In the purchase of a real estate property with the aim for investment, the possible variants for its realization are resale and rental. The income tax from the respective real estate property is determined by the variant you have chosen.
Income tax on the sale of real estate property
There are two instances when the income from the sale of a real estate property is not subject to taxation:
- If the apartment has been your property for a period of 3 years;
- If you are selling two properties within the same calendar year, and between the date of purchase and the date of sale more than 5 years have passed.
In all other cases, your income from the sale of the real estate property is subject to taxation. The basis for taxation is calculated by reducing the positive difference between the sale and purchase price of the property with 10 % expenses and then multiplying it by 10 %.
For example, if you have purchased an apartment for the price of 100 00 BGN, and then you are selling it for 150 000 BGN, the tax due will be 4 500 BGN (10 % of 50 000 income with 10 % deduction for expenses).
It is necessary to submit annually a tax return and to pay the tax not later than 30th April of the year, following the year of the sale.
Income tax payment for rental
The tax on the income from rental is 10 % from the received income, reduced with 10 % expenses, for which proving documents are not required. For example, if you are renting a property for 500 BGN per month, the total annual tax will be 540 BGN (10 % from 6 000 income minus 10 % expenses).
If you are renting a real estate property to a natural person, you are obliged to pay the tax at the end of each trimester by submitting a tax return with withholding tax (Declaration form 4001). The tax for the fourth trimester of the year is paid when submitting the income tax return (Declaration form 2001).
If you are renting a property to a legal person, the tax is deduced from the rent and is paid directly by the tenants. You are obliged only to submit annually an income tax return (Declaration form 2001) where you declare that a 10 % tax has been withheld.
For further information, visit the website of the National Revenue Agency. If you have any questions, please contact their office.