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Bulgarian Property Investing - For Profit
By Damian Qualter, Fri Dec 9th
Bulgarian Property Investment Tax Basics
The Bulgarian property tax structure may appeal to you if youare sick of paying inflated local fees in your area and arelooking for something better. Many foreign investors and secondhome owners buy property in Bulgaria because the property taxesin Bulgaria are a lot lower than the property taxes in theirlocale. Bulgarian property tax is one of the most popular topicson property forums these days. The information below will helpyou cut through the confusion.
PROPERTY PURCHASE TAX Chances are this will be the firstBulgarian property tax you will come across. When you buyproperty in Bulgaria, the property will be subject to a notaryand a municipal tax. The notary tax is paid on the higher end ofthe market price or the book value of the property. You actualrates will vary and are usually less than 1%. Not to mentionthat 2% of the market value of the property is paid as amunicipal tax. This money eventually goes to the municipality inwhere the property is situated. You will pay these taxes afteryou have signed the notary deed.
ANNUAL PROPERTY TAX All property owners in Bulgaria have to payan annual property tax just like anywhere else. The currentannual tax rate for a house is 0.15% of the capital value of theproperty. 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 awaste-collection tax. The rate for this greatly depends on thelocation and size of the place. The amount of tax that ispayable is usually about £30 a year for rural property and about£100 per year for apartments in the larger city centres. Youmust also think of the non-tax costs when you buy in Bulgaria.If you have an investment apartment in Bulgaria, you areobligated to pay annual maintenance charges and managementcosts. These are much like annual service charges that you mustpay on Apartments in order to cover managing agents as part ofthe upkeep of the common area. These charges will vary accordingto the different types of property.
PROPERTY RENTAL TAX If you rent out your property (sublet orlandlord), then the profits from the rent that you get will betaxed for the accounting year in question. If you live inBulgaria, the tax is assessed in accordance with your tax statusin Bulgaria. This status is based on a table that has differenttax rates. If you are not living there, you will be taxed on aflat rate of 15% on the taxable profit. You will also have toconsider any additional taxes that you have to pay in your homecountry.
COMPANY TAX If you own a company in Bulgaria, you should notethat in January 2005 the rate of income tax for a corporation inBulgaria was reduced from 19.5% to 15%. The tax year in Bulgariaends on the 31st of December. A limited company has no choicebut to file an annual report by the 31st of March. If youincorporated a limited company sp that you could purchase ahouse or land, then there will be no tax liability, as thecompany 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 tosatisfy the authorities that the company was not trading. Thisis a legal requirement that must be accomplished. Accountants inBulgaria can carry out this service at a reasonable cost if youneed it.
VALUE ADDED TAX (VAT) Any actions that involve land and leaseof property for residential purposes are exempt from the VATTax. However if you have purchased a property as a limitedcompany, then when you come to sell your property you may haveto add VAT to your sale price. Right now you must register yourcompany for VAT if the turnover is higher than 50,000 Leva.
VAT in Bulgaria is currently set at 20%. So in effect; it’sactually higher than it is in the UK (17.5%). I would advise youto get a good accountant either in Bulgaria or your home countryto handle these matters for you. Just make sure that theaccountant specializes in overseas property tax.
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