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Bulgarian Property Tax

How Low Is Low?

Tired of the property taxes in the UK? The Bulgarian property tax structure may appeal to you. Many UK investors and second home owners buy property in Bulgaria because the property taxes in Bulgaria are a lot lower than the property taxes in the UK.

Property tax in Bulgaria is one of the most popular topics on property forums. The information below cuts through the confusion.

Property Purchase Tax

Most likely, this will be the first Bulgarian property tax you will come across. Your purchased property will be subject to a notary and a municipal tax.

The notary tax is paid on the higher of the market price or the book value of the property. Rates vary and are typically less than 1%. In addition, 2% of the market value of the property is paid as a municipal tax. This money goes to the municipality in which the property is situated. You pay these taxes after you have signed the notary deed.

Annual Property Tax

All property owners pay an annual Bulgarian property tax. The current annual tax rate for a house is 0.15% of the capital value of the property. So, if a house cost £20,000 on purchase, the annual Bulgarian property tax payable would be £30.

In addition to this tax, owners also pay a waste-collection tax. The rate depends on the location and size of the dwelling. The amount of tax payable is usually about £30 per year for rural property and about £100 per year for apartments in city centers.

Consider also non-tax costs. If you have an investment apartment in Bulgaria, you must pay annual maintenance charges and management costs. These are similar to annual service charges payable on UK flats to managing agents as part of the upkeep of the common area. These charges will vary according to the different types of property.

Property Rental Tax

If you rent out your property, then the profits from the rent received will be taxed for the accounting year in question. If you live in Bulgaria, the Bulgarian property tax is assessed according to your tax status in Bulgaria. This status is based on a table with different tax rate bandings. If you are a non-resident, you will be taxed on a flat rate of 15% on the taxable profit. You will also need to consider any additional tax payable in your home country.

Company Tax

If you own a company in Bulgaria, note that in January 2005 the rate of income tax for a corporation in Bulgaria was reduced from 19.5% to 15%. The tax year in Bulgaria ends on December 31. A limited company must file an annual report by March 31.

If you incorporated a limited company to purchase a house or land, then there will be no Bulgarian property tax liability, since the company was not trading. However, you still must submit company accounts to the Companies’ House Register in Bulgaria every year to satisfy the authorities that the company was not trading. This is a legal requirement. Accountants based in England can carry out this service at a reasonable cost of around £150.

Value Added Tax (VAT)

Transactions involving land and lease of property for residential purposes are exempt from Value Added Tax. However if you have purchased a property as a limited company, then when you come to sell your property you may have to add VAT to your sale price.

Currently you must register your company for VAT if the turnover (over the last 12 months) exceeds 50,000 leva (£17,600).
VAT in Bulgaria is currently set at 20%, so it’s actually higher than it is in the UK (17.5%).

I am not qualified to provide personal taxation advice. My advice is to get a good accountant either in Bulgaria or your home country. Be sure that the accountant specializes in overseas property tax.