ARTICLES 
BULGARIA REAL ESTATE TAX SUMMARY
PricewaterhouseCoopers
GENERAL
Bulgaria is a politically stable country, and the introduction of a currency board in 1997 stabilised the country's economy. However, as is the case elsewhere in Central and Eastern Europe, legislation, including that governing real estate, is volatile and subject to frequent change. A foreign investor can invest in properties in Bulgaria either directly or through a local entity. Only Bulgarian-resident individuals and entities can acquire title to land, while non-residents may acquire only buildings and limited rights (e.g., leasehold and construction rights) to land. In some limited cases, acquisition of immovable property by non-residents requires prior permission of the Ministry of Finance. Foreign investors are guaranteed full repatriation of profits resulting from an investment in Bulgaria. The transfer abroad can be made only after the bank effecting the transfer is presented a certificate proving payment of all Bulgarian taxes due.

Investing through a local entity versus direct investment
As indicated above, a foreign investor can invest in properties in Bulgaria either directly or through a local entity. In the case of a direct investment, the tax treatment of the foreign investors depends on whether or not their activities constitute a permanent establishment. The definition of a permanent establishment under Bulgarian law is very broad: the mere fact that a foreign company owns and rents out property in Bulgaria (except where such activity is carried out through an independent agent) may create a permanent establishment under domestic law. The various tax treaties entered into by Bulgaria usually contain a narrower definition of permanent establishment. If the activities of a foreign person owning real property in Bulgaria do not constitute a permanent establishment, the person will be liable for only 15% withholding tax on the rentals and capital gains, unless an even lower rate is applied under a double tax treaty.

Basis of taxation
The taxation of a local entity or a foreign entity which constitutes a permanent establishment is as follows.

Rental income
The basis of the taxable income of a company, investing in Bulgarian real property is the gross income derived from the property less tax-deductible, property-related expenses and depreciation. Such expenses include repairs, maintenance, renovation and similar costs and interest on loans used for the acquisition of the property. A Municipal Tax at a rate of 10% of profits is due. This is then deductible in calculating taxable profits which are subject to a flat corporate tax rate of 15%.

Depreciation
Land itself is not depreciable, although any immovable property affixed thereto is, provided that it is used for the business activities of the company and is booked as a fixed asset. Depreciation for tax purposes is at a rate of 4% per annum, and is usually calculated using the straight-line method. Real estate acquired for purpose of re-selling it is considered as "investment property". As such, it is non-depreciable and is subject to annual revaluation to the market value. In practice, it is often unclear in which situations a property should be treated as an "investment property" rather than as a fixed asset.

Loss carry-forward
Tax losses can be carried forward for a five-year period. Losses cannot be offset against profits from previous years.

Capital gains
Capital gains are treated as ordinary income subject to corporate income tax.

Transfer taxes
Apart from corporate tax, no other direct taxes are levied on the transfer of real property. The transfer is, however, subject to notary and municipal fees. The notary fees are paid on the higher of the market price or the book value of the property at varying rates, with the maximum being BGN 3, 500. In addition, 2% of the market value of the property is paid to the municipality in which the real property is situated.

Local taxes and rates
The owner of a building or a plot is obliged to pay a real property tax. Where a building is built on a State or municipal plot, the value of the plot will also be included in the tax base. The tax is equal to 0.15% of the book value of the property. Arable land is exempt from local taxes. In addition to the real property tax, owners also pay waste-collection fees.

Value Added Tax
Transactions with land and lease of property for residential purposes are exempt from

Value Added Tax (VAT).
All other real estate transactions are subject to VAT at the uniform rate of 20%. The buyer/lessee is entitled to a VAT refund, provided that it is registered for VAT purposes.

FINANCING THE PROPERTY

Debt
Under currency control regulations, a registration with the Bulgarian national Bank is required for loans granted by non-residents to Bulgarian entities. Where the debt financing exceeds the equity financing, deductibility of interest is subject to limitation, which is determined by a particular formula. If the interest costs exceed the allowable limit, the excess is non-deductible. The interest costs not deducted in a given year can be deducted in the subsequent tax period. Interest paid to a foreign lender is subject to a withholding tax of 15%, unless a lower rate is available under a double tax treaty. Upon receipt of a loan denominated in a foreign currency, a local company must re-value its foreign currency liability monthly. The positive or negative differences are accounted for as current financial income or expenses. No additional evaluation is made at the end of the financial year or upon repayment of the loan.

Equity
An equity contribution can be either in cash or in kind. Real property, limited property rights, etc. can be subject to in kind contributions after a special evaluation is performed.

BULGARIA PROPERTY ARTICLES
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Dominique Perrault to design the new City of Sofia
International, News Bg 4/30/2009
Open mall constructed in Burgas for 30 million Euro
Stefan Nikolov, News Bg 11/12/2008
The Bulgarian Real Estate Market Still Major for Investors
Stefan Nikolov, News Bg 10/2/2008
Russians Once Again on the Bulgarian Real Estate Market
Stefan Nikolov, News Bg 9/5/2008
Peak Moment in Bulgarian Real Estate Market
Stefan Nikolov, News Bg 7/22/2008
Golf playground near Ravno pole, Bulgaria
Kristalina Ilieva, News Bg 7/2/2008
Bulgaria Ranks 4th In Construction Growth in EU
Olga Yoncheva, News Bg 6/19/2008
Why Investing in Bulgaria Worths?
Financial Mirror, News Bg 5/22/2008
Equest Sells Hotel “Serdika” in Sofia
Sgrada.com, News Bg 5/16/2008
Russians Invest 30 M EUR Close to Golden Sands Resort
International, News Bg 4/7/2008
Independent: Bulgaria Enchants Britons
Independent: Bulgaria Enchants Britons
Brits Fall for Bulgarian Charms
Brits Fall for Bulgarian Charms
Bulgaria: a darling of the property market
Bulgaria: a darling of the property market
Ski season in Bulgaria’s Pamporovo
Ski season in Bulgaria’s Pamporovo
Snow show with Miss Bulgaria
Snow show with Miss Bulgaria
Bulgarian Ski Resort Property Boom
Bulgarian Ski Resort Property Boom
Backstory: Can you say pied-a-terre in Bulgarian?
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Rogge And Bulgaria’s Prime Minister To Cooperate On Sofia 2014
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Further Plans for Bulgaria's Winter Olympics Host Application
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Bulgaria maps out infrastructure priorities until 2013
Bulgaria maps out infrastructure priorities until 2013
High-Speed Motorway Construction Underway
High-Speed Motorway Construction Underway
Construction in Bansko Resort Limited
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Bulgaria increases transit options
Bulgaria increases transit options
Bulgaria hopes to join the single European currency, the euro, in 2009
Bulgaria hopes to join the single European currency, the euro, in 2009
Bulgaria joins Budget Travel catalogue
Bulgaria joins Budget Travel catalogue
Bulgarian Ski Resort Property Boom
Bulgarian Ski Resort Property Boom
Bansko Introduces Online Avalanche Alert
Bansko Introduces Online Avalanche Alert
Tourism Authority Lands Hand to Sofia 2014
Tourism Authority Lands Hand to Sofia 2014
A Glimpse Upon the History of Stara Zagora
A Glimpse Upon the History of Stara Zagora
Bulgaria seen as attractive ski destination
Bulgaria seen as attractive ski destination
Ski home bargains in Bulgaria
Ski home bargains in Bulgaria
A little place on the piste
A little place on the piste
Sofia 2014 Queues in Bids Power Index
Sofia 2014 Queues in Bids Power Index
Bulgarian Property appeals to sports enthusiasts
Bulgarian Property appeals to sports enthusiasts
International company to invest 90 mln euro in golf course near Kavarna
International company to invest 90 mln euro in golf course near Kavarna
Buying Real Estate in Bulgaria is a Super Bargain
Buying Real Estate in Bulgaria is a Super Bargain
Bulgaria to Impose New Bank Account Numbers by March 1
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Price of Farmland Will Go up by 40% Because of Bulgaria's EU Accession
Price of Farmland Will Go up by 40% Because of Bulgaria's EU Accession
Bulgaria offers attractive property
Bulgaria offers attractive property
Interest toward Bulgarian agriculture sector
Interest toward Bulgarian agriculture sector

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