Bulgaria: Taxes and Costs

Bulgaria: Taxes and Costs

EFFECTIVE TAX RATE ON RENTAL INCOME MONTHLY INCOME €1,500 10% €6,000 10% €12,000 10%     Click HERE for worked sample. SOURCE: Read disclaimer Income Tax Gross rents payable to non-residents are withheld at source at 10%. Deductions are not allowed for non-residents. Real Estate Tax Real estate tax is around 0.15% of the sale/purchase price of the property to be paid quarterly in the end of months March, June, September and November. Alternatively, the taxpayer can pay his real estate dues in one installment to avail himself of a discount. Corporate Route It is forbidden for non resident individuals to buy land in Bulgaria unless they register as a trade company. Rental income of companies engaged in leasing real estate is taxable at a corporate income tax of 15% on net rental income. Expenses from depreciation, maintenance, repairs, renovations and interest from loans used to acquire the property are deductible from the gross income to arrive at the net rental income. Depreciation rate for tax purposes is 4% per annum. Municipal Tax Profits from leasing are taxed at 10% by the municipality where the property is located. Withholding Tax Foreign companies not operating under a permanent establishment in Bulgaria is subject to a withholding tax rate on their gross rental income of 15%. Capital Gains Tax Sale of real estate by non-residents in Bulgaria is subject to 15% withholding tax on the net gains received. The inflation adjusted acquisition price or the taxable value of the property for the purpose of real estate tax, whichever is higher, is deductible from the selling price. Properties owned for more than five years are not taxable. Properties which have served as primary residence for at least three years are exempt from capital gains tax. Properties owned for more than five years are also not taxable. Corporate Route Capital gains of non-resident corporations are taxed as a regular income at the rate of 15%. The taxable gains are computed by deducting the inflation-adjusted acquisition price or the taxable value of the property for the purpose of real estate tax, whichever is higher, from the sales proceeds. VAT Selling property in Bulgaria is subject to 20% VAT, usually already included in the selling price. Individuals and corporations who are VAT-registered are entitled to a VAT refund.

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