Bulgaria: Opportunities for indirect investment in real estates in Bulgaria
The new Special Purpose Vehicles and Securitisation Vehicles Act (promulgated in State Gazette, issue 21 of 12.03.2021) regulates the establishment, licensing, operation, conversion and termination of special purpose vehicles, as well as the establishment, licensing, operation and termination of vehicles with the special purpose securitisation. A special purpose vehicle shall be a public limited company which, subject to the conditions and in accordance with the procedure laid down in this Act, invests money raised by issuing securities in real estates or in receivables.
A special purpose vehicle may carry out the following activities: 1. raising funds by issuing securities; 2. purchase of real estates and rights in rem over real estates, carrying out construction and improvement works for the purpose of making them available for management, letting, leasing or renting and selling them or buying and selling receivables.
The real estates acquired by the special purpose vehicle must be located on the territory of the Republic of Bulgaria or on the territory of another Member State. The special purpose vehicle may acquire real estates on the territory of another Member State only if this is provided for in the articles of association of the vehicle and in the prospectus for the public offering of securities.
The special purpose vehicle must have an initial capital of not less than BGN 500 000.
A special purpose vehicle, unlike other public limited companies, is exempted from corporation tax. In accordance with Article 175 of the Corporate Income Tax Act, “special purpose vehicle under the Special Purpose Vehicles and Securitisation Vehicles Act shall not be subject to corporate income tax.” Furthermore, in accordance with the Personal Income Tax Act (Article 46, para 3), individuals who are shareholders of such a company pay tax on dividend income at a rate of 5%, while the other tax rates (on other income) specified in this Act are higher. There are about 50 real estate securitisation companies operating in Bulgaria. A number of them own dozens of properties that they have made available for use and, accordingly, these properties generate income. These companies are complemented by new business structures for Bulgaria, such as specialised companies with an exclusive object of activity, which are engaged in the acquisition of real estates in Bulgaria and in other EU Member States. Where the real estates acquired by the specialised company are located in the territory of another EEA Member State, international evaluation standards, i.e. the standards adopted by the International Valuation Standards Board, London, United Kingdom, apply to the valuations of these properties.
Source: State Gazette, issue 21 of 12.03.2021