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Advice needed
 
 
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babsieb59
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PostPosted: Mon Oct 21, 2019 10:14 am 
Post subject: Advice needed
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Hi, we have made and had an off accepted on a house in the elhovo region. The estate agents now are asking us if we will allow the asking price to be put on the deeds to be what the original price was, as it was bought when you had to have a company. We aren't happy with this as it's a very large amount of difference. We are surprised that the estate agents are suggesting this, is this normal in Bulgaria??  
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moonlight
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PostPosted: Mon Oct 21, 2019 1:19 pm 
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If you are not happy with it, don't accept it!
Advice will not ( I imagine) change your concerns after a while.
That procedure is technically fraud, but has been known to be the norm, i.e. adding some appreciation to the original purchase price, then the remainder paid " cash in hand".
Above certain amounts ( 15000 I think) transactions must be through a bank. leaving the recipient account liable to "scrutiny" for tax purposes!

Regards
  
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Seedy
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PostPosted: Mon Oct 21, 2019 1:53 pm 
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Presumably the value has now increased since the vendor bought it? The "company" bit is just smoke and mirrors - one assumes that they agreed to lie about the price when they bought it themselves.

10,000 leva is the ceiling for cash transactions since July 1st 2011.

It isn't "technically" fraud, it IS fraud! Don't do it, it will come back to bite you at some time. The seller wants it like that so they can avoid CGT but that will just land you in the same boat somewhere down the line. It really isn't worth getting involved in skulduggery like this; first of all, if anything goes wrong with the purchase you'll only be entitled to recoup the amount set out in the notary deed. Moreover, if you are found out you'll be liable to a fine of a minimum of 25% and a maximum of 100% of the total value of the transaction....

Just tell them that you want the full amount in the Act or you'll walk away: it's crazy starting your new life in BG by lying and breaking the law, especially since they won't be around to carry the can if it comes out!
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babsieb59
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PostPosted: Mon Oct 21, 2019 3:05 pm 
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Thanks for the replies, we had already decided not to do it, just surprised that it was the estate agents that have put it to us. They are supposed to be a reputable company. And yes the value has increased considerably since first purchased.  
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Seedy
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PostPosted: Mon Oct 21, 2019 5:42 pm 
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Bear in mind that "estate agent" isn't what they are here, they're just brokers and will lie and cheat to get a sale; anyone can buy and sell property as it's totally unregulated at the moment, so "reputable" doesn't come into it. In this case, I imagine that they're just passing on the seller's wishes.
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Moscow_Wolf
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PostPosted: Sun Oct 27, 2019 10:04 am 
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Seedy wrote:
Bear in mind that "estate agent" isn't what they are here, they're just brokers and will lie and cheat to get a sale; anyone can buy and sell property as it's totally unregulated at the moment, so "reputable" doesn't come into it. In this case, I imagine that they're just passing on the seller's wishes.


I am under the impression that IF a Bulgarian property is purchased via a Bulgarian Company then, Capital Gains Tax is not paid if the property has been owned more than 3 years or perhaps it is 5 years. I seem to recall my Lawyer mentioning something on these lines in passing.

I would also be wary of where the purchase payment is being transferred, to the Company Bank account that owns the property or the Director's personal bank accounts. I don't think the former causes any illegalities to the purchaser, but I'm not sure of the ins and outs of these deals currently.
  
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Seedy
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PostPosted: Sun Oct 27, 2019 4:25 pm 
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Moscow_Wolf wrote:
I am under the impression that IF a Bulgarian property is purchased via a Bulgarian Company then, Capital Gains Tax is not paid if the property has been owned more than 3 years or perhaps it is 5 years. I seem to recall my Lawyer mentioning something on these lines in passing.



Yes and no, Mr Wolf.

If the property is owned by an individual, then it shouldn't attract any CGT as long as it's been owned for over 3 years. However, if it's owned by a company then any profit made on the sale of the property attracts tax at 15% - strictly speaking it's not CGT per se but Corporation Tax on the profit: as they used to say "Not John, but Johnny..." Wink

However, it actually gets worse: if the selling price is BGN50k or more, the company, even if it's not VAT registered, is required to add VAT (at the standard rate of 20%) to the selling price; the company is then required to register for VAT for the current period, even if it intends to wind itself up after the sale. VAT has to be held in a separate bank account, of course - and the company owner then has the pleasure of hiring an accountant to handle all the tax affairs before going through the winding-up process. It's hardly surprising that the seller in this scenario wants an under-the-counter arrangement to avoid a s#1t-load of hassle and expense. Very Happy

To top it all, there's the possibility that the buyer will get caned for whatever the seller doesn't pay the government, as they will be deemed to be part of the financial fraud for making illicit cash payments.....and that's on top of the 25-100% of the full transaction value fine. Embarassed

All in all, as Herman's Hermits would say, "A Must To Avoid"! Blast From The Past
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Moscow_Wolf
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PostPosted: Thu Oct 31, 2019 3:22 pm 
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Seedy wrote:
Moscow_Wolf wrote:
I am under the impression that IF a Bulgarian property is purchased via a Bulgarian Company then, Capital Gains Tax is not paid if the property has been owned more than 3 years or perhaps it is 5 years. I seem to recall my Lawyer mentioning something on these lines in passing.



Yes and no, Mr Wolf.

If the property is owned by an individual, then it shouldn't attract any CGT as long as it's been owned for over 3 years. However, if it's owned by a company then any profit made on the sale of the property attracts tax at 15% - strictly speaking it's not CGT per se but Corporation Tax on the profit: as they used to say "Not John, but Johnny..." Wink

However, it actually gets worse: if the selling price is BGN50k or more, the company, even if it's not VAT registered, is required to add VAT (at the standard rate of 20%) to the selling price; the company is then required to register for VAT for the current period, even if it intends to wind itself up after the sale. VAT has to be held in a separate bank account, of course - and the company owner then has the pleasure of hiring an accountant to handle all the tax affairs before going through the winding-up process. It's hardly surprising that the seller in this scenario wants an under-the-counter arrangement to avoid a s#1t-load of hassle and expense. Very Happy

To top it all, there's the possibility that the buyer will get caned for whatever the seller doesn't pay the government, as they will be deemed to be part of the financial fraud for making illicit cash payments.....and that's on top of the 25-100% of the full transaction value fine. Embarassed

All in all, as Herman's Hermits would say, "A Must To Avoid"! Blast From The Past


Noted.
  
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