Property Tax Bulgaria

Owners of rental property in Bulgaria, who are non-resident there, are liable to pay property tax and must apply for an Identification code with the BULSTAT register. An Individual is considered non-resident in Bulgaria if s/he does not spend 183 days or more in any tax year (calendar year) in Bulgaria, does not have their primary residence or does not have a permanent establishment in Bulgaria.

In Bulgaria, land cannot be purchased by a non-resident, only buildings. When a foreigner wishes to purchase land, s/he must do so in a Bulgarian registered company. There are proposed changes to Bulgarian law to permit EU foreigners to purchase land in their own name. Currently a building, without land, can be acquired in an individuals own name or through a Bulgarian property.

Taxes payable when purchasing a property are as follows:

Transfer fees Upon the Notary verification of the property purchase deal you will be required to pay Local tax/transfer fees @ 2% and State Entry fee @ 0.1% of the purchase price (Per Notary deeds).

VAT on buildings purchased in Bulgaria is charged @ 20%. VAT applies when you purchase a property from a company which is registered for VAT. An individual cannot reclaim VAT on the purchase of a residential property but likewise is not obliged to pay VAT over on rents received. A Company may be obliged to register for VAT in certain circumstances but may also opt to register, in which case it can reclaim the VAT on purchase. If registered, VAT will be payable on rents received and on the ultimate sale of the property. The company must register for VAT before it purchases the property, otherwise it cannot reclaim the VAT on purchase.

Ongoing taxes payable in Bulgaria on property are as follows:

Income Tax on rents for a non-resident landlord is subject to 10% (previously 15%) withholding tax on gross rents. No deductions are allowed for costs incurred. Rental costs including mortgage interest will be permitted when calculating Irish Tax due in Ireland on foreign Bulgarian rents.

Corporate Income Tax is payable if the property is purchased through a company and is calculated @ 10% (previously 15%) on the company profits. Full deductions including mortgage interest will be given for eligible costs incurred in connection with renting the property.

Local Property taxes (rates) are also payable quarterly and vary per location. Inhabited house duty is calculated between 0.15% and 0.30% (it was @ 0.15% before 01.01.2008) of the Tax evaluation of the property (defined each year) and a Waste Collection duty is calculated @ 0.16% of the property’s tax evaluation value. The local Municipalities set the annual property values similar to local council taxes in Ireland/UK. This value is generally lower than the purchase price.

Other applicable taxes are as follows:

Capital Gains Tax (CGT) is payable on any increase in value since acquisition @ 10% (previously 15%). The gain is calculated on the difference between the sale price and the higher of the tax estimation and the price of acquisition (Notary Deeds), corrected by an inflation index.

Income from sale of property is exempt from Income tax (CGT) if:

> The person is ordinary resident in the EU, AND

> During the tax year the person sells not more than one residential property regardless of date of acquisition OR,

> During the tax year the person sells not more than two properties which have been owned for more than 5 years OR

> The income is from the sale of real estate property, which has been inherited

Inheritance Tax is payable by non-resident beneficiaries on certain transferred assets. The tax rate depends on the relationship between the parties and the size of the inheritance. The lineal heirs are completely exempt from this tax. For all other beneficiaries the tax rate will apply only on property with tax evaluation above €125,000.

If you are considering buying property abroad or have already made an overseas property investment, it is important that you are aware of your tax obligations and the property taxes associated with such a purchase.

Worldwide income

You will have an obligation to declare and file your French income with your tax return in your resident country. Please contact us for further details regarding double taxation relief and/or filing your Irish/ UK Tax Return.

For more information Property Tax 

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