Taxes and fees for buying property in Bulgaria
Maria Plamenova, Thursday, 7 November 2013
This article is part of a series of 8 articles about buying property in Bulgaria. The other articles in the series cover the following topics:
Buying a property comes at a price. The buyers should always consider not only the price they pay for the property but also all the fees and taxes that come with such an investment. Buying property in Bulgaria is no different, that is why the foreigners who have decided to enter the local real estate market should have a clear idea what to expect and what the costs might be.
One of the most significant taxes that come with the purchase of a property in Bulgaria is the so called local tax. Its full name is Tax on the acquisition of property through donation or for consideration. According to the Bulgarian Law on Local Taxes and Fees this local tax should be first paid and only after that the deal can enter the Register of the recordation judge becoming active. The amount of this tax at the moment is 2.5% of the certified material interest. The certified material interest is the price in the deed between the seller and the buyer. In the past a lot of sellers declared a lower certified material interest in order to decrease the amount of the local tax but this creates uncertainty and is not so common any more.
Now comes the question who is responsible to pay the local tax. According to Article 45 of the Law on Local Taxes and Fees the local tax should be paid by the buyer of the property unless otherwise agreed. In case it is agreed that the tax should be divided between the two sides, they are jointly liable. It is also possible that the sides agree for the seller to pay the tax. This comes to remind us that negotiations during the purchase are very important. The buyer and the seller should come to an agreement who will pay the local tax because it is a significant amount of money. The practice shows that usually it is the buyer who pays but there are quite many exceptions of this rule and you as a buyer can use that when negotiating the rest of the terms for the deal. It is good to know that the local tax is not always paid by the buyer of the property.
Another important question when it comes to money is when they should be paid. The local tax is paid at the notary when signing the deal.
Many people know that owning a property is an expensive privilege. This includes the annual taxes and fees. There are two of these in Bulgaria. There is an inhabited house duty that every owner in Bulgaria has to pay annually. It is a percentage of the property tax evaluation and is different for every municipality. Another important expense that should not be underestimated is the garbage collection fee.
In order to calculate the inhabited house duty and the garbage collection fee the authorities use the so called tax base. Every property has a property tax evaluation (tax base) determined according to its location, area, floor, year of construction and many other criteria.
How do you get the property tax evaluation for your property? It is important to know that when it comes to deals with property it is necessary for the seller to present a property tax evaluation. Only the owner of the property can request and receive such evaluation from the authorities. The property evaluation tax is used to determine the inhabited house duty but it is a different percentage for every municipality. The tax varies from 0.1 to 4.5 permil in the different municipality but usually it is 2-3 permil. For example if you have a 50 000 euro apartment in Sofia, you will have to pay around 94 euro inhabited house duty per year. Paying the tax early (by the end of March) results in a 5% discount.
The garbage collection fee is also a permil of the property tax evaluation. Although it is a fee for collecting the garbage produced by the owner and/or users of the property, at the moment it is not determined by the amount of garbage produced. It doesn’t matter if you are living the whole year or just a few weeks in the property, you will pay the same garbage collection fee. So the Bulgarian authorities are thinking of a way to correct this. At the moment though the owners pay between 0,1 and 5 permil every year. In most of the municipalities the garbage collection fee is from 1 to 3.5 permil. We can use the previous example – for a 50 000 euro apartment in Sofia you will have to pay 80 euro garbage collection fee.
Before buying a property in Bulgaria it is always good to have at least approximate idea what the additional costs will be. The local tax that is paid during the purchase is a significant part of these costs but there are other expenses as well – lawyer and notary fees, commission for the real estate agent etc. All those fees and taxes that come with the purchase can be between 8 and 10% of the property price.
This article is part of a series of 8 articles about buying property in Bulgaria. The other articles in the series cover the following topics:
Buying a property comes at a price. The buyers should always consider not only the price they pay for the property but also all the fees and taxes that come with such an investment. Buying property in Bulgaria is no different, that is why the foreigners who have decided to enter the local real estate market should have a clear idea what to expect and what the costs might be.
One of the most significant taxes that come with the purchase of a property in Bulgaria is the so called local tax. Its full name is Tax on the acquisition of property through donation or for consideration. According to the Bulgarian Law on Local Taxes and Fees this local tax should be first paid and only after that the deal can enter the Register of the recordation judge becoming active. The amount of this tax at the moment is 2.5% of the certified material interest. The certified material interest is the price in the deed between the seller and the buyer. In the past a lot of sellers declared a lower certified material interest in order to decrease the amount of the local tax but this creates uncertainty and is not so common any more.
Now comes the question who is responsible to pay the local tax. According to Article 45 of the Law on Local Taxes and Fees the local tax should be paid by the buyer of the property unless otherwise agreed. In case it is agreed that the tax should be divided between the two sides, they are jointly liable. It is also possible that the sides agree for the seller to pay the tax. This comes to remind us that negotiations during the purchase are very important. The buyer and the seller should come to an agreement who will pay the local tax because it is a significant amount of money. The practice shows that usually it is the buyer who pays but there are quite many exceptions of this rule and you as a buyer can use that when negotiating the rest of the terms for the deal. It is good to know that the local tax is not always paid by the buyer of the property.
Another important question when it comes to money is when they should be paid. The local tax is paid at the notary when signing the deal.
Many people know that owning a property is an expensive privilege. This includes the annual taxes and fees. There are two of these in Bulgaria. There is an inhabited house duty that every owner in Bulgaria has to pay annually. It is a percentage of the property tax evaluation and is different for every municipality. Another important expense that should not be underestimated is the garbage collection fee.
In order to calculate the inhabited house duty and the garbage collection fee the authorities use the so called tax base. Every property has a property tax evaluation (tax base) determined according to its location, area, floor, year of construction and many other criteria.
How do you get the property tax evaluation for your property? It is important to know that when it comes to deals with property it is necessary for the seller to present a property tax evaluation. Only the owner of the property can request and receive such evaluation from the authorities. The property evaluation tax is used to determine the inhabited house duty but it is a different percentage for every municipality. The tax varies from 0.1 to 4.5 permil in the different municipality but usually it is 2-3 permil. For example if you have a 50 000 euro apartment in Sofia, you will have to pay around 94 euro inhabited house duty per year. Paying the tax early (by the end of March) results in a 5% discount.
The garbage collection fee is also a permil of the property tax evaluation. Although it is a fee for collecting the garbage produced by the owner and/or users of the property, at the moment it is not determined by the amount of garbage produced. It doesn’t matter if you are living the whole year or just a few weeks in the property, you will pay the same garbage collection fee. So the Bulgarian authorities are thinking of a way to correct this. At the moment though the owners pay between 0,1 and 5 permil every year. In most of the municipalities the garbage collection fee is from 1 to 3.5 permil. We can use the previous example – for a 50 000 euro apartment in Sofia you will have to pay 80 euro garbage collection fee.
Before buying a property in Bulgaria it is always good to have at least approximate idea what the additional costs will be. The local tax that is paid during the purchase is a significant part of these costs but there are other expenses as well – lawyer and notary fees, commission for the real estate agent etc. All those fees and taxes that come with the purchase can be between 8 and 10% of the property price.
All types of property for sale in Bulgaria by private sellers and estate agents. Find your perfect villa, condominium or apartment on the Black Sea coast or in one of the Bulgarian Ski Resorts.
There are certain documents that are a must-read if you wish to or are in the process of buying property in Bulgaria. Check the Land Registry,
Municipality Sketch, planning permissions, latest town plan, property survey, paid-up receipt for the previous owner’s annual property tax an other
documents you will find in this post
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