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The purchase of a property in Bulgaria as a non resident, and being a resident there, involves a series of fiscal obligations which must be met:

V.A.T.
The Value Added Tax Act (VAT Act) currently in force is effective as from 1
January 1999. Although Bulgaria is not a member of the European Community, the VAT legislation in many aspects follows the provisions of the Sixth VAT Directive.

VAT is chargeable on the sale of real estate in Bulgaria. But this is usually included in the purchase price of the property, so this is something to be analysed in detail for the total cost of purchasing a property.

TAX ON REAL ESTATE
Owners of real estate in Bulgaria are liable to pay an annual tax on the value of their real estate.

The rate varies depending on whether the real estate is used for residential or commercial purposes.

The rate for residential purposes is fixed by the local authorities. This tax is payable at the beginning of each year.

These taxes are usually up to the equivalent of 150€ per year, and are lower in local areas.

WEALTH TAX:
There is no wealth tax in Bulgaria.

3.4. CAPITAL GAIN TAX

Capital gains are usually taxed as income (15% on profits); however the following assets are exempt:
• The taxpayer’s main residence, provided it has been his main residence for at least 3 years.
• Two properties which have not been the taxpayer’s main residence, if owned for at least five years.
• Any number of agricultural and forest estates, provided they have been owned for at least 5 years.
• Cars and other road vehicles, aircrafts and vessels owned for at least one year.
• Assets received by inheritance or gift.
• Certain types of movable property, including shares in Bulgarian quoted company.

INCOME TAX FOR INDIVIDUALS
An individual in Bulgaria liable for tax on his income as an employee as well as on income as a self-employed person. Bulgarian law distinguishes between resident and non-resident taxpayers.

RESIDENTS: irrespective of their citizenship, are deemed those persons who have their permanent domicile in Bulgaria or reside in the country more than
183 days in any 365 days’ period (in this case the individual becomes a resident taxpayer for the calendar year in which the 183-day threshold is exceeded). Resident taxpayers are taxed on their worldwide income.

NON-RESIDENT: are liable only for their income derived from Bulgarian sources.

The law provides for specific treatments of such types of income as royalty payments and technical services fees, interest payments, income received by independent contractors and freelancers, rentals, income of managers and board members, etc.

CORPORATE TAX
The companies are liable for this ta x on its income. From 2005, standard corporate tax in Bulgaria is 15%.

A special tax rate is applicable for companies dealing in insurance as well as companies engaged in games of chance and gambling.

TYPES OF CORPORATIONS
In Bulgaria, the following are accepted forms of incorporation:
1st. A limited liability company (with the suffix OOD)

- At least 1 shareholder or more is required to set up the company. The shareholders may be individuals or companies.
- The minimum share capital is BGL 5.000, with the minimum nominal value of BGL 10 a share.
- At least 70% of the capital must be paid up before registration.
- The owners of the company are liable only for the amount of capital invested.
- An annual shareholders' meeting must be convened at least once a year.
- A director must be appointed for the company.

2nd. A liability company with a single shareholder (with the suffix
EOOD)

- This is an OOD company owned by one individual, who may be a foreign resident.
- The single shareholder may serve also as a director of the company.

3rd. A consolidated company (with the suffix AD)
- At least 1 shareholder or more is required to set up the company.
- The minimum share value is BGL 1.
- The company must have a minimum registered capital of BGL 50,000. For banks, the minimum capital requirements are BGL 10 million.
- At least 25% of the registered capital must be paid up before registration.
- The company is managed by a board of management, or at two levels by 'a supervisory board' and a 'board of management'.

4th. A consolidated company with a single shareholder (with the suffix
EAD)
- The company is owned and controlled by a single shareholder.
- It is compulsory to file an annual balance sheet with the tax authorities.

DEDUCTION OF TAX AT SOURCE
Taxation of Employee
An employer is obligated to deduct tax at source from an employee and to make additional contributions to social security.

Bulgaria Social Security
In 2006 as regards to salaried employees, the social security rates are:
Employer 23.6%-24.3%
Employee 12.3%
Other deductions:
Tax must be deducted at source from the following payments on the basis of the following:
- Dividend - The standard deduction is 7%.
- Interest - the standard rate of tax deducted at source - 15%.
- Royalties - the standard rate of tax deducted at source - 15%.

- Payments to company managers and directors - 15% deduction at source. Comment: Tax deducted at source in respect of foreign residents is subject to the Double Taxation Prevention Treaty.

INHERITANCE AND GIFTS TAX
The Bulgarian Law distinguishes between residents and non residents. RESIDENTS: are liable to inheritance tax on property situated in both Bulgaria and overseas.

NON-RESIDENT: are liable to inheritance tax only on properties situated in
Bulgaria.
In both cases, is the recipient who pays the tax.

From 2005, inheritances received by the surviving spouse and direct relatives will be exempted.

Brothers, sisters, nieces and nephews who inherit will pay inheritance tax at
0.7% on amounts received above BNG 250,000.

All other beneficiaries pay inheritance tax at rates up to 20%.

Gifts tax is payable at fixed rates depending on the relationship between the donor and the donee. Spouses and direct line inheritors are exempt. Gifts between brothers and sisters are taxable at 0,7%, and 5% for all other beneficiaries.

 REPORTING DATES AND PAYMENT
- The tax year in Bulgaria is the year ending on December 31.
- A limited company files an annual report by March 31. An individual must file an annual report by April 15.
- Companies that finished the previous year with a profit pay 12 monthly advance payments in the following year.
- New companies make 4 quarterly advance payments.
 

With this guide, we do not intend to replace the need for the specialised and personalised attention you must demand from one of our qualified professionals you will contact if you wish to buy a property in Bulgaria. Our aim is to provide a general step - by-step idea of the basic questions you must keep in mind in this important and sometimes delicate process; in order to guarantee a safe transaction, with no unexpected surprises.