Bulgarian Property Investment Tax Basics
The Bulgarian property tax structure may appeal to you if you are sick of paying inflated local fees in your area and are looking for something better. Many foreign investors and second home owners buy property in Bulgaria because the property taxes in Bulgaria are a lot lower than the property taxes in their locale. Bulgarian property tax is one of the most popular topics on property forums these days. The information below will help you cut through the confusion.
PROPERTY PURCHASE TAX Chances are this will be the first Bulgarian property tax you will come across. When you buy property in Bulgaria, the property will be subject to a notary and a municipal tax. The notary tax is paid on the higher end of the market price or the book value of the property. You actual rates will vary and are usually less than 1%. Not to mention that 2% of the market value of the property is paid as a municipal tax. This money eventually goes to the municipality in where the property is situated. You will pay these taxes after you have signed the notary deed.
ANNUAL PROPERTY TAX All property owners in Bulgaria have to pay an annual property tax just like anywhere else. The current annual tax rate for a house is 0.15% of the capital value of the property. So for example, if a house cost 20,000 on purchase, the annual Bulgarian property tax payable would be 30.
Aside form this tax; the owners also have to pay a waste-collection tax. The rate for this greatly depends on the location and size of the place. The amount of tax that is payable is usually about £30 a year for rural property and about £100 per year for apartments in the larger city centres. You must also think of the non-tax costs when you buy in Bulgaria. If you have an investment apartment in Bulgaria, you are obligated to pay annual maintenance charges and management costs. These are much like annual service charges that you must pay on Apartments in order to cover managing agents as part of the upkeep of the common area. These charges will vary according to the different types of property.
PROPERTY RENTAL TAX If you rent out your property (sublet or landlord), then the profits from the rent that you get will be taxed for the accounting year in question. If you live in Bulgaria, the tax is assessed in accordance with your tax status in Bulgaria. This status is based on a table that has different tax rates. If you are not living there, you will be taxed on a flat rate of 15% on the taxable profit. You will also have to consider any additional taxes that you have to pay in your home country.
COMPANY TAX If you own a company in Bulgaria, you should note that in January 2005 the rate of income tax for a corporation in Bulgaria was reduced from 19.5% to 15%. The tax year in Bulgaria ends on the 31st of December. A limited company has no choice but to file an annual report by the 31st of March. If you incorporated a limited company sp that you could purchase a house or land, then there will be no tax liability, as the company was not trading at the time of the purchase. However, you still have to submit company accounts to the Companies' House Register in Bulgaria every year if you are going to satisfy the authorities that the company was not trading. This is a legal requirement that must be accomplished. Accountants in Bulgaria can carry out this service at a reasonable cost if you need it.
VALUE ADDED TAX (VAT) Any actions that involve land and lease of property for residential purposes are exempt from the VAT Tax. However if you have purchased a property as a limited company, then when you come to sell your property you may have to add VAT to your sale price. Right now you must register your company for VAT if the turnover is higher than 50,000 Leva.
VAT in Bulgaria is currently set at 20%. So in effect; it's actually higher than it is in the UK (17.5%). I would advise you to get a good accountant either in Bulgaria or your home country to handle these matters for you. Just make sure that the accountant specializes in overseas property tax.
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