Beware False Price in the Deeds in Bulgaria...

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Beware False Price in the Deeds in Bulgaria

Overseas buyers looking to purchase property in Bulgaria frequently hear that the regular practice is to put a lower price in the deeds to save money. Agents and even lawyers often assure the purchaser that most property transactions in Bulgaria are conducted precisely in this manner. The overseas buyer often poses no more questions, because they believe this information to be correct.

How wrong they are - there are such enomous risks to the buyer; it?s really important that people don?t get tricked with this.

Putting a lower price in the deeds during the last stage of the conveyancing process in Bulgaria is generally done because the vendor wishes to avoid taxes and fees which are due on final signing and which depend upon the property price which is declared in the deeds. The higher the value of the property, the higher the taxes and charges. But by declaring a lower price in the deeds than that which is actually being paid is an evasion of Bulgarian law and creates an ?invalid? or ?fake? deal and can lead to serious consequences.

From a civil law point of view this kind of ?fake? deal would be considered null and void anyway. To add to this, if you were found guilty of having been party to such a deal you could be charged with a fine of up to 1,000 pounds and even imprisonment of up to three years.

It is also a common practice at the moment with Bulgarian constructors who are trying to avoid VAT which has to be paid on new build or off plan sales. They offer the potential of putting in a low and false price in order that they do not pay all or any of the VAT due.

For the overseas buyer, one can only imagine what any mortgage company might have to say about all of this if at a later date they become aware of the property being under-declared on the deeds! Bulgarian estate agents often say, 'oh well, don't worry, you can do the same; just find someone else to pay you part in cash later', but it?s not that simple. With European entry looking increasingly likely in the immediate term, it won?t be so easy to find a buyer willing to do this and people trying to operate in this way will find it increasingly difficult to do so. Any buyer really has to ask himself whether he would do this in Britain with a similar proposal from an agent, paying in some cases up to 70% of the price in cash and then hoping to find a future buyer who would do the same.

Even if after all this, anyone still thinks it's a good idea to put a lower price in the final deed, then let?s take a look at the financial implications on just a small scale when it comes to re-sale. :

Firstly, if the full purchase price is declared Price 40,000 Taxes and Notary Fees about 3.5% 1,400 Re-sale Price 60,000 Profit 20,000 Gains Tax at 15% 3,000

Secondly, if a lower price is declared (the real price remains at 40,000 as in the first example above)...
Price 20,000
Taxes and Notary Fees about 3.5% 700
Re-sale Price 60,000
Profit 40,000
Gains tax at 15% 6,000

Initially,it looks good - 700 pounds is saved on the initial taxes and fees when buying. However, when it comes to re-sale there?s an additional tax burden of 3,000 pounds!.

The best advice we can give to anyone is to get your own independent lawyer who will act in your interests. Buyers should not be tempted by those that say this kind of practice in Bulgaria is above board, it?s certainly not and purchasers could end up in real difficulties all round.

Quest Bulgaria is the specialist english language magazine for those interested in buying property, moving to and investing in Bulgaria. Impartial and in-depth articles written every month by practicing lawyers, accountants, real estate and other experts. No-nonsense, factual and impartial.

Monthly printed magazine : online advice board with practicing professionals such as lawyers, accountants... : discount scheme for all your Bulgarian property needs

Contact :
Jain Goodall, Marketing Director
Quest Bulgaria
Tel : 00 359 2 851 90 65
GSM : 00 359 878 227 222

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Punitive damages serve a number of important functions which—despite a few horror stories, which are themselves either apocryphal or overturned in the courts, the functions remain valid and in the public interest. Persons causing great harm—persons deliberately or with gross negligence causing great harm should not view paying damages as merely a cost of doing business, a cost that might fit neatly into a risk analysis of wrongdoing. That is what happened in the Ford Pinto case in which the cost of paying claims to victims of a known deadly hazard was deemed less than the cost to retool the assembly line, and thus the hazard was maintained knowing full well that further people—more people would be injured or killed. This is the purpose of punitive damages, to punish this kind of egregious wrongdoing, and to deter, to be a deterrent to such conduct. It is not immediately clear why a deterrent—or the necessity of the deterrent should bear any great relationship to the amount of actual damages in a given case. There is nothing wrong and indeed something highly desirable in maintaining this disincentive to wrongdoing in an appropriate relationship to the harm and the conduct of the tort-feasor. This trend has led one commentator to suggest that ''[p]unitive damages have replaced baseball as our national sport.'' Theodore B. Olson, Rule of Law: The Dangerous National Sport of Punitive Damages, Wall St. J., Oct. 5, 1994, at A17. See also Malcolm E. Wheeler, A Proposal for Further Common Law Development of the Use of Punitive Damages in Modern Products Liability Litigation, 40 Ala. L. Rev. 919, 919 (1989) (''Today, hardly a month goes by without a multimillion-dollar punitive damages verdict in a product liability case.'').  


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