| Bulgarian
Property Investment Tax Basics
The Bulgarian property tax structure may appeal
to you if you are sick of paying inflated local fees in your
area and are looking for something better. Many foreign investors
and second home owners buy property in Bulgaria because the
property taxes in Bulgaria are a lot lower than the property
taxes in their locale. Bulgarian property tax is one of the
most popular topics on property forums these days. The information
below will help you cut through the confusion.
PROPERTY PURCHASE TAX Chances are this will
be the first Bulgarian property tax you will come across.
When you buy property in Bulgaria, the property will be subject
to a notary and a municipal tax. The notary tax is paid on
the higher end of the market price or the book value of the
property.
You actual rates will vary and are usually
less than 1%. Not to mention that 2% of the market value of
the property is paid as a municipal tax. This money eventually
goes to the municipality in where the property is situated.
You will pay these taxes after you have signed the notary
deed.
ANNUAL PROPERTY TAX All property owners in
Bulgaria have to pay an annual property tax just like anywhere
else. The current annual tax rate for a house is 0.15% of
the capital value of the property. So for example, if a house
cost 20,000 on purchase, the annual Bulgarian property tax
payable would be 30.
Aside form this tax; the owners also have
to pay a waste-collection tax. The rate for this greatly depends
on the location and size of the place. The amount of tax that
is payable is usually about £30 a year for rural property
and about £100 per year for apartments in the larger
city centres.
You must also think of the non-tax costs when
you buy in Bulgaria. If you have an investment apartment in
Bulgaria, you are obligated to pay annual maintenance charges
and management costs. These are much like annual service charges
that you must pay on Apartments in order to cover 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
(sublet or landlord), then the profits from the rent that
you get will be taxed for the accounting year in question.
If you live in Bulgaria, the tax is assessed in accordance
with your tax status in Bulgaria. This status is based on
a table that has different tax rates. If you are not living
there, you will be taxed on a flat rate of 15% on the taxable
profit. You will also have to consider any additional taxes
that you have to pay in your home country.
COMPANY TAX If you own a company in Bulgaria,
you should 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 the 31st of December. A limited
company has no choice but to file an annual report by the
31st of March.
If you incorporated a limited company sp
that you could purchase a house or land, then there will be
no tax liability, as the company was not trading at the time
of the purchase. However, you still have to submit company
accounts to the Companies' House Register in Bulgaria every
year if you are going to satisfy the authorities that the
company was not trading.
This is a legal requirement that must be accomplished.
Accountants in Bulgaria can carry out this service at a reasonable
cost if you need it.
VALUE ADDED TAX (VAT) Any actions that involve
land and lease of property for residential purposes are exempt
from the VAT 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. Right now you
must register your company for VAT if the turnover is higher
than 50,000 Leva.
VAT in Bulgaria is currently set at 20%. So
in effect; it's actually higher than it is in the UK (17.5%).
I would advise you to get a good accountant either in Bulgaria
or your home country to handle these matters for you. Just
make sure that the accountant specializes in overseas property
tax.
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