Investing in Bulgaria via SCI: Benefits and Pitfalls

Published on October 1, 2025 and written by Cyril Jarnias

Investing in Bulgaria through a Real Estate Civil Company (SCI) presents a unique opportunity to diversify one’s portfolio while benefiting from the attractive tax advantages offered by this structure. This country, with its strategic position at the crossroads of Europe and its expanding real estate market, is attracting more and more investors ready to explore new avenues. By choosing an SCI, investors can not only benefit from flexibility in managing their assets, but also from interesting tax optimization, which is often a decisive argument for choosing this structure. However, it is essential to have a good understanding of the realities of the Bulgarian market as well as the associated legal obligations to avoid potential pitfalls. This article explores the benefits and precautions to take to demystify this mode of investment in Bulgaria.

How to invest via an SCI: the Bulgarian context

Legal framework of SCIs in Bulgaria

In Bulgaria, the concept of a Real Estate Civil Company (SCI) does not exist exactly as it does in France. However, there are similar structures for real estate investment. The closest legal forms are the limited liability company (OOD) or the single-member limited liability company (EOOD).

The right to property is a fundamental right guaranteed by the Bulgarian Constitution. Foreigners can acquire real estate properties in Bulgaria, but there are certain restrictions, particularly concerning the purchase of agricultural land.

Creating a real estate company in Bulgaria

To create a real estate company in Bulgaria, here are the main steps to follow:

1. Registration of the trade name with the Commercial Register 2. Holding of a constitutive general meeting 3. Deposit of the share capital into a special bank account 4. Filing of documents with the Commercial Register

The company creation timeframe is generally 3 business days after the complete file is submitted to the registration agency.

Required documents and administrative formalities

The documents needed for forming a limited liability company in Bulgaria include:

• Articles of Association
• Minutes of the constitutive meeting
• Notarized signature specimens of the managing directors
• Signed declarations by the managers
• Certificate of deposited capital
• Proof of payment of registration fees

All documents must be translated into Bulgarian. It is highly recommended to engage a local law firm to ensure document compliance.

Taxation and legal obligations

The Bulgarian tax regime for real estate companies is relatively advantageous. The corporate tax rate is 10%, one of the lowest in the European Union. Dividends paid to shareholders are subject to a 5% withholding tax.

Real estate companies in Bulgaria must submit annual tax returns and can benefit from various deductions and tax credits, particularly in the R&D sector.

Specifics for foreign investors

Foreign investors can create and manage real estate companies in Bulgaria without major restrictions. However, for the purchase of agricultural land, residency conditions apply:

– Individuals or legal entities must be residents or established in Bulgaria for more than 5 years to acquire agricultural land. – Companies whose shareholders do not meet these residency conditions cannot acquire agricultural land.

Role of legal professionals

Although not mandatory, the assistance of a lawyer or notary is highly recommended for the creation and management of a real estate company in Bulgaria. These professionals can:

– Draft and verify constitutive documents – Assist with administrative procedures – Advise on tax and legal aspects – Represent the company before Bulgarian authorities

Costs associated with creating a real estate company

The main expenses to anticipate for creating a real estate company in Bulgaria are:

– Trade name registration: approximately 25 euros – Filing documents with the Commercial Register: approximately 80 euros – Document translation fees – Lawyer or notary fees

The minimum required share capital is very low, set at 2 BGN (approximately 1 euro), making company creation very accessible.

Advantages of real estate investment via a company in Bulgaria

Investing in real estate through a company in Bulgaria offers several advantages:

– Attractive tax rate – Simplified creation procedures – Low required share capital – Possibility to acquire real estate as a legal entity – Protection of partners’ personal assets

Bulgaria offers a favorable framework for real estate investors, with relatively simple administrative procedures and advantageous taxation compared to other European countries.

Tax optimization: the advantages of an SCI in Bulgaria

The Bulgarian tax framework: an asset for real estate investors

Bulgaria stands out for its particularly attractive tax regime within the European Union. With a single tax rate of 10% on personal and corporate income, the country offers one of the most competitive tax environments in Europe. This advantageous tax policy attracts many foreign investors, particularly in the real estate sector.

Tax specifics of SCIs in Bulgaria

Real Estate Civil Companies (SCI) benefit from advantageous tax treatment in Bulgaria. Rental income generated by an SCI is taxed at the flat rate of 10%, representing a tax burden significantly lower than in many other European countries.

Regarding real estate capital gains, Bulgaria also applies a tax rate of 10% on gains realized from the sale of real estate properties. However, there is a full exemption from capital gains tax for properties held for more than 3 years, which encourages long-term investments.

Tax optimization strategies for SCIs

Real estate investors can optimize their taxation in Bulgaria through several strategies:

• Using real estate depreciation to reduce the taxable base
• Deducting loan interest and management fees to decrease the fiscal result
• Reinvesting profits into new real estate projects to benefit from tax deferrals

For example, an SCI acquiring an office building in Sofia for 1 million euros could depreciate the property over 25 years, thus reducing its taxable income by 40,000 euros per year.

Administrative and tax obligations of SCIs

To fully benefit from the advantageous tax regime, SCIs in Bulgaria must comply with certain obligations:

• Maintaining accounting in accordance with Bulgarian standards
• Filing annual tax returns before March 31 of the following year
• Paying quarterly corporate tax installments
• Declaring rental income and real estate capital gains

Best practices to maximize tax benefits

To optimize the taxation of their SCI in Bulgaria, investors should:

• Plan their investments for the long term to benefit from the capital gains exemption
• Structure their acquisitions to maximize tax deductions
• Regularly consult local tax experts to remain compliant with legislation
• Consider creating multiple SCIs to diversify risks and optimize tax management

By adopting these practices, investors can fully leverage the advantageous tax framework offered by Bulgaria while contributing to the development of the local real estate market.

Buying real estate in Bulgaria: pitfalls to avoid

Pitfalls and challenges of the Bulgarian real estate market

The Bulgarian real estate market, although attractive to foreign investors, holds several particularities that can turn into real pitfalls for ill-informed buyers. In some popular tourist areas, particularly on the Black Sea coast, artificially inflated prices are sometimes observed that do not reflect the actual value of properties. This phenomenon is often fueled by strong foreign demand and limited supply, creating a localized speculative bubble.

Legislative complexity for non-residents

Bulgarian legislation regarding real estate acquisition by non-residents can prove to be complex and changing. Restrictions on the purchase of agricultural or forest land by foreigners, although partially eased for EU nationals, remain a major obstacle. Furthermore, creating a local company to circumvent these restrictions, although common, requires a thorough understanding of Bulgarian corporate law.

Crucial importance of due diligence

Conducting thorough due diligence is absolutely essential before any real estate investment in Bulgaria. This step allows to:

• Verify the legality and clarity of property titles
• Ensure the absence of liens or disputes on the property
• Confirm the property’s compliance with local urban planning regulations

Particularities of property rights

The system of property rights in Bulgaria presents certain specificities that may surprise foreign investors. For example, the notion of shared ownership is common in residential buildings, where common areas are collectively owned by all property owners. This situation can complicate decision-making regarding building maintenance or renovation.

Risks related to unclear property titles

Purchasing properties with ambiguous or incomplete property titles represents a major risk in Bulgaria. Problems can arise due to:

• Poorly documented property restitutions from the communist period
• Unresolved inheritances
• Errors in land registries

These situations can lead to costly and time-consuming disputes, or even the total loss of the investment.

Need to surround oneself with local professionals

To navigate the complexities of the Bulgarian real estate market, it is crucial to surround oneself with trusted local professionals. A lawyer specialized in real estate law can:

• Thoroughly examine all legal documents
• Verify the transaction’s compliance with current legislation
• Protect the buyer’s interests throughout the process

Similarly, a Bulgarian notary will play an essential role in finalizing the transaction, ensuring its legality and proceeding with the official registration of the property transfer.

Vigilance against potential fraud

The Bulgarian real estate market is unfortunately not exempt from fraudulent practices. Investors must be particularly vigilant against:

• Fake owners or unauthorized intermediaries
• Properties presented as completed when they are still under construction
• Promises of unrealistic rental yields

A cautious and methodical approach, combined with the expertise of reputable local professionals, is the best protection against these risks.

Understanding corporate law in Bulgaria for an SCI

Types of companies in Bulgaria

Bulgarian law recognizes several forms of companies, the most relevant for creating a structure similar to a Real Estate Civil Company (SCI) being:

The limited liability company (OOD): This is the most common form for small and medium-sized enterprises. It requires a minimum capital of 2 BGN (approximately 1 euro) and can be formed by one or more partners.

The single-member limited liability company (EOOD): A variant of the OOD with a single partner, it offers increased flexibility for individual entrepreneurs.

The joint-stock company (AD): Although less common for real estate structures, it can be considered for larger-scale projects. It requires a minimum capital of 50,000 BGN (approximately 25,000 euros).

Legal requirements for registering a structure similar to an SCI

To create an entity equivalent to an SCI in Bulgaria, one generally needs to:

– Draft the company’s statutes – Deposit the share capital into a Bulgarian bank account – Register with the Bulgarian Commercial Register and Companies – Obtain a BULSTAT code (tax identification number) – Register for VAT if annual turnover exceeds 50,000 BGN

Tax implications

Taxation of rental income: Rental income is subject to corporate tax at the rate of 10%, one of the lowest in the European Union.

VAT: The standard VAT rate in Bulgaria is 20%. Real estate rentals are generally exempt from VAT, but there are exceptions for certain types of commercial properties.

Administrative formalities

Incorporating a company in Bulgaria involves:

– Choosing a unique company name – Appointing one or more managers – Establishing a legal address in Bulgaria – Opening a bank account for capital deposit – Registering with tax authorities

Rights and responsibilities of partners

In a structure similar to a Bulgarian SCI:

– Partners have voting rights proportional to their shares – They participate in profits and losses according to their contribution – Their liability is limited to their capital contribution – They can transfer their shares, subject to conditions provided in the statutes

Regulation of property transfers

Real estate property transfers in Bulgaria require:

– A notarized deed – Registration in the cadastre – Payment of local taxes and registration fees

Differences with corporate law of other EU countries

Some particularities of Bulgarian corporate law:

– A very low minimum share capital for OODs and EOODs – A relatively fast and simplified registration procedure – No obligation to appoint a statutory auditor for small companies – The possibility for foreigners to hold 100% of shares in a Bulgarian company without restriction

These specificities can make investing in Bulgaria attractive, but it is crucial to fully understand the nuances of the local legal system before committing.