Overview:
Bulgaria is a politically stable country, and the introduction of a currency board in 1997 stabilised the country's economy. However, as is the case elsewhere in Central and Eastern Europe, legislation, including that governing real estate, is volatile and subject to frequent change. A foreign investor can invest in properties in Bulgaria either directly or through a local entity.

Only Bulgarian-resident individuals and entities can acquire title to land, while non-residents may acquire only buildings and limited rights (e.g., leasehold and construction rights) to land. In some limited cases, acquisition of immovable property by non-residents requires prior permission of the Ministry of Finance. Foreign investors are guaranteed full repatriation of profits resulting from an investment in Bulgaria . The transfer abroad can be made only after the bank organising the transfer is presented a certificate proving payment of all Bulgarian taxes due.

Capital Gains Tax
In principle for foreign persons (who do not reside in Bulgaria more than 183 days within one year) capital gains tax is 10 % of the profit (the balance between the declared purchase price and the declared sale price, minus expenses recognized by the law that reduce the taxable profit) but there will be no capital gains tax, if the following conditions are met:-

• During the calendar year the person has sold only one property in Bulgaria (i.e. for more than one property there will be capital gains tax);
  
  
• During the calendar year the person has sold up to 2 properties but more than 5 years have passed since the person has acquired the estates in question;
  
  
• For tax purposes the person is considered resident of a member state of EU or another state from the European Economic Area, i.e. the tax relief is only for “European” citizens.

Basis of taxation:
The taxation of a local entity or a foreign entity which constitutes a permanent establishment is as follows.

Rental income
The basis of the taxable income of a company, investing in Bulgarian real property is the gross income derived from the property less tax-deductible, property-related expenses and depreciation. Such expenses include repairs, maintenance, renovation and similar costs and interest on loans used for the acquisition of the property. A Municipal Tax at a rate of 10% of profits is due. This is then deductible in calculating taxable profits which are subject to a corporate tax rate of 10%.

Depreciation
Land itself is not depreciable, although any immovable property affixed thereto is, provided that it is used for the business activities of the company and is booked as a fixed asset. Depreciation for tax purposes is at a rate of 4% per annum, and is usually calculated using the straight-line method.

Real estate acquired for purpose of re-selling it is considered as "investment property". As such, it is non-depreciable and is subject to annual revaluation to the market value. In practice, it is often unclear in which situations a property should be treated as an "investment property" rather than as a fixed asset.

Loss carry-forward
Tax losses can be carried forward for a five-year period. Losses cannot be offset against profits from previous years.

Debt
Under currency control regulations, a registration with the Bulgarian national Bank is required for loans granted by non-residents to Bulgarian entities. Where the debt financing exceeds the equity financing, deductibility of interest is subject to limitation, which is determined by a particular formula.

If the interest costs exceed the allowable limit, the excess is non-deductible. The interest costs not deducted in a given year can be deducted in the subsequent tax period. Interest paid to a foreign lender is subject to a withholding tax of 15%, unless a lower rate is available under a double tax treaty.

Upon receipt of a loan denominated in a foreign currency, a local company must re-value its foreign currency liability monthly. The positive or negative differences are accounted for as current financial income or expenses. No additional evaluation is made at the end of the financial year or upon repayment of the loan.

Equity
An equity contribution can be either in cash or in kind. Real property, limited property rights, etc. can be subject to in kind contributions after a special evaluation is performed.  

Other property costs

Bulgaria’s cost of living is one of the lowest in Europe. A meal for two, made from organically pure products and including a bottle of nice wine will not cost you more than seven or eight Euros.

Examples:

Public utilities
Electricity: 0.10 euro/kWh
Water: 0.50 euro/m3
Inhabited house duty: 50 euro/year
Cleaner: 50 euro/month
Internet-LAN: 15 euro/month
Ground phone: 90 euro/once4 euro/month
Mobile phone: M-TEL 6-22 euro/month
Fuel: 0.7 euro/litre
Diesel: 0.5 euro/litre
Gas: 0.4 euro/litre

Food Prices
Chicken: 2.5 euro/kg.
English bacon: 4 euro/kg.
Salami: 1.6 euro/kg.
Sirloin: 7.39 euro/kg.
Cheese: 1.4 euro/kg.
Milk: 0.5 euro/liter
Sauce: 0.5 euro/kg.
Olive: 1.7 euro/kg.
Mushroom with sauce: 2.4 euro/kg.
Rice: 0.4 euro/kg.
Pasta: 0.5 euro/0.220 kg.
Jam: 0.4 euro/0.3 kg.
Coffee: 0.5-4 euro/0.1 kg.
Bread: 0.3 euro/0.8 kg. Fruits: 0.6 euro/kg.
Whiskey: 8 euro/litre
Bulgarian brandy: 1.5 euro/0.7 litre

Daily goods
Deodorant: 1.2 euro/50 ml.
Cream: 0.8 euro/75 ml.
Shower gel: 1.2 euro/250 ml.
Soap: 0.4 euro/0.1 kg.
Shampoo: 1.5 euro/250 ml.
Tooth-paste: 0.5 euro/50 ml.
Washing powder: 0.3 euro/0.5 kg.
Color dye: 2 euro