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, buyers 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 % to 4% of the value of the property to be purchased depending on the policy of each municipality (usually the tax rate is 2,5 %). For example, if the purchase price of the property is EUR 100 000 EUR and the tax rate is 2,5 % of EUR 100 000, the property transfer tax will amount to EUR 2500. 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 (NNAA). 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 BGN
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
The VAT due is 20 % after the paid taxes and fees for the transfer have been discounted.
There is no VAT on land transfer deals. 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. Thus the total transfer expenses related to the purchase of a property are approximately 3% of the price of the property and include the property transfer tax, the Notary fee and the Land registry gee.
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 notarial deed for transfer of property
2.Documents identifying the participants in the proceedings
3.Letter of authorization if agent represent one of the parties
4.Documents certifying the property right
5.Declarations by the parties certifying their civil, marital and property status
6.Declaration by the person who acquire the property certifying the origin of the funds, in case the value of the estate is over 15000 euros
7.Declaration by the interpreter that his translations are reliable
8.Certificate for tax assessment and paid taxes
9. 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. If the owner fails to keep this obligation the respective municipality is starting an executive procedure against the owners and imposing a burden over the property for collection of the debt. Finally, the amount due increased several times including the bailiff and attorney fees.

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.

This article was created by Valova&Angelova law firm.