Mortgage application fees -am I being ripped off???

Coney Island

I am buying a property in Bulgaria and applied for a mortgage via a Greek Bank with branches in London (Piraeus Bank). I received a first quotation today and although I was happy with the terms, I am just really annoyed with the application fees. Note that I spent 495 Euro for an agency to put in me in contact with the bank, and now I should pay the following:

Application fee (not refundable) - 108 Euro
Arrangement fee - 370 Euro :mad:
Valuation Fee - 100 Euro :rolleyes:
Cost due to creation of a Mortgage of Real Estate (Governemnt Taxes and Fees Payable) - 223 Euro
Bank Legal Cost (to be paid even though I am using my own solicitor) - 444 Euro :mad:

Total Cost = 1,245 Euro

This is very expensive in my opinion!!! Is this normal as applications fees???

Note that this does not include all the legal fees for my lawyer, those are already included in the price of the property I am purchasing.

RainyDay

I heard Eddie Hobbs explaining how they usually have two prices for property in Hungary & Bulgaria - the normal price, and the hyper-inflated Irish price that the greedy Irish investors are prepared to pay. Looks like the banks are jumping on the bandwagon too.

Just out of interest - what's your view on the currency risks associated with this investment? What's the income tax liability? And what about capital gains tax wen you sell?

muffler

I would think you should go out there yourself and arrange something locally. It would be a lot cheaper overall plus you can get a nice wee break into the bargain

Coney Island

I didn't really investigate the currency risk for this buy as I will be paying in Euro to the Agency I bought the apartment through.

My problem is that as I don't own a property in Ireland and therefore cannot remortgage anything here and Banks in Ireland do not give mortgages for properties oversea, then I need to apply for the mortgage abroad.

Out of curiosity, when you apply for a mortgage in Ireland, how much do you pay in initial fees more or less?



Answering your other question:

I. VAT:
The amount of VAT in Bulgaria is 20% with some exceptions. Some deals are free of VAT /land purchase, shares purchases, etc /. Some are with VAT in smaller amount.

II. TAXATION OF THE INDIVIDUALS:

The taxation of the annual incomes of the individuals in Bulgaria is in accordance with the following progressive table:

Annual income Taxation
Till 1560 leva. Free of taxes
from 1560 leva. to 1800 leva. 10 % for the income over 1560 leva.
from 1800 leva to 3000 leva. 24 leva + 20 % for the income over 1800 leva.
from 3000 leva. to 7200 leva. 264 leva + 22% for the income over 3000 leva.
over 7200 leva. 1188 leva + 24 % for the income over 7200 leva.

The dividends accounted from Bulgarian companies in benefit of the shareholders in the respective company will be taxed with “final tax” which is always in amount of 7%. These incomes, after the taxation with 7%, will not be included in the total income described in the table above.

Coney Island

muffler wrote:

I would think you should go out there yourself and arrange something locally. It would be a lot cheaper overall plus you can get a nice wee break into the bargain

I was already over there in May to choose the apartment, now the apartment is finished and just need to borrow 37,000 to pay for the 70% left. The bank I mentioned above already pre-approved the mortgage as I meet the requirements (now the only need to do the checkings on the property). My problem here is that I am annoyed of having today such a high fee before getting the mortgage. Especially I don't understand why I have to cover the 444 Euro for the legal fees of the bank and 370 Euro for "Arrangement fee".

From my point of view it is their interest as much as mine to give me the mortgage, as I will be paying interest on it for the next 10 years.

How much are the initial fees if you apply for a mortgage for a property in Ireland?

Dub13

Coney Island wrote:

Banks in Ireland do not give mortgages for properties oversea,
.

They do mortgages for properties in the UK...much safer bet.

Coney Island

Dub13 wrote:

They do mortgages for properties in the UK...much safer bet.

No chances to get a 91 square meters apartment locates 50 meters from the sea for 53,000 Euro though....

RainyDay

Hi Coney - In general, Irish lenders don't charge application fees anymore, though there are serious legal fees involved in property transactions.

Can I respectfully suggest that you do some very serious thinking before proceeding with this transaction? Here's my reasons;

- You haven't thought about currency risk - your mortgage will be in Euro's but your rental income will be in local currency. If there is a substantial drop in the value of the local currency, your income will drop correspondingly. If there was to be a devaluation, the value of your income and your property could be sliced overnight. Note that I know absolutely nothing about the Bulgarian currency or economy, so I've no idea on the likelihood of these events taking place, but if you haven't researched this stuff, you really shouldn't be investing signficant money in this currency.
- On taxation, you haven't answered about Capital Gains Tax at all - Have you checked this out? Your answer about income tax mentions both personal tax & company tax - which will apply to you? You've only mentioned the Bulgarian tax issues - what about the Irish Revenue's view on your offshore income? Will you be able to right off your interest charges against your rental income (as you would over here)?
- You seem to be confusing cheapness of the property with value of the property. Property in certain parts of West Dublin (like this one) is cheap by Dublin standards - does this mean that it offers good value for money? Not at all. Just because your apartment is costing you €53k (which is cheap by Irish standards, but not by local standards), this doesn't mean it is good value for money. If you don't have enough first-hand knowledge to really know whether this is a good price, you'd be crazy to invest your money.

Coney Island

Hi RainyDay, thanks for the advices. Answering your questions:

- Bulgaria will be joining the EU in 2007 and it is quite a safe bet that I will not be losing money on the currency exchange, however I do not expect more than max 3,000 gross income per year from this property. I rent it out to make some extra money that will help me paying off the mortgage, but this is not the primary scope of the investment. Many investors buy in Bulgaria and do not rent or use the apartment at all, and keep it with the sole scope of reselling in 10 years time.
Also I am not planning of selling for at least the next 5-7 years. At least.

- Here there some very interesting threads on Capital Gain in Bulgaria, apparently there is no Capital Gain Tax in Bulgaria if you sell after 5 years: http://www.mybulgaria.info/modules.php?name=Forums&file=viewforum&f=25

- The price of the apartment is cheap for Bulgaria standards, I buy it for 53k, and found the same apartment on a different website (of course already "sold") for 68k. Here is the apartment (#10): http://www.bulgariancoastalproperties.com/properties.php?view=6

The reason is cheaper comparing to other properties is mainly because there is not swimming pool in the complex and although located 50 m from the sea, I have no view on the sea.

Dub13

just be very careful,i know a couple of people who got stung in the Bulgarian property market

madramor

1:
say you want to buy a second hand house in ireland for
317,500 you will have to pay 15,875 stamp duty because
you are no longer a first time buyer.

2:
"Bulgaria will be joining the EU in 2007 and it is quite a safe bet that I will not be losing money on the currency exchange"
joining EU does not mean joining the euro

3:
"Many investors buy in Bulgaria and do not rent or use the apartment at all, and keep it with the sole scope of reselling in 10 years time."
so when everybody goes to sell their appartments what happens to the price?
what does this say about the rental market when people don't bother to rent
out appartments; means not worth bothering

4:
"Here there some very interesting threads on Capital Gain in Bulgaria, apparently there is no Capital Gain Tax in Bulgaria if you sell after 5 years:"
tax laws change and anything could happen in 5-7 years

5:
"The price of the apartment is cheap for Bulgaria standards, I buy it for 53k, and found the same apartment on a different website (of course already "sold") for 68k."
thats not bulgarian standards thats internet standards big difference see above for eddie hobbs quote.

6:
"The reason is cheaper comparing to other properties is mainly because there is not swimming pool in the complex and although located 50 m from the sea, I have no view on the sea."
cheaper price now, may mean less growth, and difficulty to sell later on.

7:
one of the dodgiest blokes i know is selling property in bulgaria, real bogey
bast**d

RainyDay

Coney Island wrote:

- Here there some very interesting threads on Capital Gain in Bulgaria, apparently there is no Capital Gain Tax in Bulgaria if you sell after 5 years: http://www.mybulgaria.info/modules.php?name=Forums&file=viewforum&f=25

- The price of the apartment is cheap for Bulgaria standards, I buy it for 53k, and found the same apartment on a different website (of course already "sold") for 68k. Here is the apartment (#10): http://www.bulgariancoastalproperties.com/properties.php?view=6

The reason is cheaper comparing to other properties is mainly because there is not swimming pool in the complex and although located 50 m from the sea, I have no view on the sea.

Just a couple of points in addition to those mentioned by madramor;

You've spoken about the Bulgarian tax impact, but not the Irish tax impact. Will you also get hit for Irish income tax and/or CGT?

I wouldn't consider the existance of an ad on a website as sufficient evidence of good value for a €50k investment for me. I'd want a lot more hard information.

Hope it works out for you.

garred

Coney Island I say go for it. 18 months ago I was going to buy in Bulgarıa a 2 bed apartment for 25,000 in the Sun Beach complex and was talked out of it by friends and family. The price has over doubled since. I am actually in Turkey at the mo finalising the purchase of a property. With regard to your charges, could you not of got equity on your property back home. I have various charges to pay because Im a foreign buyer but Im not being ripped off its just the way it is, no matter where you are there are always setup costs. Although some of the charges seem a bit obscure.

You will pay Vat in Ireland and CGT but whatever costs you have will be taken into consideration (not sure if there is a tax agreement between the 2 countries).

Are you getting a guaranteed rental income or is it for private use. No matter what you do good luck with it. Some people are dead against investing overseas, better the devil you know and all that. Im sure you have done your homework so dont let people put you off if you really want to do it go ahead with it, I didnt and I lost out.

This Turkish keyboard is recking my head!

Coney Island

madramor wrote:

1:
say you want to buy a second hand house in ireland for
317,500 you will have to pay 15,875 stamp duty because
you are no longer a first time buyer.

I am foreigner living in Ireland though, and by the time I sell the Bulgarian property I would have moved abroad. Also I am planning of opening a bank account in Bulgaria and I am not sure I want to declare the property the the Taxman, but I know it is risky so I will have to do some research.

madramor wrote:

2:
"Bulgaria will be joining the EU in 2007 and it is quite a safe bet that I will not be losing money on the currency exchange"
joining EU does not mean joining the euro .

They are planning to join the EURO too.

madramor wrote:

3:
"Many investors buy in Bulgaria and do not rent or use the apartment at all, and keep it with the sole scope of reselling in 10 years time."
so when everybody goes to sell their appartments what happens to the price?
what does this say about the rental market when people don't bother to rent
out appartments; means not worth bothering .

Still as I said it is capital apreciation I am looking for and I am pretty confident price will not go down. If it does I won't sell and keep a lovely apartment in Bulgaria. I am very open to option to what I am gonna to with it. For example I work for an IT multinational and plenty of people work from home and report remotely, so I might even move there in 5 years time and work from home...

madramor wrote:

4:
"Here there some very interesting threads on Capital Gain in Bulgaria, apparently there is no Capital Gain Tax in Bulgaria if you sell after 5 years:"
tax laws change and anything could happen in 5-7 years .

It may or may not, this could happen everywhere.

madramor wrote:

5:
"The price of the apartment is cheap for Bulgaria standards, I buy it for 53k, and found the same apartment on a different website (of course already "sold") for 68k."
thats not bulgarian standards thats internet standards big difference see above for eddie hobbs quote..

This could be true, but there is not much you can find for this price on the black sea coast now....most of the properties are now around 60k-90k

madramor wrote:

6:
"The reason is cheaper comparing to other properties is mainly because there is not swimming pool in the complex and although located 50 m from the sea, I have no view on the sea."
cheaper price now, may mean less growth, and difficulty to sell later on. ..

I don't think so. As a potential buyer for example I am not interested in having a swimming pool when I live 50 meters from the beach....

madramor wrote:

7:
one of the dodgiest blokes i know is selling property in bulgaria, real bogey
bast**d ..

Can you please advise name of the agency? PM me if you prefer....

Coney Island

Dub13 wrote:

just be very careful,i know a couple of people who got stung in the Bulgarian property market

who did they buy from?

Dub13

Coney Island wrote:

who did they buy from?

Not sure...but one of them had money in that development that went bust last year,remember the one that was half built it was all over the news here.I think some company in Holland were/are involved.

I am by no means trying to put you off,goodluck to you if you do go ahead with it.

Coney Island

Dub13 wrote:

Not sure...but one of them had money in that development that went bust last year,remember the one that was half built it was all over the news here.I think some company in Holland were/are involved.

I am by no means trying to put you off,goodluck to you if you do go ahead with it.

Well, so far I am on the safe side, the apartment was finished 2 weeks ago and so far I only paid 1,000 Euro....not sure long I can push back to the builder though. Hopefully I will get the funds for the mortgage soon :rolleyes:

RainyDay

garred wrote:

Some people are dead against investing overseas, better the devil you know and all that. Im sure you have done your homework so dont let people put you off if you really want to do it go ahead with it, I didnt and I lost out.

'The devil you know' is a gross over-simplification. If you don't have a thorough understanding of currency issues, taxation issues (international & local), legal issues (good title, tenant rights), economic issues and local property prices, you are crazy to invest money in foreign property. You might as well put it all on a lame horse in the 3.30 at Leopardstown.

Coney Island wrote:

I am foreigner living in Ireland though, and by the time I sell the Bulgarian property I would have moved abroad. Also I am planning of opening a bank account in Bulgaria and I am not sure I want to declare the property the the Taxman, but I know it is risky so I will have to do some research.

Oh now I get it - You see taxation as some kind of 'optional extra' so you can choose whether or not you want to participate. You come over here to work in our country, you expect our honest law-abiding citizens to help free of charge with financial advice and you don't have the decency to pay your fair share of taxes. Are you driving on our publically funded roads over here? Are you protected by our publically funded Gardai here? Will you be treated by our publically funded health service in case of emergency here? Assuming that the answer is 'yes' to all 3, then please have the decency to pay your taxes.

Apart from the ethical issues involved, let's look at some practical issues.
The fact that you will have moved abroad is largely irrelevant. If you are currently tax resident in Ireland, your rental income will have an Irish income tax liability. And when you come to sell, you will still have a CGT liability in your 'abroad' location, unless the terms of any double-taxation treaty between that location and Bulgaria prevent this (which is unlikely).

Did you follow any of the press articles over the last 3 or 4 years about bogus non-resident accounts? All through the 70's & 80's, many Irish men & women thought that taxes weren't for them, and held their hot money in bogus non-resident accounts. They (like you) were convinced that they were smarter than the Revenue Commissioners and would never be caught. Today, they are facing punitive bills for overdue taxes, plus penalties, plus interest at Revenue rates (which are much higher than bank rates btw). I heard Joan Burton (Labour Finance spokesperson) mention this week that Revenue are currently collecting data on movements of funds to offshore locations, so no doubt in a few years (when the interest & penalties have built up nicely), they will come knocking on your door.

So please do fire ahead & buy your over-priced property in a country where you clearly know little about their economic prospects and less about their taxation structure. All the intermediaries involved in your transaction will be laughing all the way to their banks with their little slices of your money, and you can expect to have some 'interesting' meetings with the tax authorities over the next few years.

Coney Island

This is not nice to say, I always paid all my taxes. As for this specific case I think 99% of the people would do the same if they knew they would never get caught.

garred

RainyDay wrote:

'The devil you know' is a gross over-simplification. If you don't have a thorough understanding of currency issues, taxation issues (international & local), legal issues (good title, tenant rights), economic issues and local property prices, you are crazy to invest money in foreign property. You might as well put it all on a lame horse in the 3.30 at Leopardstown.

Ahh Rainy Day we debate again. How are things? In all honesty that is a bit of a ridiculous comparison, a proven property investment and a lame horse, please. You learn and investigate these issues as it sounds like he has done. No investor in the Irish market knows everything about the property whether it be tax, legal, construction, they rely on other professionals as is he. As I have said some people are dead against foreign property but the facts are that it has risen hugely in the last 5 years and projected forecasts are that it will continue to do so, but these are not concrete as no investment is.
My advice Coney is if you have done your homework well then go ahead and good luck.

RainyDay

garred wrote:

You learn and investigate these issues as it sounds like he has done. No investor in the Irish market knows everything about the property whether it be tax, legal, construction, they rely on other professionals as is he.

No offence, but I really don't think that Coney has done sensible research on this option. He has no idea about what double-taxation treaties exist and how these will impact him. He has no idea whether mortage interest is a taxable expense (as it would be over here). His information on the local market seems to be limited to surfing a few other sites aimed at foreign investors. He seems to think that is property must be a good investment because it is cheap by Irish standards. He doesn't seem to understand the currency risks that could be involved.

I predict that many foreign property transactions will turn into a can of worms for the buyers. We've seen UK TV shows with buyers in Spain finding the local council reclaiming their properties. We've seen one major development in Bulgaria which had been specifically marketed to Irish buyers collapse.

garred wrote:

As I have said some people are dead against foreign property but the facts are that it has risen hugely in the last 5 years and projected forecasts are that it will continue to do so, but these are not concrete as no investment is.

What projected forecasts are you referring to? Do you mean the ones in the nice glossy brochure with the sales agent hands to you (while he drools at the thought of all the commission he's going to pick up on your sale). And of course, the past performance has no real relevance to the future. Indeed, you could mark an arguement that a good past performance indicates a liklihood that prices have already peaked. But most importantly - you say they are not concrete - What the hell do they make their apartments from over there?

Coney Island wrote:

This is not nice to say, I always paid all my taxes. As for this specific case I think 99% of the people would do the same if they knew they would never get caught.

The truth hurts eh? And for you and all those geniuses who 'know' that they will never get caught, just think how many of the bogus non-resident account holders also 'knew' in the 80's that they would never get caught. They were wrong, very wrong.

Coney Island

RainyDay, on your opinion, what is the very worse that can happen if this investment doesn't work out? I mean, the very worse from now to 10 years in the future?

And what is, on your opinion, the very best that can happen if I am really lucky? I mean, the very best from now to 10 years in the future?

Would like to hear your opinion on these possibilities.


Also I would like your opinion on why investing in a new house let's say in Dublin (price 400k for example) would be a much safer bet? I find it as much risky, and the stake (400k) much higher. Suppose in 10 years time there is some economical crisis (I wish not) and many jobs may be moving to eastern europe and asia and people need to migrate to find a job....then your 400k house could lose value and your loss would be much higher than mine. Can you please give me your opinion on this?

garred

RainyDay wrote:

No offence, but I really don't think that Coney has done sensible research on this option. He has no idea about what double-taxation treaties exist and how these will impact him. He has no idea whether mortage interest is a taxable expense (as it would be over here). His information on the local market seems to be limited to surfing a few other sites aimed at foreign investors. He seems to think that is property must be a good investment because it is cheap by Irish standards. He doesn't seem to understand the currency risks that could be involved..

Well fair enough on the homework part, its the bottom line with any investment - fail to prepare, prepare to fail. One issue that people can not seem to understand is taking into account setup costs. Its why I pulled out of an investment with the brother but it took me ages to get it into his head that even though we were making a net profit each year with guaranteed rental income, overall we were making a loss and were relying on the property price going up which is not an investment but a gamble.
However what do you think will happen to the property it there is a major currency devaluation. Do you think it will crash and stay so. Lets look at Ecquador for example, they had a major currency and economic crash about 5 years ago. Their currency was worthless. However within 3 months they had switched to the dollar and their economy was back on track, it even improved. So even if there is a major currency devaluation in Bulgaria do you honestly think it will stay that way long term and will never recover?
Have you also considered the fact that the economy is improving, tourism increasing, that the currency could strenghten thus making the investment even more valuable regardless of property price increases?

RainyDay wrote:

I predict that many foreign property transactions will turn into a can of worms for the buyers. We've seen UK TV shows with buyers in Spain finding the local council reclaiming their properties. We've seen one major development in Bulgaria which had been specifically marketed to Irish buyers collapse.

In all fairness there are always one or two examples in any society, in any investment where people have been done. To pick one/two developments out of thousands is not relevant. Personally my uncle was ripped of by his developer in Ireland but that would not put me off an investment here if the right one came along.

With regard to your query on projected forecasts no its not on estate agents (please give me some credit) as these have a vested interest and no-one in their right mind would go by their word, no matter what the country. If you really want evidence just google it, trust there is plenty of professional opinions on it out there. However as I have said you cannot buy a property and rely on it going up in value to make money. You have to take all costs and incomings into account and be making a net profit regardless of it going up. I take your point there.

RainyDay

Coney Island wrote:

RainyDay, on your opinion, what is the very worse that can happen if this investment doesn't work out? I mean, the very worse from now to 10 years in the future?

Worst case scenario - OK, let's put together all the negative outcomes I've heard about in other individual cases. First of all, you'll find out that you don't actually own the apartment in question - you own a car parking space in the development instead. Your local solicitor took a kick-back from the developer (who has close links to the Bulgarian organised crime gangs) to rip you off. The bank you borrowed from don't care and are still chasing you for their mortgage repayments. Irish and/or Bulgarian tax authorities don't care and are chasing you for tax due on rental income which you never recieved. Because you didn't know up front that 'foreigners must buy through a limited company with a local shareholder' (from Mazars.ie), your legal options to recover your loss are severely restricted. You spend €5k-€10k on local lawyers to try to recover your loss before you realise that you're never going to see a penny of your money.

So you are down the €60k cost of the apartment, about €10k on legal fees and face tax bills of €10k across both jurisdictions. And you've lost your Irish first-time buyer status, so you'll be paying full stamp duty when you come to buy a property here.

But I guess all of those disasters aren't very likely to come together. A more likely negative scenario is that you'll find that you overpaid for the property (somebody has to pay for all those exhibitions in the Dublin hotels and the inspection flights) - the real local value is more like 2/3rds of what you paid. You find tenants very hard to get/keep - so the property is only rented out about 40%-50% of the time. You going to be out of pocket to fund mortgage repayments. The lack of a double-taxation treaty between Ireland & Bulgaria means you're hit for income tax on your rental income in both jurisdictions.

So in 10 years time, you end up with a property that's worth about 80% of what you paid for it, you're out of pocket for quite a lot of cash. And if the value of the property ever does come up above the waterline, you'll be hit for capital gains taxes in both jurisdictions when you sell.

Coney Island wrote:

And what is, on your opinion, the very best that can happen if I am really lucky? I mean, the very best from now to 10 years in the future?

Best case scenario is that you get tenants which cover your mortgage and tax liabilities and you get steady growth in the value of your property which allows you to make a reasonable return on your investment. Yes - this could possibly happen. I'm not saying that all offshore investment is bad. I am pointing out that there are very serious risks involved, and you need to do your homework very carefully.

Coney Island wrote:

Also I would like your opinion on why investing in a new house let's say in Dublin (price 400k for example) would be a much safer bet? I find it as much risky, and the stake (400k) much higher. Suppose in 10 years time there is some economical crisis (I wish not) and many jobs may be moving to eastern europe and asia and people need to migrate to find a job....then your 400k house could lose value and your loss would be much higher than mine. Can you please give me your opinion on this?

I never said that I'd recommending investing in a new house in Dublin. If you're looking for somewhere to live, then yes - it makes sense to buy a house (provided you can afford it and you're getting decent value for money of course). If you're looking for a pure investment, I'd recommend that you think about options other than property.

Coney Island

Thanks. I am taking note....

Just a quick point, a limited company is not required for apartments, only for houses and lands.

Bg knowhow

1. Banks in Bulgaria are not as regulates as in EU. Most foreign owned banks in Bulgaria use their preferred system. I.e. A Greek bank uses their system and a German bank their system an Italian bank their system.
2. Mortgage loans are relatively new to Bulgaria. Within the last 3 yrs
3. The banks are out for what they can get for as long as this situation lasts. Especially as interest rates are falling.
4. Arrangement fees on top of the mortgage account for between 1% and 4% of the loan amount. This is normal in Bg.
5. They know that Irish banks will not fund property purchases in Bulgaria with the loan secured against the Bg property and that you have no option.
6. Negotiating a bank loan to purchase property in Bulgaria from a bank operating in Bulgaria is HORSE TRADEING..... Literally.
7. There is a double taxation treaty in place between Ireland and Bulgaria.
8. You will pay it in both countries. The total will not be higher that the total tax you will pay in your country of residence. i.e. (at current rates) you will 15% in Bg and 5% in Ireland. The total not exceeding Irl CGT @ 20%.
9. You would have to be tax resident in Bulgaria and have owned the property for 5 years in order not to be taxed in Bg. The clause you referred to applies to residents of Bg.
10. Your property purchase will be registered with BULSTAT within a week of purchase.
11. Bulstat Bg Tax and statistics office.
12. All bank transfers of money from Ireland to Bulgaria are notified and recorded to the Irish revenue. Nothing to worry about if everything is legit.
13. There are a lot of things to get right when purchasing property abroad, Bulgaria is no exception. DO NOT believe the urban tales of what goes on there. Go check it out for yourself. There are plenty of good properties to purchase and some very knowledgeable Irish people dealing in the Bulgarian property market in Ireland.
14. Use an Irish based agent, You will be able to meet them and judge for yourself. Also you wont have to get on a plane to see them. It is quite unbelievable what the Bg and UK based agents say to potential Irish purchasers.
15. You only need a Bulgarian registered company IF you are buying LAND.
16. There is no different price for Irish purchasers IF your buying new build.
17. There is a FOREIGNER price if you let it be know when buying rural property.
The local perception is “Foreigners are rich and can afford it” and there are enough stupid purchasers to support this belief.

Hope this is of some help.

Coney Island

Thank you, these information were very useful.

Is it normal practise in BG for the builders to notarily register properties at a lower price of what is actually paid? Having done some research it look like it is common in Bulgaria to adopt this practise. For example let's say the price of the apartment is 50k, then the builder register it at 25k and although you save some money initially on the notary deed fee of about 3%, then you will be likely to lose money when you decide to sell as you would pay capital gain on whatever exceed 25k....I though this could be worked around as after 5 years that you own the property you don't pay capital gain, however you mentioned that this happens only if you are resident in Bulgaria, in which case I would need to pay 20% capital gain tax even after 5 years?

Also I have been told by my agent (in Ireland) that the 20% VAT applicable for new building in Bulgaria is already included in the price. Should I have the "incl. VAT" clearly spelled out in the contract or is enough the "Obtain certificate from the local tax authority that there are no outstanding obligations for the buyer/s of the property to the particular tax authority (we understand that his certificate MUST be presented by the mortgagors or their representing solicitor at the time of signing the Mortgage Deed). " that the I have to get for the bank?

Bg knowhow

Yes you are going to pay CGT in one or both countries. FACT.

What the rates will be in 5 yrs? who knows and what will EU membership mean for CGT payments? Who knows.
BUT the good news is that paying CGT it means you made money.

Its not common but its not unknown for builders-developers in Bg to notorise at a lower price.
In Bulgaria the majority of properties have two values.
1. The Notorised Book value
2. The Market value.

Please note that this is legal in Bulgaria.

Always ensure that the documents state the price you are paying and nothing else. ITs not worth it. It something else is being sugested. STOP and find another development.
This type of practice is almost a thing of the past BUT not quite yet.


What does this mean?

Local taxes. Annual property taxes are paid on the book value
Since most people dont like paying tax the Bulgarians normally have a lower value recorded. And as they can own two properties without paying CGT and dont pay CGT on other property they have owned for mor than 5 years it does not concern them. They are more concerned with annual property tax (Rates).

In order to aviod or is it evade VAT @ 20%, SOME developers use a lower value VAT is paid on this value.

Note (You can also notorise at a higher value and pay the additional 20% VAT.) Also legal.

For the foreign based buyer this contains a lot of potential problems.
1. CGT @ 20% is paid on the difference between the recorded book value when purchased and the market price when sold. Whammy
2. Notary fees are paid on the Market value Therefore no saving.
3. There is a max fee to the Notary and most property purchases achieve this figure.
4. The puracher is potentially liable for the unpaid VAT (DDC). Whammy

This is important VAT @ 20% is payable on all new construction.
Companies can claim it back.
MAKE SURE THAT VAT FOR THE FULL AND CORRECT AMOUNT IS INCLUDED IN THE PRICE QUOTED AND MAKE SURE IT IS WRITTEN INTO ALL CONTRACTS.

Make sure that it is included and recorded. It generally is but not always, nasty suprise for some people.

Local Taxes and Loans secured against property.
Your Bulgarian solicitor will check this and yes it is needed.
Your Bulgarian solicitor must check this anyway even if you are not using a bank. They must ensure that there is no loans against the land- property otherwise you have a problem. The same thing hapens in Ireland for the same reason. Who realy owns a property must be established prior to selling and that it is free of all burdens (taxes, loans, water charges etc).

If you do not have your own Bulgarian Lawyer GET ONE NOW. IF you need some advice I can give you a list.

They cost between euro 500 and 1500. Dont buy property without you own one.

Hope this helps.
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Coney Island

Thank you again. I think my problem here is that the property would be registered with the The Notorised Book value lower than The Market value and I would have to pay CGT @ 20% is paid on the difference between the recorded book value when purchased and the market price when sold. So, is it correct that if I don't reside in Bulgaria I cannot avoid to pay 20% CGT after 5 years?

In my case the value of the apartment is around 50k, suppose they regustered at 25k, the CGT for the difference would be 20% of 25k = 5k taxes to pay on this + 20% CGT for whatever exceeds 50k when I sell. This is not good, but still if the apartment goes up in value to let's say 100k in 10 years time, then it could still be worth it (assuming that the CGT conditions stay the same). What do you think?
This is a 91 m2 apartment right on the beach in Pomorie, between Sunny Beach and Burgas. I did not find anything of this size for a similar price around there).

Tax 20% is already paid on this apartment (I checked with my Irish agent), but I will request to spell it out clearly in the contract.

Yes I have a Bulgaria lawyer who is taking care of everything, and this is included in the price of the apartment. This is my lawyer (I also met him in person in the studio when I was in Bulgaria and went out for dinner, he seems good: http://www.legaconsult.com/ )

Your advices are much appreciated.

Victor

Coney Island wrote:

Yes I have a Bulgaria lawyer who is taking care of everything, and this is included in the price of the apartment. This is my lawyer (I also met him in person in the studio when I was in Bulgaria and went out for dinner, he seems good: http://www.legaconsult.com/ )

Did you pick him yourself or was he on a suggested list ("and this is included in the price of the apartment")?

Bg knowhow

What is the name of your Irish agent?

You do not have independent Legal advice

Get your own Bulgarian Lawyer Now!!!!!!!

I would be concerned about a Lawyer who advertises Property for sale on his web site.

You would not buy property in Ireland without your own Lawyer.
#Why are you doing this in Bulgaria???????????

YOUR MAD

IF YOU WANT A LIST I CAN POST ONE