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Fast-track EU citizenship through investment in real estate properties in Bulgaria – the legal way?

During the last two decades, Bulgaria gained reputation of a country with immense potential for real estate property development and huge returns on investment (ROI). Many buyers from Germany, UK, France, The Netherlands, Belgium, Russia, China, etc., have profited from the rising real estate prices that came along with the EU membership of Bulgaria in 2007. At that time, another hype drove investors to Bulgaria from around the globe – the Parliament decreased all tax rates (personal and corporate) to untouched levels for the whole EU and the Bulgarian passport and citizenship became the ultimate Freedom tool – for worldwide travel and EU-wide unrestricted residency and legal protection.

The Bulgarian citizenship simply became the best choice for any non-EU national (as well as for EU nationals seeking tax haven within Europe). It provided the same rights as any other EU citizenship (ie German, French, Italian, etc.) and at the same time it offered the opportunity to seriously cut down the individual’s tax bill.

booming real estate market in Bulgaria

But is it possible to combine the investment in real estate properties in Bulgaria with the opportunity to obtain fast-track EU citizenship? The short answer is YES. Please read on to find our how...

WHAT ARE THE BULGARIAN NATURALIZATION AND IMMIGRATION LAWS FORESEEING?

EU citizenship by ral estate investmnt in Bulgaria Fast-track Bulgarian citizenship is not directly possible by means of investment in real estate properties in the country. The Bulgarian "Law for the Foreigners" foresees only that a foreigner will be able to obtain "long term residency" in Bulgaria against an investment in real estate for an amount of at least 306 776 EUR. This is definitely not what the real investor and cosmopolite would really be looking for. "Residency" is not "Citizenship". Even worse, "long term residency" is not even "permanent residency". The above option is utilized mainly by small investors willing to relocate to Bulgaria by means of purchasing their own home.

The Bulgarian naturalization laws foresee however that a person is eligible for permanent residency and consequentially (in one year time) for full EU (Bulgarian) citizenship if an investment is made of at least 1 022 584 EUR. There are many different options for acceptable investments, however the three main ones are:

  • Investment in shares of Bulgarian public companies, listed on the Bulgarian Stock Exchange (BSE);
  • Investment in Bulgarian sovereign (or municipal) bonds;
  • Investment in trust bank account (account under management) with Bulgarian bank.

The Bulgarian laws prohibit financing of the third option (bank account under management) by another Bulgarian financial institution (ie bank). Such a restriction however, does not apply to the first two options.

While the majority of our clients are utilizing the above three options directly, with the extremely low interest rates in recent years, there are more and more customers who are willing to obtain EU citizenship by investment in real estate properties in Bulgaria – an option, not immediately available in the Bulgarian legislation.

FAST-TRACK EU CITIZENSHIP BY INVESTMENT IN REAL ESTATE. WHAT IS OUR 100% LEGAL /AND VERY PROFITABLE/ SOLUTION?

Financing Bulgarian fast-track citizenship The advantages of investing in Bulgarian real estate properties are immense. Compared to many other destinations, Bulgarian properties are still widely undervalued. The investment potential is unmatched. As the DailyMail rightfully points out in its article of 14.04.2017, "Bulgaria is top of the list of the top 10 best value destinations to buy a holiday home". Rental returns and ROI in Bulgaria are much higher than those of similar properties in Cyprus or Spain. Taxation is lower (virtually no council tax or the analogue in the non-UK countries), VAT on property deals is in many cases not applicable at all (as opposed to Cyprus and other destinations). Maintenance charges are low, very low.

As pointed out above, from the three main options, the trust bank account is the only one that may not be financed by law. Investments in shares and/or bonds (the first two options) can be financed by all means possible. With an average rental returns from 2015 and 2016 in the range of 7-9% per annum and historically low interest rates, the obvious solution comes to mind - investing in Bulgarian real estate properties and then securing low interest credit in order to finance the purchase of Bulgarian bonds or shares.

Below are the main stages that the client has to go through (with our full legal and administrative support of course):

1) SELECTING THE REAL ESTATE PROPERTIES PORTFOLIO

At this stage, the client is presented with different buying opportunities from pre-approved real estate agencies (REA) in Bulgaria. We have very strict criteria of 28 points that are evaluated before we present the REA’s offers to the client. Any properties from REA that don’t pass this pre-selection test are not even considered. Apart from properties from reputable REA’s, we present the client the opportunity to purchase properties directly from owners (after careful due diligence examination by our lawyers of the property and the owner’s background). We prize ourselves of being able to provide properties of exceptional value and investment potential in all areas of Bulgaria, being the seaside, the ski resorts, rural, agricultural or city properties. All properties we offer are completely freehold – no exception of this rule. Among other characteristics, we pay special attention that the following conditions are met:

  • The property can be mortgaged for at least 95% of its purchase price. We can often achieve 100% and even more;
  • The property can return at least 7% per annum if rented out;
  • The property has very low maintenance charges (is in the 10% lower percentile);
  • The property can be purchased VAT-free (not always possible) and has close to zero annual tax;
  • The property is highly liquid, both for re-sale and for rental.

2) PURCHASING THE REAL ESTATE PORTFOLIO

With our legal team’s support, the client can now purchase the selected properties (or single property). We will assist in preparing all documents, drawing the notary deeds and ensure that the whole process is completely compliant with all national and local laws in Bulgaria.

3) MORTGAGING THE REAL ESTATE PORTFOLIO WITH EITHER BULGARIAN OR A SWISS BANK

Bearing in mind that one of our main conditions for the property eligibility has to be met (see above), we can ensure that the client will be able to obtain a mortgage against his real estate portfolio for at least 95% of the purchase price. This is something we consider to be very important. Most foreigners in Bulgaria are buying properties (overpriced) that will be able to fetch no more than 70% of the purchased price if mortgaged immediately after the acquisition. Our tough selection however guarantees close to 100% re-financing (in some cases even more than 100%).

In case of a mortgage through a Swiss bank, the level of securitization may be slightly lower than 95% as the Swiss banks tend to place higher security margin. The financing interest rate however will be lower than the one from the Bulgarian bank.

4) USING THE MORTGAGE PROCEEDS TO PURCHASE THE REQUIRED INVESTMENT TO OBTAIN THE EUROPEAN CITIZENSHIP

The proceeds from the mortgage can be now used to purchase the required Bulgarian bonds or shares on the stock exchange. Once the purchase is completed, the naturalization process (in order to obtain the fast-track Bulgarian citizenship) can be processed as usual. That’s it. It is all as simple as it is.

In that way, the applicant can purchase real estate portfolio in Bulgaria that will at least deliver 7% per year (if rented out), mortgage the properties at very low rates (in most cases much lower than the rental return alone), and then get as a bonus the return (coupon) from the bonds or the capital appreciation (and dividends) from the Bulgarian shares. On top of all that, the client will benefit from the upwards potential of the real estate purchased. And in a little bit more than a year the client can get his brand new EU passport. No country in the EU can even come closer to these exceptional conditions that only Bulgaria can offer.

5) OBTAINING THE BULGARIAN CITIZENSHIP, PROPERTY MANAGEMENT – THE FINAL PART

We will of course assist the client through all stages until and after the official citizenship presidential decree is issued and the issuance of the Bulgarian passport is completed. We will legally and administratively support the rental and the property management of the real estate portfolio, ensuring full legal compliance and tax optimization.

We firmly believe the "real estate citizenship" option is the best investment decision any "second citizenship" seeker can make.