Property Taxes

The tax is nonrefundable and gratuitously (not connected to direct benefit) payment imposed unilaterally by a general form of the State, element of budgetary income, which together with other revenues is allocated to meet public needs. It is imposed to certain groups of objects or persons. In an absence of a voluntary payment it is collected forcibly from the property taxpayers.

Parts of the Bulgarian tax system are the property taxes. Subject to taxation is the property / wealth / of the citizens. These taxes are local taxes with municipal meaning. The real estate properties are assessed with taxes in quantitative and qualitative aspects. Individual qualities like income and solvency of the taxpayer are not regarded. They used to finance the production of so-called "Domestic goods" that are public goods provided by Municipalities. Until the late 19th century direct property taxes were the most important profit income of the State budget. At the moment they have secondary meaning. Direct property taxes have some shortcomings. This is the reason for their secondary role in modern tax systems. The main shortcoming is the gap between the object of taxation (property) and the source of the payment (income). Direct property taxes are based on tax valuation of the property (based on regulations of the Ministers and the Parliament). Through direct property taxes double taxation is done- once the property is levied and owners pay property tax, then they pay tax over their income, but these benefits have already been subject to income tax. Irrespective these weaknesses have not disappeared in modern tax systems and are deemed to complement the progressive income taxation and have social significance. These taxes are presented as personal because are paid by the owners or users of the property.

Direct property taxes can be subdivided as Periodic (over a real estate property) and Lump sum (over inheritance).

Taxes on property and all other taxes, implement fiscal, social and economic-regulatory function.Property taxes are not affected by changes in economic situation in the state.

In our country there are the following property taxes: property tax, inheritance tax, gift tax, transfer tax and property tax over the regulated land.

Initially property tax is paid with the acquisition of the property. This tax is called local tax. The money goes in the municipal budget in the Municipality where the property is located. The value of the local tax is determined by the Municipal Council and it is different in the different Municipalities. But it can`t be less than 2% of the value of the property`s price. Active entity in this relation is the Country which has transferred this power to Municipalities. Passive entity is the owner of the property. Beside the local tax, when transferring an ownership of a property there are notary fees that have to be paid. This fee is paid to the notary for completing the bargain. The amount is the same in all the regions in the Country, but is calculated by a special formula based on the transaction value. If the notary is registered for VAT (as it is in the general), the size of the notary fee will be with 20% VAT over.

Registration fee. This fee is paid to the Property Register at the Registry Agency. The amount of the registration fee is the same in the different regions of the Country and is fixed at 0.1% of the transaction, respectively the tax assessment. In any case it is advisable when preparing a deal to hire a lawyer.

After acquiring a property, the person physical or legal entity, shall submit a tax declaration for newly acquired property. Based on the information referred to in this declaration and tax valuation of the property the annual tax will be calculated. The annual property tax includes property tax and tax for collecting the rubbish. It is owed no matter if the property is used or not, which means that the tax on property is not related to profit. Tax is paid for buildings and land in regulation; agricultural land owners do not pay annual property tax.

Tax is paid also when inheriting a property. Taxpayers or their legal representatives shall, within 6 months after they inherit to submit a declaration in the Municipality at the last residence of the deceased, and if the latter had resided abroad, the declaration is submitted where most of his properties are located.

Taxable persons describe in the declaration the inherited property type, location and valuation. The Municipality Council sets with Regulation the amount of the tax for each heir or legatee within the limits set by the Local Taxes and Fees Act.

Donations have their special place in taxation. They are not a result of a economic or business process. Donations, however are subject to local (municipal tax), the rule is that the taxpayer is the gifted. However, the parties may agree that the tax is due from both parties who are jointly guaranty. Also, parties may agree that the tax is due by the transferor. In this case the other party is voucher. The tax has to be paid within two months of transferring the property, in the Municipality, where the property is located.

Tax is paid also when a property is given for rent. It is 15% of the income, after deduction of the statutory expenses.

When a profit is made, after selling a property the tax that has to be paid is 10% of the profit .There are some exceptions from this rule, of course. This tax is not paid in some specific cases. The income from the tax year is not assessed, when there is a period of more than 3 years from the date of acquisition and the date of resale. If the owner has more than one property and wants to avoid paying tax profit, when reselling them, he has to wait at least 5 years until the resale. The income from annuity, lease and property, restituted under a legal act, is not assessed by taxes.