Tax on selling a property: when it is due and how it is calculated

The Personal Income Tax Act (PITA) lists the income from property sales that is not taxable. This refers to income obtained during the tax year from the sale or exchange of (Art. 13, para. 1, item 1 PITA):

• one residential property, if more than three years have passed between the date of acquisition and the date of sale;
• up to two real estate properties, as well as agricultural and forest properties regardless of their number, if more than five years have passed between acquisition and sale.

The two cases apply separately for each tax year. If during the year you sell one home that you have owned for more than three years, the income is not taxable. If in the same year you also sell a villa that you have owned for more than five years, it may also fall under the exemption in the second item.

However, if you sell a home that you have owned for less than three years, or more properties than the two items allow, the income is taxed under the general rules. The date of acquisition is usually the date of the notary deed, but in cases of inheritance, donation or new construction the rules may be more complex – check them carefully.

When the sale is not exempt, the taxable income is determined by reducing the positive difference between the sale price and the acquisition price by 10 percent in expenses (Art. 33, para. 1 PITA). If you sell at a loss, there is no taxable income.

The taxable income is included in the annual tax base, and the tax on it is 10 percent (Art. 48, para. 1 PITA).

You bought an apartment for 100,000 euro and you sell it two years later for 130,000 euro. Because less than three years have passed, neither of the two exemptions applies. The positive difference is 30,000 euro. After a reduction by 10 percent in expenses, the taxable income is 27,000 euro and the tax is 2,700 euro.

If the same apartment had been owned for more than three years and had been the only residential property sold during the year, the income would have been non-taxable under Art. 13, para. 1, item 1, letter "a".

Taxable income from a sale is declared in the annual tax return, which is submitted by 30 April of the year following the year in which the income was obtained. The tax due is also paid by the same date. The return can also be submitted electronically through the portal of the National Revenue Agency.

Keep the notary deeds for the purchase and the sale and the documents for the price paid – they prove the acquisition price and the dates on which the exemption depends.

Do not confuse the tax on income from the sale with the local tax on the acquisition of property. The latter is paid to the municipality upon the transfer and by law is borne by the buyer, unless the parties have agreed otherwise (Art. 45 of the Local Taxes and Fees Act). The tax under the PITA, which this article is about, is the seller's obligation and is declared to the NRA.

If the contract stipulates that the seller will also bear the local tax, this is a cost of the transaction that you must include in your calculation of the net amount you will receive.

The rules above apply to individuals who sell property outside of business activity. Other provisions apply to sales by companies, sole traders and persons who are not resident for tax purposes in Bulgaria. Foreign sellers should also check the rules of the country in which they are resident, as well as the applicable double taxation avoidance treaty.

• Calculate how many years you have owned the property as of the date of sale.
• Check how many properties you have sold during the same year.
• Gather the documents for the acquisition price.
• If in doubt, contact the NRA or a tax consultant.

• NRA – Personal Income Tax Act (Art. 13, 33, 48)
• NRA – Personal income tax

This article is not legal or tax advice. The information is general and current as of the date of publication; for your specific case, contact the NRA or a tax consultant.