Tax on property income in Bulgaria
December 05, 2016
Effective Tax Rate on Rental Income
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Nonresidents are liable to pay tax on their Bulgarian-sourced income. Joint taxation is not allowed and married couples are taxed separately.
Income earned by nonresidents is taxed at a flat rate of 10%. Deductions are not allowed for nonresidents.
Tax on gross rents payable to nonresidents is withheld at source at 10%. Tax due must be remitted monthly unless a tax treaty between Bulgaria and the foreign country exists whereupon tax may be remitted quarterly.
Capital gains realized by nonresident individuals from the sale of Bulgarian property are taxed at 10%. The taxable capital gains is 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, and incidental expenses (maximum of 10% of the selling price or fair market value of the property).
The following capital gains are exempt from taxation:
- Disposal of one residential property, provided that the property was held for more than three years before it was sold
- Disposal of a maximum of two real estate properties, provided that the property was held for more than five years before it was sold
Capital gains derived from the sale of properties acquired by inheritance are not subject to tax. Capital gains derived from the sale of properties received as gifts are taxed on the gross receipts because the acquisition price of the donation is deemed to be zero.
VALUE ADDED TAX(VAT)
Land transaction sales and leasing residential properties are exempted from VAT.
Real Estate Tax
Owners are liable to pay real estate tax on their Bulgarian property. The tax base is the assessed value of the property as calculated by the local tax authorities. The tax rates are set by the municipalities where the property is located and may vary between 0.1% and 0.45%.
Income and capital gains by corporations are taxed at a flat rate of 10%. Income-generating expenses are deductible in computing taxable income. Corporate income tax must be remitted on or before 31 March of the succeeding year.