Acquisition of land by foreigners
Since joining the European Union (EU) in 2007, Bulgaria has implemented regulations regarding the acquisition of land by EU citizens and third country nationals.
While EU citizens can freely acquire non-agricultural land, restrictions remain in place for agricultural land. This article explores the legal requirements and limitations surrounding land acquisition in Bulgaria.
Land Acquisition for EU and EEA Citizens
After 5 years of Bulgaria’s EU accession, EU and European Economic Area (EEA) citizens can acquire non-agricultural land in Bulgaria, irrespective of their permanent residence status.
Additionally, Bulgarian companies registered by EU and EEA citizens, as well as foreign companies from EU and EEA member states, can freely acquire non-agricultural land.
The acquisition of agricultural land is subject to different regulations. According to the Treaty on the Functioning of the EU (TFEU)
Bulgaria is obligated to lift restrictions on agricultural land acquisition for EU and EEA citizens and legal entities after 7 years of EU accession.
However, a legal amendment in 2014 introduced a mandatory 5-year residence or establishment requirement for individuals and legal entities seeking to acquire agricultural land.
This means that regardless of citizenship, the buyer must have resided in Bulgaria for at least 5 years prior to the acquisition transaction.
Legal entities must be registered under Bulgarian legislation for a minimum of 5 years as well.
Controversies and European Commission Proceedings
The mandatory residence/settlement requirement for agricultural land acquisition has been criticized as a violation of the TFEU’s principles of freedom of establishment and free movement of capital.
In 2015, the European Commission initiated criminal proceedings against Bulgaria, citing this violation. However, the proposed bill to repeal the mandatory residence requirement has yet to be adopted by the National Assembly.
Exceptions to Residence Requirement
The mandatory residence/settlement requirement does not apply to the acquisition of agricultural land through legal inheritance. In such cases, individuals inheriting agricultural land are not bound by the 5-year residence requirement.
Acquisition by Third Country Nationals
Unlike EU and EEA citizens, third country nationals can only acquire land (agricultural and/or non-agricultural) in Bulgaria through international treaties that have been ratified and entered into force according to the Bulgarian Constitution.
Currently, no such international agreements with third countries have been signed. However, third country nationals can inherit land by law.
In the case of agricultural land, they are required to transfer it within 3 years of acquisition.
Restrictions on Bulgarian Commercial Companies: Bulgarian commercial companies are prohibited from owning agricultural land if their partners/shareholders are citizens of third countries or if they are registered in third countries or countries with preferential tax regimes.
This prohibition also applies to Bulgarian joint-stock companies with bearer shares. Violations of this ban can result in pecuniary sanctions.
Case law has clarified that the legal ban on land acquisition by foreigners applies only to land itself and not to built-up properties.
According to this practice, the prohibition does not apply when the land is a common part of independent buildings.
In such cases, the ban does not extend to the sale of adjacent land that is part of the building.
This exception allows for the accessory ownership of the adjacent land to follow the ownership of the building.
Conclusion: Bulgaria has implemented regulations governing the acquisition of land by EU citizens and third country nationals.
While EU citizens can freely acquire non-agricultural land, restrictions remain in place for agricultural land, including a mandatory 5-year residence requirement.
Legal challenges have been raised regarding the compatibility of these regulations with EU laws.
It is important for individuals and companies seeking to acquire land in Bulgaria to understand and comply with these regulations to avoid legal complications.