12.2011 in the last days of its sessions/20.12.2010/.