|
|
|
|
Tax Evaluations
When new property is complete in Bulgaria the tax authorities in Bulgaria do a valuation of the property for the purposes of taxation, called the “tax valuation”.
When assigning the property to the new buyer the developer/owner and the buyer then can either decide to either declare the full purchase price on the notary deed or the legal “tax valuation”, which will of course affect the taxes that are due on the property.
The following taxes are affected by the amount that is declared on the notary act:-
1)Transfer tax:- 5%
2)Value added tax:- 20%
3)Notary fees (variable)
Therefore the vendor decides to put the lower “tax valuation” on the title deed, meaning lower taxes for both the buyer and seller.
The buyer benefits from:
a) A lower purchase price (due to the lower VAT amount being paid by the vendor)
b) A lower transfer tax (to be paid directly by the buyer)
c) Lower notary fees (to be paid by the buyer)
When selling the property in the future they can then also declare on the new notary act the new “tax valuation”, thus not having to pay higher capital gains tax than they would have if they had declared the full sales price.
To facilitate this, the new buyer must pay a certain amount of money to the vendor/developer by direct bank transfer via the new buyer or through their lawyer’s client account, which amounts to an amount no less than the amount that will be declared on the notary deed. The developer then requires the balance of the money to be paid by either of the following methods:
1)Direct cash payment (the developer gives a receipt for this against due payments).This can be organised by giving your lawyer or our company a power of attorney to open a bank account in your name. You then transfer the money to this account and then our company or your lawyer withdraws this money for payment to the developer against a receipt.
2)Transfer direct to a bank account out of Bulgaria (against a request for the money from the developer, stating that this money is being requested as payment against money due. Also a receipt will be given for this payment)
3)Transfer direct to our company’s bank account (our company gives a receipt for the due payments). The money is then paid to the developer and at the transfer of the property you are obliged to issue a receipt in prove that our company has returned the amount you have transferred.
Although this is not a normal practice in the UK it is very common in a lot of overseas countries such as Bulgaria and Spain.
The alternative to this is for the developer to fully declare the purchase price on the notary act, however the new buyer will be expected to pay the difference between the VAT of the declared price and the tax valuation (can be as much as 14% extra), as well as having to pay higher transfer taxes and notary taxes.
The other issue regarding the declaring the full purchase price on notary deed is the need for the buyer to charge a higher price (or taking a lower profit) when selling the property on to a third party, to cover the extra buying cost and to still remain competitive.
In most instances there will be two prices quoted on the pricelist, one being for the under declared amount and the other for the fully declared amount and the purchaser can choose which option to take (but this MUST be decided at the time of purchase).
|
|
|
|
 |
|
|
 |
|
|
Mobile phone:
00359 897 858 667 |
|
|
Office number:
00359 2 962 40 35
|
|
|
|
| |
|
Best Bulgarian Real Estate Ltd - A Leading Agent for Property in Bulgaria
| | | | |
