Below is a guideline to the tax implications of property investment in Bulgaria. It is important to be clear of these prior to any purchase.
For companies - The rental incomes and expenses related thereon are part of the financial statement of the company and they are reflecting in the statement as incomes/expenses. The corporate tax is due on the profit of the company according to the result of the final financial statement.
There is no municipal tax of profit of the rental incomes of the company. The corporate tax is 10% of the profit.
For foreigner physical persons - there is 10% final tax on the rental incomes. The final tax on the income shall be assessed on the gross sum .
Land itself is not depreciable, although any immovable property affixed thereto is, provided that it is used for the business activities of the company and is recorded as a fixed asset.
Depreciation for tax purposes is at a rate of 4% per annum, and is usually calculated using the straight-line method. Real estate acquired for the purpose of re-sale is considered as "investment property". As such, it is non-depreciable and is subject to annual revaluation to the market value. In practice, it is often unclear in which situations a property should be treated as an "investment property" or a fixed asset.
Tax losses can be carried forward for a five-year period.
For companies - Capital gains are treated as ordinary income subject to corporate income tax.
For foreigner physical persons - The final tax on income from sale of immovable property shall be assessed on the positive difference between the selling price and the documented cost of acquisition of the property debited with 10 per cent expenses. The final tax rate is 10%.
Exemption for foreigner physical persons, EU citizens for tax purpose - Taxability shall not apply to any income acquired during the tax year from the sale or exchange of one residential immovable property, provided that more than three years have elapsed between the date of acquisition and the date of sale or exchange;
The transfer of immovable property is subject to notary, municipal fees and land registry fee. Notary fees are paid on the agreed price pointed in the title deed, but not less than the tax evaluation, with the maximum being BGN 6000.
Tax on the transfer of the property is between 0.1% and 3% on the property value and it is paid to the municipality. The percentage depends on the municipality where the property is located. The property value is the agreed price between the parties, but could not be less than the tax evaluation.
There is land registry fee, which is 0.1% of the price and it is due to the Registry agency.
Tax on donation - First of all no tax shall be levied on any properties acquired by donation between lineal relatives and between spouses. In the rest of the cases tax on donation shall be charged on the assessed value of the transferred property in an amount determined by the Municipal Council as follows: from 0.4 to 0.8 per cent- applicable to donations between siblings and the children of siblings; and from 3.3 to 6.6 per cent- applicable to donations between any persons other than the persons referred to in the previous item.
The owner of a building or a plot is obliged to pay a real property tax. Where a building is built on a State or municipal plot, the value of the plot will also be included in the tax base. 0. The tax is within a range of 0.1 to 2.5 per mille of the assessed value, depends on the municipality.Arable land is exempt from local taxes. In addition to the real property tax, owners also pay waste-collection fees.
The transfer of the right of ownership of land, the creation or transfer of limited rights in rem to land, as well as the letting or leasing of land, shall be an exempt supply.
Moreover the letting of a building or part thereof for residential use to a natural person who is not a merchant shall likewise be an exempt supply
All other real estate transactions are subject to VAT at the uniform rate of 20%. The buyer/lessee is entitled to a VAT refund, provided it is registered for VAT purposes.
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