VAT confusion on sale of property

[vetkoek]

I have spent some time going thru old posts about this subject but frankly am still very confused! I bought my property back in 2009 when it was still necessary to establish a company. I am now looking to sell the property but can find no clarity as to how VAT is applied to a sale. Two possible scenarios now exist (i) the buyer is happy to buy the company and its assets (ie. the property), or (ii) the buyer is not interested in buying the company. My lawyer seemed to indicate that from a VAT perspective it would be preferable if the buyer takes the company, implying that VAT is then no longer payable. There also seems to be the threshold figure of 50,000 LB above which VAT is to be paid. Does this mean that VAT is calculated as 20% of the selling price minus 50,000 LB? I have scoured the internet trying to understand this (as ultimately it influences the selling price) but seriously need some guidance. Another point of concern. If the buyer agrees to purchase the property, does the company have to be closed or does it automatically become 'dormant' from the annual accounts returns perspective? Selling seems so complicated! Any advise will be much appreciated.

[ChrisF]

VAT (DDC) in Bulgaria is in line with EU legislation.
Your company will be liable for VAT on all sales in the accounting year that total 50,000 leva or over, at 20%, therefore it is best to keep your sales below this.

[ChrisF]

Sorry, meant to answer the second part of the question also.
By law, in Bulgaria even 'empty' or dormant companies have to submit yearly returns, usually referred to as nil returns. There are heavy fines for not doing this.

[vetkoek]

Hello ChrisF and many thanks for your prompt response. A couple of queries. As an example, assuming that the property sale transaction described in the notary deed is 100,000 LB. In this case is VAT due on the full 100,000 LB (ie. 20,000 LB) or on 100,000 LB less VAT threshold (ie. 100,000 - 50,000 = 50,000 = 10,000 LB VAT due)? Just a point, most people who register a company in order to buy a property are not VAT registered since they are not conducting any business. What is the implication in the above case?

With regards to closing the company once the property is sold. This must be a regular practise (and source of income) for local accountants?

[ChrisF]

You would pay VAT on 100,000 leva, which is 20,000 leva. As in the UK you are either registered for VAT or you are not, which means either you have nothing to pay or you pay on the full amount of your sales in any tax year. Quite sure that the buyer wouldn't want the full price put on the notary deed, though, as it would mean they would pay more in notary fees on their purchase.
I have never met anyone who has closed their company; when it became possible to hold property in your own name I got two or three quotes for closing my company. All were around 600euro, which seemed an awful lot as I had closed a company in the UK before coming to live in Bulgaria and the cost was only £10. As my accountant only charges 50 leva for a nil return I decided to stick with the company until prices were a little more sensible.
The alternative to closing a company is to sell it as a ready-formed company (just as you can buy off-the-shelf companies in the UK) then all that is needed is to submit forms to change names on the company formation documents. Ask your accountant or a lawyer if they know anyone who wants to buy a ready-made company, but also check what they would charge to transfer it to a new owner. Again, the necessary forms will be downloadable from brra.bg

[bigbulg]

If you sell your Property and this is the only transaction your company makes, ie not working company but sole purpose for owning house/land in BG, you will not have to pay VAT even if it's above the threshold but you will be liable to any gains tax should you be lucky enough to make a gain (documented) on the sale. From your perspective it would be best to sell/change the company director/manager to the new owners and except the money in a briefcase, only the cost of a Notary, but not the best option as the buyer/new manager.

[ChrisF]

Sorry, no. Any company is liable for VAT if sales are more than 49,000 leva in a financial year. A company formed for the sole purpose of buying property is no different to any other company.
Bulgaria is full of stories, please check them out thoroughly or you could end up in trouble

[johndoe3]

This is bad news.
I think that this year, I may have to increase the Insurance Value on my house to cover this VAT.
Keep this a secret in case the house burns down, else the Gypsies will want 20 % on top.
Still I suppose, that I can put it against Capital Gains (Loss) Tax.
I will ask the estate Agent this year, even they are full of buls**t and rumour.

[bigbulg]

Sorry, no. Any company is liable for VAT if sales are more than 49,000 leva in a financial year. A company formed for the sole purpose of buying property is no different to any other company.
Bulgaria is full of stories, please check them out thoroughly or you could end up in trouble

Speak with a good accountant, the first transaction is VAT free.......................................................................