Bulgarian Property Tax

provided by "Property Tax International",

tel. 1890 931 931, +353 (0) 56 7794555,

12-14 College Green, Dublin 2.

Non Resident in Bulgaria

Non-residents are taxed in Bulgaria on income arising from Bulgarian sources only and are liable to a number of other property related taxes outlined below.

An individual is considered resident in Bulgaria if s/he spends 183 days or more in any tax year (calendar year) in Bulgaria. Non-residents may also be liable for tax on the same source of income in their home country of residence, where taxes are levied on worldwide income. Relief for double taxation may apply.

In Bulgaria, land cannot be purchased by a non-resident, only buildings. Where a foreigner wishes to purchase land, s/he must do so in a Bulgarian registered company. The building can be acquired in an individuals own name or through a Bulgarian company. The legal structure adopted when purchasing property in Bulgaria will determine what taxes apply.

BULSTAT Identification code

Foreign individuals, who do not have Personal Identification Number (PIN) or Personal Foreigner's Number (PFN) and own property in Bulgaria, are obliged to register in the BULSTAT Register to get an Identification code within 7 days of purchasing the property. Individuals are issued a Registration certificate.

When a Bulgarian company is set up, within 7 days of the issuance of the Court registration, a BULSTAT registration should be made to receive an Identification code (code under BULSTAT). The Company is issued an Identification card.

Income Tax - Individual

Rental income for a non-resident landlord is subject to 15% withholding tax on gross rents. No deduction is allowed for costs incurred. As a landlord/lessor, you are obliged to pay Bulgarian withholding tax to the Tax Authorities by the end of the month, following the month, when any income has been received.

If you are leasing to a company, it is the company’s obligation to withhold any due tax from the rent and pay it over to the Tax Authorities. You should seek proof of taxes paid. If you are Irish Resident you must also declare your Bulgarian rental income to the Tax authorities in Ireland and pay personal income tax on any income earned. There is a double taxation agreement (DTA) between Ireland and Bulgaria and therefore credit for Bulgarian income tax paid is given against Income Tax payable in Ireland.

Corporate Income Tax

If you purchase property through a Bulgarian company, you will be required to pay corporate income tax in Bulgaria at 15%, calculated on the financial results. Unlike for an individual full deduction will be given for eligible costs incurred in connection with the property. The Company is obliged to make preliminary tax instalments quarterly and an annual tax return should be filed together with the annual financial statements by 31 March of the year following the respective calendar year.

If/when the Company distributes to you the profit as dividend, it will be taxed in Bulgaria. The withholding tax payable on dividends paid to an Irish resident individual is 7%.

You will need to declare this income in Ireland also. Relief for withholding tax will be given against Irish tax payable on the Bulgarian dividend.

Capital Gain Tax

When you sell your Bulgarian property, capital gains tax at 15% is payable on any increase in value since acquisition. If sold by an individual, any capital gains tax paid in Bulgaria can be offset against capital gains tax payable in Ireland on the same gain.

The gain is calculated on the difference between the sales price and the higher of the tax estimation and the price of acquisition (per Notary Deeds), corrected by the inflation index.

Inheritance and Donations Tax

Inheritance tax is payable by non-resident beneficiaries on certain transferred assets in Bulgaria. In Bulgaria the tax percentage depends on the relationship between the parties and the size of the inheritance/donation. The lineal heirs are completely exempt from inheritance and donations tax. For all other beneficiaries the tax percentages (0.7 or 5%) apply only on inherited/donated property with tax evaluation above 125,000 Euro.

VAT

The VAT rate in Bulgaria is 20% on property purchases. VAT applies when you purchase a property from a company that is registered for VAT.

Transfer fees (equivalent to stamp duty)

Upon the Notary verification of the property purchase deal you will be required to pay Local tax/transfer fees of 2% and State Entry fee of 0.1% on the purchase price (Per Notary deeds).

Local taxes - Inhabited house duty and Waste collection duty

Within 2 months of purchasing the property, a declaration of the purchase must be made to the Bulgarian Tax office. Once registered, local taxes will become payable. The payment of local charges should be made quarterly throughout the year 31 Mar, 30 Jun, 30 Sept & 30 Nov..

Inhabited house duty is calculated at 0.15% of the Tax evaluation of the property (defined each year). The Waste Collection duty is calculated at 0.16% of the property’s tax evaluation value. A 5% discount applies if the full annual amount is payable by 31 March.

Property Tax International can organise the completion and filing of your Bulgarian tax returns in addition to advising on your property tax obligations in your home country.