TAXATION
When registering property ownership amount of state taxes and notarial duty accounts for about 4.5 %, while VAT equals 20%. Upon settlement of transaction the property owner must within two month declare the acquisition in front of the Local taxes and Duties Department of the city hall of the district the property was purchased in. The declaration includes detailed description of the property: construction year, construction materials, structural peculiarities, area, number of levels, and cost.
Taxable base is tax evaluation of the property estimated by the office of Local taxes and Duties Department . Taxation rate is estimated by the City Council (in Bulgarian – 'Общински съвет') of each city and region of Bulgaria. In Bulgaria there is also garbage disposal tax (specific interest in each district) calculated depending on the property cost specified in the notarial deed.
Foreign investors pay all the taxes and duties provided for by the Bulgarian legislation. After the foreign investor provides certificate of payment of taxes and duties provided for by the Bulgarian legislation, the investor has the right to freely use income and revenue on the territory of the Republic of Bulgaria and to transfer income, revenue, and other amounts of money in foreign currency outside the borders of the Republic of Bulgaria without let or hindrance in the following cases:
- revenue – income, dividends, interests on the investments;
- amount of money received upon compulsory purchase of the assets invested for the state requirements;
- liquidation share resulting from discontinuation of activities of the commercial organization with foreign investment;
- amount received upon sale of the property;
- amount received upon compulsory seizure of property of the foreign investor.
Foreign individuals working in the Republic of Bulgaria also use these rights in order to receive their occupational earnings after they have provided certificate of payment of the compulsory taxes and duties. For promotion of foreign investments and priority investment projects there was created the Foreign Investment Agency. It is a state authority affiliated to the government of the Republic of Bulgaria.
In 1993 between the government of the Russian Federation and the government of the Republic of Bulgaria there was signed an Agreement on Avoidance of Double Taxation. Under this Agreement, tax payer can at its own discretion pay certain types of taxes either in Russia, or in Bulgaria (avoidance of double taxation). Agreement on Avoidance of Double Taxation applies to income and property taxes collected in Russia or in Bulgaria, notwithstanding the methods of their collection.
According to the new Law on tax on income of physical persons, item 1 of section 13 provides for the following:
The following revenues are not subject to taxation:
1. Revenues received within fiscal year from sale or replacement of a single property, notwithstanding the date of its acquisition ...
But the same law specifies 'Tax on income of foreign individuals':
Item 1 of section 37: 'final tax, regardless of provisions of section 13 (cited above), shall be collected from the following revenues from the source in Bulgaria, which where accrued/paid to the foreign physical parties:
Т.10 Revenue from sale, replacement or other compensatory transfer of real property'.
Amount of final tax accounts for 10%. Upon sale of firm's property tax of the same volume is collected.
