Increasing the solvency of a company Question: Hello! EOOD with an authorized capital of BGN 2.00 was registered by the founder - a citizen of Russia - with the sole purpose of purchasing a plot for a house. A decision has now been made to purchase a lan

Increasing the solvency of a company

Question:
Hello!
EOOD with an authorized capital of BGN 2.00 was registered by the founder - a citizen of Russia - with the sole purpose of purchasing a plot for a house. A decision has now been made to purchase a landed property with the aim of subsequently leasing it indefinitely and free of charge to the owner of the capital of the company. Funding is required to pay for this purchase. There is an article in the Articles of Association of EOOD that states that additional contributions can be made. Can a decision be made by the owner in connection with an urgent need for funds to make an additional contribution or to make interest-free financing for the longest possible period, since in reality the amount will be returned only after the sale of the plot? What option do you recommend for tax exemption? Should the Company enter these decisions in the Commercial Register?
Thanks in advance!

Answer:
Hello,
In order to be exempt from taxes, the temporary solution is for the owner of the Company to provide a loan to the company. If within five years this loan is not returned, it will be converted as the Company's own capital and this circumstance will have to be entered in the Commercial Register, for which you will have additional costs related to state fees and a possible lawyer's fee, which Prepare the necessary documents for this procedure. If the loan is repaid within these 5 years, you will not have any additional costs. The other solution is to proceed now with the capital increase and the expenses that we have described to do now.

Even if you draw up a rent contract that is gratuitous (as you say - free rent), upon an inspection by the National Revenue Agency, it will not be recognized, because according to the legal norms in Bulgaria, there can be no gratuitous transactions - even more so between affiliates. Accordingly, the NRA will treat this transaction at market price and the company will be considered to have realized income equal to the market price determined by the NRA.

We hope we have been helpful!
Greetings!