Bulgaria property news and articles

The Need to do Something

Most of us don’t like making investment decisions. They make our heads hurt. They make us face up to unpleasant things – like taxes and death. We don’t really understand what we are doing, what the options are and what is best. We don’t know who we should trust to give us advice. We know we ought to do something, but it will wait until next week-or maybe the week after. Until then our present arrangements will have to do. If you are moving to live overseas you must review your investments. Your current arrangements are likely to be financially disastrous – and may even be illegal.

What Are You Worth?

In financial terms, most of us are worth more than we think. When we come to move abroad and have to think about these things, it can come as a shock.

Take a pencil and list your actual and potential assets in the box below. This will give you an idea as to the amount you are worth now and, just as importantly, what you are likely to be worth in the future. Your investment plans should take into account both figures.

Current Assets                Value (leva)                 Value (€)                           Value (£)

Main home
Holiday home
Contents of main home
Contents of holiday home
Car
Boat
Bank accounts
Other cash-type investments
Bonds, etc.
Stocks and shares

Future Assets                  Value (leva)                     Value (€)                              Value (£)

Value of share options
Personal/company pension (likely lump sum)
Potential inheritances or other accretions
Value of endowment mortgages on maturity
Other
TOTAL

Who Should Look After Your Investments?

You may already have an investment adviser in the UK and you may be very happy with his or her experience and the quality of the service you have received, but this person is unlikely to be able to help you once you have moved to Bulgaria. Moreover, he or she will almost certainly not have the knowledge to do so. He or she will not know about Bulgarian investments that might be of interest to you. Even if he or she has some knowledge of these things, your investment adviser in the UK is likely to be thousands of miles from where you will be living.

Nor is it a simple question of selecting a new local (Bulgarian) adviser once you have moved. They will usually know little about the UK aspects of your case or about UK tax and inheritance rules that could still have some importance for you.

Choosing a financial adviser who is competent to deal with your needs once you are in Bulgaria is not easy. By all means seek guidance from your existing adviser and from others who have already made the move. Do some research. Meet the potential candidates. Are you comfortable with them? Do they share your approach to life? Do they have the necessary experience? Is their performance record good? How are they regulated? What security, bonding and guarantees can they offer you? How will they be paid for their work: fees or commission? If commission, what will that formula mean they are making from you in ‘real money’ rather than percentage?

Where Should You Invest?

For British people the big issue is whether they should keep their sterling investments. Many will have investments that are largely sterling-based. Even if they have investments in, for example, a Far Eastern fund, these will probably be denominated in pounds sterling and they will payout dividends in pounds.

You will be spending Bulgarian leva. As the value of the Bulgarian lev fluctuates against the pound sterling, the value of your investments will go up and down. That, in itself, isn’t too important because the value won’t crystallise unless you sell. What does matter is that the revenue you generate from those investments (rent, interest, dividends and so on) will be paid according to the fluctuations in value.

Take, for example, an investment that generated you £ 10,000 per annum. Rock steady. Then think of that income in spending power. Your income will vary as the difference between the sterling and the lev varies. If the lev increases in value compared with sterling your income will increase, but if it falls then you will have a drop in income. The same result follows when you look on it as sterling changing in value.

Just to reiterate: it is possible to be tax resident in more than one country at the same time. In this case you could end up liable to pay the same tax in both countries. Also, a particular item of income could, under each country’s different rules, be taxable in both the country in which it is sourced and also in the country in which the recipient of that income is resident.

For these reasons, many countries have concluded agreements called double taxation agreements with other countries to protect individuals from being required to pay tax twice. Bulgaria and the UK have such an agreement.

If you feel you might be at risk of double taxation, it is important to familiarize yourself with the double taxation agreement between Bulgaria and the UK and to get advice from a professional who is familiar with this field and who is acquainted with your personal circumstances.

To Buy as an Individual or as a Company?

Before Bulgaria joined the EU,you had no option but to register a company if you were buying property with land. However as pointed out in the previous chapter, there is now the possibility, if you are an EU member state citizen, to own property as an individual as long as you are you are legally resident in Bulgaria (see pp.m-i2).Thetax breaks for individuals appear better than those applied to companies (you can sell one property per year without tax) and you should consider buying as an individual if possible.

It is worth pointing out that anyone who has already bought a property via a company might also consider closing the company down and taking the property into their personal name to take advantage of these tax breaks for individuals before any further price increases.

Tax Planning Generally

Do it, and do it as soon as possible. Every day you delay will make it more difficult to get the results you are looking for. There are many possibilities for tax planning for someone moving to Bulgaria.

Some points worth considering are:

• Time your departure from the UK to get the best out of the UK tax system.
• Think, in particular, about when to make any capital gain if you are selling your business or other assets in the UK.
• Arrange your affairs so that there is a gap between leaving the UK (for tax purposes) and becoming resident in Bulgaria.That gap can be used to make all sorts of beneficial changes to the structure of your finances.
• Think about giving away some of your assets. You won’t have to pay UK wealth tax on the value given away, and the recipients will generally not have to pay either gift or inheritance tax on below-limit gifts.