According to Bulgarian law, the sale of real estate is treated as a source of income. Therefore, it is critically important to be aware of the taxes due. taxes on the sale of property. The standard rate of taxation for this type of income is 10%. The good news, however, is that the Personal Income Tax Act (PITA) has provided for a number of exceptions and "loopholes" that completely exempt you from this obligation if you meet certain conditions.
In this fourth part of our Seller's Guide, we will look in detail at how the taxable amount is formed, when the state will not take a penny from you, and what are the specifics for foreign property owners in Bansko.
1. The Golden Rule: ONLY Profit is Taxed
The most common misconception among sellers is the fear that they will have to pay 10% on the entire amount received from the buyer. This is categorically not true. Tax is due only on the positive difference between the price at which you sell today and the price at which you acquired the property in the past (plus deducted statutory costs).
Taxable income = (Sales price – Acquisition price) – 10% statutory expenses.
Tax due = Taxable income x 10%.
Example:
Let's say you purchased a studio in Bansko in 2022 for the amount of 30,000 euros.
Today, in 2024, you sell it for 45,000 euros.
Your gross profit is 15,000 euros.
From these 15,000 euros, you deduct 10% statutory recognized expenses (1,500 euros), which leaves a tax base of 13,500 euros.
You owe 10% tax on this amount, which is equal to 1,350 euros.
Important: If you sell the property at a loss (at a price lower than or equal to the one at which you bought it), you do not realize income and therefore do not owe any tax.
2. When are you FULLY exempt from tax when selling a property?
The law is favorable to long-term owners. There are three main hypotheses in which you are completely exempt from paying tax, regardless of how big your profit from the transaction is.
Case A: “The 3-Year Rule” (One Residential Property)
You do not owe tax if you sell during the calendar year only one residential property (apartment, house, studio) and have passed more than 3 full years between the date of its acquisition (purchase) and the date of its sale.
Example: If your notarial deed of purchase is dated March 15, 2021, you can sell the property without tax consequences at any time after March 16, 2024.
Case B: “The 5-Year Rule” (Up to Two Properties)
If you are an investor with more properties, you can sell up to two real estate properties (including agricultural land, garages, commercial premises) within one year without paying tax, provided that you were their owner more than 5 years.
Case C: Property acquired by inheritance or restitution
However, if your property was transferred through Donation, the 3 and 5 year statute of limitations rules described above apply in full force!
3. How is “Acquisition Cost” proven?
If you do not fall into any of the exceptions (for example: you bought an apartment in Bansko "greenfield" for the purpose of speculation and you sell it immediately after Act 16), you will have to calculate and pay tax. To do this, you must officially prove the acquisition price:
- For a standard purchase and sale: The basis is the price that is entered in your notarial deed when you purchase the property.
- For self-construction: The documented value (invoices, contracts) for the construction of the site.
- When acquiring through donation: The acquisition price is the tax assessment of the property at the time of the donation itself.
4. Specific rules for foreign citizens in Bansko
Since a large part of the sellers in Bansko are foreigners (citizens of Great Britain, Ireland, Israel, Greece), it is important to note a few specifics:
- Territorial principle: Since the real estate is physically located on the territory of the Republic of Bulgaria, the income from its sale is considered to be acquired from a source in Bulgaria. Therefore, the tax, if any, is paid here, to the National Revenue Agency.
- Double Taxation Agreements (DTAs): Bulgaria has concluded such agreements with dozens of countries. This means that if you pay 10% profit tax in Bulgaria, you can present a document in your home country to avoid being taxed twice on the same amount.
- Identification: To file a tax return in Bulgaria, a foreigner must have an Official Number from the National Revenue Agency (NRA) or a BULSTAT number.
5. Deadlines for declaration and payment
It is extremely important to remember that the notary does not withhold this tax automatically at the time of the transaction (as opposed to the local acquisition tax, which is paid by the buyer). The declaration and payment of the profit tax is your personal responsibility.
- How to declare: An Annual Tax Return (ATR) is submitted under Article 50 of the Personal Income Tax Act (Appendix 5).
- Deadline: The declaration is submitted, and the tax is paid accordingly, in the period from January 10 to April 30 of the year following the year of sale.
Example: If the transaction was committed in August 2024, you must declare and pay your tax by April 30, 2025.
Next step: Distance selling
You are already aware of the financial framework, the valuation, the documents and the taxes. But what happens if you live in Sofia, Varna or London and do not have the physical opportunity to travel to Bansko for inspections and a transaction in front of a notary?
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