Selling a property via company

When a property in Bulgaria is owned by a company, the legal seller is the company itself, not the director personally. Consequently, the notary will insist that the sale proceeds are paid directly into the corporate bank account of the selling company, rather than a personal or nominated bank account belonging to your husband or any other individual.

Bulgarian notaries and banks follow strict anti-money laundering regulations. Payouts from a corporate asset sale cannot legally be diverted into a director's personal account or a third-party account at the closing table, as this would bypass company accounting and corporate tax tracking.

Once the funds land safely inside the company’s official corporate bank account, your husband (as the director or owner) can manage, distribute, or transfer the funds according to corporate governance rules—such as issuing a dividend or an authorised corporate shareholder transfer—to an external account of choice.

The notary would be better to advise you.

@SimCityAT

Thank you for your response 👍 it's much appreciated.

You're also going to get stiffed with a host of taxes. You'll be assessed on how much profit you've made since youtr iriginal purchase (and you'll be sorry if you got sucked into the "part payment in cash to reduce the taxable amount appearing in the notary deed" as your profit is calculated on the declared purchase price).

As an example, a €75K profit will cost you c€11K in taxes alone, plus accountancy fees and all the usual costs associated with a oroperty sale. The ratio will be broadly similar pro rata for different selling prices

@JimJ

Thanks Jim. Yes we're aware of the tax implications 🙄 and also we insisted on the price we paid being the declared price with the Notary ( obviously this is vastly different now anyhow ). We did think the tax on the property was 10% though, whereas you seem to have it higher?

@Jules999

The tax is on the profit, ie the increase in value - there are two elements, Corporate Tax at 10% and Dividend Tax at 5%.  We're in the same situation, ie selling a house that had to be bought through a company back in the old days.  Here's the breakdown of what's payable in our case, confirmed by two accountants. We've already had a couple of offers at our original proposed selling price but are now hopeful that we can sell for more than we thought - but I'm not counting any chickens for the time being.... 😎

Based on your figures (€100,000 sale price; 50,000 BGN purchase cost), here is an indicative breakdown in Euros (using the exchange rate 1.95583):

Sale Revenue: €100,000.00

Purchase Cost: €25,564.63

Taxable Profit: €74,435.37

Corporate Tax (10%): €7,443.54

Dividend Tax (5%): €3,349.59

Total Estimated Tax: €10,793.13

Please note this is a preliminary estimation. The actual tax may vary based on transaction costs and final exchange rates at the time of the sale.

It's also worth investigating the comparative costs of transferring the property into your own name(s) and then selling it as a private owner.  The drawback to that approach is that you need to keep it for 3 years to avoid paying tax; I don't know your personal circumstances but if you're a TCN then that avenue is in principle still closed..

@JimJ

Thanks, I knew nothing about dividend tax!

Not that I'm planning on selling our half-renovated house, but can renovation costs be counted against the tax? The price reselling it in original dire condition would be significantly lower than the price of selling it as a renovated house.

@janemulberry

I'm glad you raised that question Jane as my husband and I were only discussing that this morning! Our resale is vastly different because the house is unrecognisable as it's former self.

Reading up on it, if you sell a property and owe a 10% capital gains tax on the profit, documented improvement and renovation costs can be deducted from your taxable profit.

But you would definitely need to check with an expert on it. Maybe Jim could confirm?

The Good News: you can indeed claim renovation expenses, provided they are all fully documented and all invoices etc are made out to the company.  In addition, theses expenses must qualify as Capital Expenses (in essence major construction/renovation works) - other works are regarded as maintenance, which is non-claimable..

However, there is a BIG "gotcha": if your company has been making Nil tax returns and now benefits from the abolition of making any returns at all, you have been making an annual sworn statement that your company has been totally inactive, ie has had no economic activity of any kind, made no transactions, and incurred no expenses (it doesn't matter if you didn't make that statement as your accountant did it on your behalf). 

BUT you can request your Past Accounts be re-opened. Unfortunately, that means that you will then lose your company's Inactive Status and be faced with late-filing charges, accountancy costs for creating books and new filings for every year you are claiming for (with official receipts made out to the company, not you, you'll recall). In addition, you can only go back a maximum of five years.

Game Over for most, if not all, of us, I suspect... 😥

It all depends on how you agree the terms with the buyer. The situation can realistically be structured quite well through the sales agreement, as long as the property, furniture, and any investments are properly separated according to their actual ownership and documentation. My recommendation would be to find a good lawyer with experience in real estate transactions. They can easily resolve this issue for you and structure the agreement properly so that everything is clear and legally covered.😉

@Daniel Malbasic

The "legally covered" bit is the most important part for many of us, I think, especially as we aren't Bulgarian citizens and risking a criminal record is never a good thing. None of us would want to be involved with anything sounding like tax evasion. Legal tax minimisation, however....

Hmm,@JimJ, I think the best solution (for us, anyway) is to treat our property purchases in Bg as owned for life and let whoever we leave things to to sort out the mess. Our cat tribe will need good lawyers! The receipts made out in the name of the company part is definitely problematic when all our contractors wanted to be paid in cash and there were no receipts!

I hope Jules can find a solution to selling their property that isn't too costly.

@janemulberry

I think there is a misunderstanding here.

My comment was very straightforward: the terms of the sale can be structured through the sales agreement, the property, furniture and investments should be properly separated according to their actual ownership and documentation, and my recommendation was simply to consult a good lawyer experienced in real estate transactions so that everything is properly documented and legally covered.

I did not mention tax evasion at all. So I honestly don't understand why the discussion suddenly moved to criminal records and “anything sounding like tax evasion”. Legal tax planning and tax evasion are two completely different things, and nobody suggested the latter.

What I do find inappropriate is that this is now the second time my professional credibility has been questioned — first by suggesting that I am a bot, and now by introducing an implication of tax evasion into a discussion where I was simply recommending proper legal advice. If you don't know something or are unsure about the legal implications, that's exactly why people hire lawyers and tax advisers.

Also, you keep speaking in terms of “many of us” and “none of us”. If you have a specific issue with your own situation, that's completely fine, but there is no reason to turn it into an implication about someone else's professional conduct or reputation.

And before making assumptions about who you are talking to, perhaps use Google and check first. I have no problem putting my name and professional background openly behind what I say, and I think anyone making serious comments about another person's professional conduct should do the same.

I don't think there is much more to add here. My original comment was simply advice to get proper legal assistance and make sure everything is correctly documented.

All the best.

Absolutely! Tax avoidance is common sense, a big difference from tax evasion (which of course is pretty much unheard of here in Bg...😎)

Hmm, I didn't actually mean to imply that you would be promoting anything dodgy. I'm sure the way you discuss structuring things will be perfectly legal. From time to time other people do suggest things here that may not be. As I said, tax minimisation and tax avoidance are very different things. I never said your recommendation was tax avoidance.

Look at it this way  -- you came here to get SEO. The longer we keep this thread going for you, the more chance you have to show the AI bots and the search engine bots how legitimate and professional you are, unlike some of the undoubtedly dodgy services operating in Bulgaria. Also an opportunity to show how you might handle a nervous client who has been burned in the past by one of those less professional and legal services.

If you'd like me to remove my comment I will gladly ask one of the mods to take it down. If so, you may also need to remove your reply, as it seems a slight overreaction.