What is the most advantageous way to register property when buying it? The law prohibits the purchase of land in Bulgaria by citizens of other countries, but when acquiring a house or an apartment there are various registration options. Which of them will be the most advantageous?
Buyers of property in Bulgaria can register it either in their own name or in the name of a legal entity. Of these two options, most people usually choose the first: registering property in the name of an individual is faster and simpler than in the name of a company, which still has to be set up. In addition, there is no need to open a bank account and file reports every year.
However, in some cases it is more advisable to register property, especially expensive property, in the name of your own company. There are several nuances here. The company should be set up in advance and registered for VAT (in Bulgaria the tax is called ДДС). In this case, when property is purchased in the name of a legal entity, the VAT amount can be recovered. This money can then be used as a free, interest-free loan right up to the moment the property is sold, when the VAT will have to be paid to the state.
The VAT recovery procedure is governed by the Bulgarian VAT Act. Under this act, the right to a refund is granted to a person for whom, over three consecutive months following the payment of VAT liabilities, the amount of VAT on expenses stated in the monthly return exceeds the amount of VAT charged on income.
By the 14th of the month following the three-month period, the calculated VAT to be recovered is stated in the monthly reference return. From that moment the tax refund procedure begins, and it can be of two kinds — with an inspection or with an audit.
If the refund is made through the inspection procedure, the VAT is returned within 30 days from the last return filed and after deduction of other possible liabilities.
The audit procedure takes longer — 3 months, and the National Revenue Agency (NAP) may extend this period if it becomes necessary to clarify additional facts and circumstances. The procedure usually involves an audit if large amounts are being refunded, if VAT is being recovered for the first time, or if there are inaccuracies in the recovery return.
Thus, everyone has to go through the audit procedure the first time, and consequently the money can be received no earlier than three months after filing the relevant return.
If NAP officially refuses the VAT refund or returns it only in part, this decision can be appealed within seven days.
When VAT is refunded, the tax authority (NAP) always carries out an inspection, but an experienced accountant will easily solve this problem. You can contact the company Bulgarian Expert, and our specialists will help you prepare the documents correctly so that the inspectors have no unnecessary questions.
So why do only a few people recover VAT after a purchase? Unfortunately, many foreign managers are simply unaware of this possibility. Sometimes accountants, wishing to make their own work easier, say nothing about the fact that VAT can be recovered. And the consequences are rather sad: when the property is sold, the company will have to charge and pay the tax to the budget once again, although the whole amount could have been recovered and used.
But there is good news too: even if the VAT recovery deadline is missed, this mistake can be corrected within five years, counting from 1 January of the year following the year of the property purchase. To do this, a written application must be filed with NAP at the company’s place of registration.
In this case, recovering the VAT will also require a preliminary audit of the company’s operations by NAP officers. Although this information is not publicised, the law contains clear provisions on the possibility of recovering value added tax in such a situation. Consequently, if the accounting documentation and the transaction documents are in order, this opportunity can be used and the VAT recovered.
The accountants of the company Bulgarian Expert are ready to advise you and help you prepare the documents for the tax refund.
VAT registration of a company: Why? When? Is it mandatory?
Remote control of a company in Bulgaria.
Taxation of daily apartment rentals in Bulgaria
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