Law and Justice

Relevant taxes and fees when buying a property in Bulgaria

Buying and owning a property in Bulgaria is associated with paying relevant taxes just like when buying a property in the UK or any other country.

When buying a property in Bulgaria, a buyer needs to be aware that they are obliged to pay taxes in relation to both the acquisition of the property (property transfer tax) and the continual ownership of the property (annual property tax, rubbish tax) as well as tax on any income derived from this property (income tax).

With signing the Notary deed – the title deed for ownership of the property – the buyer becomes the full owner of the property and assumes all related rights and obligations. By signing of the Preliminary contract the buyer has only the right to receive the ownership over the property when all the installments have been transferred to the seller, but the seller remain the owner of the property till signing of the Notary deed for transferring the ownership.

I. Upon signing this ownership document the buyer is obliged to pay property transfer tax to the amount of 2% of the value of the property to be purchased. This is a fixed tax and is always 2% calculated on the higher value between the tax valuation of the property and the sale price shown in the Notary deed. Upon signing the Notary deed the buyer is also obliged to pay Notary fee according to the prescriptions of the Notary and the Notary Activity Act. The exact amount of the notary taxes is defined in Notary Taxes Tariff as follows:

Certified material interest in BGN Notary fee in BGN

Under 100.000 15.000

From 100. 001 to 1,000.000 15.000 plus 1.5 % for the amount over 100.000

From 1,000. 001 to 10,000 28.5 plus 1 % for the amount over 1, 000

From 10,000. 001 to 50,000 118.5 plus 0.5 % for the amount over 10, 000

From 50,000. 001 to 100,000 318.5 plus 0.2 % for the amount over 50, 000

Over 100,000 418.5 plus 0.1 % for the amount over 100,000 but less than 3,000

Upon signing the Notary deed the buyer pays Land registry fee of 0.1% of the price of the property the total amount for which is roughly 1% of the price of the property. All above stated fees could be divided between the seller and the buyer if it is stipulated in the Preliminary contract or in an appendix, which shall be non separated part of the preliminary contract.

In relation to their ownership of property in Bulgaria, foreign nationals and foreign legal entities who acquire real estate in Bulgaria are obliged to register at the Registry Agency under the registration system BULSTAT for issuance of an identification number within seven days as of acquiring of the property. The application for registration is to be submitted at the Registry Office in the region where the real estate is located. In addition to that they need to register the property in the Local Municipality and the Local Tax office.

For your convenience, we are mentioning all necessary documents for the notary procedure:

1. Draft a project of the Notary deed for transfer of property

2. Documents certifying the property right

3. Declarations by the parties certifying their civil, marital and property status, certified by the translator

4. Declaration by the person who acquire the property certifying the origin of the funds, certified by the translator

5. Certificate for tax assessment and paid taxes

6. Receipt for paid local tax for acquisition of real estate

II. After the buyer is already the owner of the property by signing of the Notary deed for the title, every year the owner is obliged to pay annual property tax, including council tax and tax for the rubbish. The size of these annual taxes is determined by the tax experts each year and depends on the size and the location of the property as well as on other factors.

III. If an owner is renting their property and deriving income from it, they are obliged to pay income tax in Bulgaria which will be different depending for instance on how the property is owned – whether by a physical person or by a company.

If the buyer rent the property as physical person, they will be paying a tax calculated on a scale as per the new Law on the Income of the Physical persons, after a legal allowance of 20% of the profit is deducted. Thus the owner is paying tax according to the mentioned formula on 80% of the profit.

If the property is owned trough a company, a corporate tax of 10% will be paid. If a buyer wishes to purchase more than two properties and develop investment business in Bulgaria, we normally advise them to buy the properties trough a company as it is more tax effective to do so and they will need an active company for their business purposes.

If a buyer decides to sell their property, provided they sell one property in one tax year, they will pay no capital gains tax. After 5 years of the acquisition of the property, they may sell two or more properties without paying capital gains tax.

We hope that we have been in assistance

NYD Law

Attorneys at law

Property law

Commercial law

Contract Law

Intellectual Property Law

Tax Law

Tel.: ++359 889555251

Fax: ++359 29173918

E-mail: n.zhelyazkova@nyd-law.com; y.valova@nyd-law.com

www.nyd-law.com