Taxes

Taxes and fees on buying a property

The additional costs when buying a property can be high, and they are often not mentioned in the sales material. In a resent study by EUBankers.Net the transaction costs in offshore property transactions were calculated, including taxes, fees and charges. South Korea is leading the statistic, with 22.08% additional costs (mainly due to a 10% VAT on all property transfers). Italy has 17% additional costs, France 16.30, Greece 15.48, Portugal 13.65 and Spain 12.16.

Bulgaria is not part of the study, but we can give the following information:

  • Property tax: 0.15% of purchase price
  • Local tax: 2.00% of purchase price
  • Notary fee:
    • on purchasing prices from 500 to 5,000 Euro: approximately 15 Euro + 1% on the amount over 500 Euro,
    • to 200 Euro + 0.1% on the amount over 50,000 Euro.
  • Agents fee: Property agents commission is normally 3% on selling price, but can be higher if more services are included.
  • Lawyers fee: A lawyer is not obligatory, but highly recommendable. Fee for making a search about 1% of purchase price.

The agents are often quoting 6% additional costs on the very low priced Bulgarian property.

Taxes on setting up a company

If you are buying a property that also consists of land, you can still only do this over a Bulgarian company. Under any circumstances it may be convenient to register you property in the name of a company with yourself as only shareholder and director.

To set up such a company is a very simple process and will have cost you between 500 and 750 Euro after you have got back the initial deposit, in taxes, fees and lawyers charges.

Yearly local taxes and charges

The annual local rates are 0.15% of the book value of the property. For a house with plot in a village the total tax could be approx. 3 Euro per year. In addition comes 0.50% waste collection fees.
Yearly property tax is 0.25% of purchase price.

Income taxes

A non-resident, foreign property owner in Bulgaria must pay income tax on what he earns in that country, meaning from rental income and capital gains by sale. From the rental income can be deducted repairs, maintenance, renovation and interest on loans for acquiring the property. The tax is 10%. However, if you have purchased a property over a company, you will be subject to company tax instead of personal income tax.

You are considered a fiscal resident in Bulgaria if you have a residence permit in the country, but also if you spend more than 183 days per calendar year there, if you carry out paid work or business activities or if Bulgaria is your centre of economic interest. It may be that your home country has another opinion on where you should pay taxes, and the conflict must be settled according to tax treaties between the countries.

The income tax rates are very modest. You can earn up to 2,160 Leva (1 Euro is approximately 2 Leva) without being taxed, on an income from 2,160 to 3,000 Leva you pay 20% tax, from 3,001 to 7,200 Leva the rate is 22, and for income over 7,200 Leva you pay the top rate that is 24%. Allowances and deductions are few and small.

A resident living from a pension is exempt from income taxes in Bulgaria

Capital Gains tax for non-resident owners is 10% of the profit (difference between declared purchasing price and declared sales price, deducting 10% as expenses). But there is no Capital Gains tax if the owner is selling only one property during a calendar year and has been sitting more than 5 years with the property.

For residents, the Capital Gains tax is levied at 15% on increases in the value of the property

Company taxes are 15%.

The VAT in Bulgaria is 20%, with certain exceptions. Transactions with land and lease of property for residential purposes are exempt. In the cases where property is not exempt, the VAT is normally baked into the sales price.

Wealth tax is not charged in Bulgaria.