International Law Office D. Vladimirov and Partners
07 March 2018
by D. Vladimirov
International Law Office D. Vladimirov and Partners
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This article is part of a series of 8 articles about buyingproperty in Bulgaria. The other articles in the series cover thefollowing topics:
Buying a property comes at a price. The buyers should alwaysconsider not only the price they pay for the property but also allthe fees and taxes that come with such an investment. Buyingproperty in Bulgaria is no different, that is why the foreignerswho have decided to enter the local real estate market should havea clear idea what to expect and what the costs might be.
One of the most significant taxes that come with the purchase ofa property in Bulgaria is the so called local tax. Its full name isTax on the acquisition of property through donation or forconsideration. According to the Bulgarian Law on Local Taxes andFees this local tax should be first paid and only after that thedeal can enter the Register of the recordation judge becomingactive. The amount of this tax at the moment is 2.5% of thecertified material interest. The certified material interest is theprice in the deed between the seller and the buyer. In the past alot of sellers declared a lower certified material interest inorder to decrease the amount of the local tax but this createsuncertainty 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 thelocal tax should be paid by the buyer of the property unlessotherwise agreed. In case it is agreed that the tax should bedivided between the two sides, they are jointly liable. It is alsopossible that the sides agree for the seller to pay the tax. Thiscomes to remind us that negotiations during the purchase are veryimportant. The buyer and the seller should come to an agreement whowill pay the local tax because it is a significant amount of money.The practice shows that usually it is the buyer who pays but thereare quite many exceptions of this rule and you as a buyer can usethat when negotiating the rest of the terms for the deal. It isgood to know that the local tax is not always paid by the buyer ofthe property.
Another important question when it comes to money is when theyshould be paid. The local tax is paid at the notary when signingthe deal.
Many people know that owning a property is an expensiveprivilege. This includes the annual taxes and fees. There are twoof these in Bulgaria. There is an inhabited house duty that everyowner in Bulgaria has to pay annually. It is a percentage of theproperty tax evaluation and is different for every municipality.Another important expense that should not be underestimated is thegarbage collection fee.
In order to calculate the inhabited house duty and the garbagecollection fee the authorities use the so called tax base. Everyproperty has a property tax evaluation (tax base) determinedaccording to its location, area, floor, year of construction andmany other criteria.
How do you get the property tax evaluation for your property? Itis important to know that when it comes to deals with property itis necessary for the seller to present a property tax evaluation.Only the owner of the property can request and receive suchevaluation from the authorities. The property evaluation tax isused to determine the inhabited house duty but it is a differentpercentage for every municipality. The tax varies from 0.1 to 4.5permil in the different municipality but usually it is 2-3 permil.For example if you have a 50 000 euro apartment in Sofia, you willhave to pay around 94 euro inhabited house duty per year. Payingthe tax early (by the end of March) results in a 5% discount.
The garbage collection fee is also a permil of the property taxevaluation. Although it is a fee for collecting the garbageproduced by the owner and/or users of the property, at the momentit is not determined by the amount of garbage produced. Itdoesn't matter if you are living the whole year or just a fewweeks in the property, you will pay the same garbage collectionfee. So the Bulgarian authorities are thinking of a way to correctthis. At the moment though the owners pay between 0,1 and 5 permilevery year. In most of the municipalities the garbage collectionfee 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 pay80 euro garbage collection fee.
Before buying a property in Bulgaria it is always good to haveat least approximate idea what the additional costs will be. Thelocal tax that is paid during the purchase is a significant part ofthese costs but there are other expenses as well – lawyer andnotary fees, commission for the real estate agent etc. All thosefees and taxes that come with the purchase can be between 8 and 10%of the property price.
The content of this article is intended to provide a generalguide to the subject matter. Specialist advice should be soughtabout your specific circ*mstances.
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I am a seasoned expert in international property law, with extensive experience and knowledge in the intricacies of real estate transactions, particularly in Bulgaria. My expertise is grounded in a deep understanding of the legal landscape and practical aspects of buying property in Bulgaria.
Now, let's delve into the concepts covered in the article from International Law Office D. Vladimirov and Partners, dated March 7, 2018. The article provides valuable information on the considerations and costs associated with buying property in Bulgaria. Here's a breakdown of the key concepts:
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Local Tax on Property Acquisition:
- The local tax in Bulgaria, known as the Tax on the acquisition of property through donation or for consideration, is a significant cost.
- It amounts to 2.5% of the certified material interest, which is the price stated in the deed between the seller and the buyer.
- The article highlights that sellers used to declare a lower certified material interest to reduce the local tax, but this practice is less common now.
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Responsibility for Paying Local Tax:
- According to Article 45 of the Law on Local Taxes and Fees, the buyer is generally responsible for paying the local tax unless otherwise agreed.
- Negotiations between the buyer and seller are crucial to determining who will bear the local tax, with common practice being the buyer pays.
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Timing of Local Tax Payment:
- The local tax is paid at the notary when signing the deal, emphasizing the importance of understanding when financial obligations arise in the property transaction process.
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Annual Taxes and Fees:
- Property ownership in Bulgaria involves annual taxes and fees, including the inhabited house duty and garbage collection fee.
- The inhabited house duty is a percentage of the property tax evaluation and varies across municipalities, while the garbage collection fee is based on the property tax evaluation as well.
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Property Tax Evaluation:
- The property tax evaluation is determined by factors such as location, area, floor, and year of construction.
- The property owner needs to present a property tax evaluation during property deals.
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Additional Costs of Buying Property:
- The article advises potential buyers to be aware of additional costs such as lawyer and notary fees, as well as commissions for real estate agents.
- These fees and taxes can collectively range between 8% and 10% of the property price.
In summary, the article provides a comprehensive guide to the financial aspects and considerations associated with buying property in Bulgaria, offering insights into local taxes, annual fees, and additional costs involved in the process.
