FULL VALUATION AND CAPITAL GAINS TAX

Historically, it has been common practice in Bulgaria to under-declare the actual value of a property in order for both the developer (and sometimes the purchaser) to save on property taxes such as VAT . Although this can be of benefit to both parties at the purchase time, it can work against the purchaser at the time of any future sale as the difference between the theoretical purchase price stated on the title deeds and the sale price would be greater than the difference between the actual purchase price and the sale price. This would give rise to a greater perceived profit and hence greater capital gains tax liability.

As it is still very much in the developer's interest to under-declare the value, it is up to the purchaser to specifically request a full valuation to be entered on the title deeds. This will usually cost a little extra in up-front taxes, but it should be more than compensated for at the time of sale.

Please note that the developer is under no obligation to agree to this, so it is as well to check this out at a very early stage in the process with the agent marketing the property. As more British buyers enter the market and request this, it is slowly starting to change, and with EU accession, anomalies like this should eventually become a thing of the past.

Page last updated: 7th January 2007