Real estate tax

Under Bulgarian law, a distinction is to be made between the real estate tax payable on an annual basis for possession of real estate located within the territory of the Republic of Bulgaria, and the local property tax payable once, upon acquisition of a piece of real estate. This exposé deals with the conditions of tax liability as well as with some exemptions where no tax is due.
Annual real estate tax
Subject to real estate tax are buildings and self-contained units within buildings; landed properties situated within the urban growth boundaries of populated areas and settlements; as well as landed properties located outside said urban growth boundaries that, according to a detailed zoning plan, have the intended purpose as per article 8 (1) of the Spatial Development Act (i.e., to be used for residential, public service, industrial, storage purposes, as resort facilities, summer houses, sports and entertainment facilities, for landscaping, as decorative water features, transport and traffic infrastructure, including bicycle lanes and access and mobility infrastructure for people with disabilities, etc.), and subject to change of the designated purpose of the land when required in accordance with a special law.
Taxable persons or entities are the following: (i) the owners of taxable pieces of real estate; (ii) the users, subjects to a contractually established right to use such real estate; (iii) the concessionaire, subject to a concession agreement in respect of the real estate; (iv) the owner of a building located within a state-owned or municipal landed property is taxable in respect of said property or the relevant portion thereof; (v) for a piece of state-owned or municipal real estate, the taxable person or entity is the appointed manager of said real estate.
The tax base for taxation of a residential and non-residential property in private ownership of a natural person is the assessed tax value of the property, and for non-residential property owned by an enterprise, the tax base is the higher of the following two values: the book value and the assessed tax value. In that context, when filing a tax return in accordance with article 14 of the Local Taxes and Levies Act, an enterprise must state the book value of the declared property.
The rate of taxation of real estate is set by an ordinance of the relevant municipal council and may range between 0.1 and 4.5 per one thousand. Thus the rate may well differ from one municipality to the next.
Tax relief is provided for residential properties of private individuals if these properties constitute their principal residence. The tax rate in such cases is reduced by 50 percent. The principal residence must be stated in the owner’s tax return. Pursuant to the law, ‘principal residence’ is a piece of property used for satisfying the housing needs of an individual and members of his/her family for most of the year. A tax relief may only be granted for a single property.
Real estate tax must be paid irrespective of whether a property is used or not. If a piece of property is not used on a year-round basis, the owner may file an application in standard form with the municipality where the property is located, not later than October 31st of the preceding year, and will thus be partially exempted from waste tax, though not from tax on the building.
Exempted from real estate tax are:
• real estate constituting public municipal property;
• real estate constituting public state property, except when rented out to a person or entity that is not exempted from real estate tax;
• civic cultural centers;
• buildings that are property of foreign countries used for housing diplomatic or consular missions, subject to conditions of reciprocity;
• buildings that are property of the Bulgarian Red Cross or of Red Cross organizations registered in another EU member state or a state-party to the Agreement on the European Economic Area;
• the buildings of schools of higher learning or academies used for educational purposes or scientific research;
• temples and monasteries used for religious activities, together with the grounds on which they are built, that are property of legally registered religions in Bulgaria, and houses of worship, together with the grounds on which they are built, that are property of legally registered religions in Bulgaria; to be exempted from real estate tax, such houses of worship, temples and monasteries must be duly entered in the Register as per article 12 (3) of the Religious Denominations Act;
• parks, sports grounds, playgrounds and other similar facilities serving public needs;
• buildings constituting cultural value when not used for commercial purposes;
• museums, art galleries, and libraries;
• real estate used directly for the operation of mass transit systems;
• temporary auxiliary structures used in the construction of a new building or facility until its completion and commissioning;
• immovable property restituted to its lawful owners that is currently unfit for use, for a period of 5 years;
• buildings commissioned prior to January 1st, 2005, and having an energy efficiency certificate Class B, and buildings commissioned prior to January 1st, 1990, and having an energy efficiency certificate Class C, issued in accordance with the Energy Efficiency Act and the ordinance as per article 48 of the Energy Efficiency Act, as follows: a) for a period of 7 years as from the year following the year of certification; and b) for a period of 10 years as from the year following the year of certification, subject to the condition that steps are undertaken to use renewable energy sources for the needs of the building;
• buildings commissioned after January 1st, 1990, and prior to January 1st, 2005, and having an energy efficiency certificate Class C, and buildings commissioned prior to January 1st, 1990, and having an energy efficiency certificate Class D, issued in accordance with the Energy Efficiency Act and the ordinance as per article 48 of the Energy Efficiency Act, as follows: a) for a period of 3 years as from the year following the year of certification; and b) for a period of 5 years as from the year following the year of certification, subject to the condition that steps are undertaken to use renewable energy sources for the needs of the building.
 
Real estate acquisition tax
Subject to taxation are pieces of real estate and limited property rights over these, including the right to build and the right to use, when such rights have been acquired against compensation. The taxable person/entity is the acquirer of the property, i.e., its buyer.
The tax base for determining the rate of taxation is the assessed value of the property in Bulgarian Levs at the moment of transfer of ownership. Pieces of real estate and the limited property rights over them are assessed on the basis of the negotiated sale price, and if that is lower than the assessed tax value, on the basis of the latter.
For pieces of real estate acquired against compensation, the acquisition tax is determined by the municipal council at the rate of 0.1 to 3 percent of the assessed value of the property being transferred. The acquisition tax must be made payable upon transfer of the ownership of the piece of real estate at the respective municipality where it is located.
Pieces of real estate acquired through donation between direct relatives or spouses are exempted from this type of tax.
When real estate is donated or otherwise acquired without compensation, the acquisition tax is calculated on the basis of the assessed value of the property being transferred at a rate determined by force of an ordinance of the municipal council, as follows:
– when the donation is between siblings and their children – between 0.4 and 0.8 percent;
– when the donation is between persons other than the ones described above – between 3.3 and 6.6 percent.
Exempt from acquisition tax is real estate acquired by:
– the state or any municipality;
– educational, cultural and scientific organizations supported by the national budget, as well as social and integrated health and social resident care services;
– the Bulgarian Red Cross;
– organizations with national coverage of, or for, for people with disabilities;
– disaster relief funds and funds for conservation and restoration of historical and cultural monuments;
– medical facilities as per article 5 (1) of the Medical Facilities Act;
– legally registered religions in Bulgaria, with respect to their temples and monasteries used for religious activities, together with the grounds for which they are built, as well as houses of worship, together with the grounds on which they are built.