Bulgarian property tax is one of the most popular topics. The information below cuts through the confusion.
Most likely this will be the first Bulgarian property tax you will come across. (Well, after registering the company tax, of course :) (And definitely not the last :) The 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. Sometimes the sellers want to declare a lower price in the documents, because they don't want to pay high taxes. This is generally better for you as well, because you will pay less too. But make sure a solicitor looks over the deal.
Every property owner in Bulgaria pays an annual 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 €50,000 on purchase, the annual Bulgarian property tax would be €75.
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 is usually about €45 per year for rural property and about €150 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. This is a sum you pay for cleaning the common parts, sometimes security, etc. These charges will vary according to the different types of property. In the resorts for example, you will pay between €6 and €12 per m2 per annum.
If you rent out your property, then the profits from the rent received will be taxed for the accounting year. If you live in Bulgaria, the 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.
If you own a company in Bulgaria, you will have to pay a company tax. The tax year in Bulgaria ends on the 31 December. A limited company must file an annual report by the 31 March.
If you have incorporated a limited company to purchase a house or land, then there will be no tax liability, as 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.
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 €25 000.
VAT in Bulgaria is currently set at 20%.
And in the end - the best advice is to hire a professional accountant to look after you books and explain you the tax system better - laws change often, taxes too.