Taxes on house sale

Hi. Sorry to hear this ,,it doesn't really help you but it has been a known practice here that they under value on purchase ,it helps the seller as they don't pay such high taxes ,l advise anyone buying a property here to get an English speaking solicitor and make sure that the full value is on the deeds ,   or you lose out if you resale

Hi ,thanks for that .I did have an interpreter  and nothing was mentioned at the time. I m trying to find out where the money went to, 16500 leva to be exact it certainly did nt go the the  seller . its a lot of money . I have till the end of this month to sort it or pay . Thanks again

Did you use a notary to close the sale?    The sellers in Bulgaria cheat the government at every opportunity.   You are so screwed and you will have to pay the taxes.   Why do so many people fall for the real estate ruses designed to harm them?  It is because the seller, the agent and the buyer want to save money on the purchase.   Bulgaria as a government has caught on to this scheme.   Don't fall for it.   Use a solicitor and a notary.   Otherwise you will suffer the same fate.   

The answer is that the civilized world has rules and laws and Bulgaria does not license contractors, Real Estate Brokers etc.   Caveat Emptor.

Hi Thanks for your help .I spoke to an accountant  where I live who told me that because I did everything by the law and I have proof of letters in English along with bank statements both in UK and Bulgaria proving I paid the money and made a huge loss That I would not be made to pay anything in the UK if it ever came to that .However she could  not advise me to ignore it  ,but others  did . and after giving it a lot of thought decided that I would ignore it . I was a victim of fraud . I have all letters in English asking me for a large amount of Euro s to purchase  the house  ,but the money  they actually purchased it for through my power the attorney was much lower and put in Bulgarian .Leaving me ignorant as I was nt told nothing and signed the documents months later when we arrived . I m not sure what s going to happen now.  I ve heard nothing yet .I just could nt justify letting the crooks have more of my money . I may regret it I hope not . Anyway thanks  again

Hi Mate

i made the same cock up on my first property, you might even find that the agreed price with the seller was actually what you paid for it and the rest was split between them and you cant really go and prove this as the Notary has the legal documents giving the lower figure, they are thieves just like any other authority anywhere in the world.
And you will pay capital gains if you sell within 5 years or it was...everything they do is about the £...
costly mistake i know...

Hi thanks. I like Bulgaria a lot and the people I met are really friendly .We made a few good friends over the eleven years we had it as a holiday home   . It s a shame the government allows such bad practices with the element of a few bad people . It puts foreigners off going there to buy property  and be part of their country bringing with them money which the country could do with .I am not dishonest , but refuse to pay the money they are asking . I m  a victim o f ; their ; crime. Sadly I wont be returning to Bulgaria again . This is something the Bulgarian government should try to avoid . In my opinion Europe is a beautiful huge continent with plenty to see and enjoy . Sadly I wont be promoting Bulgaria but start to enjoy other parts of Europe  as i do  of our own UK . As I ve said I don't  know where this leaves me but  I ll keep this site informed if anything happens that may help others .  I m  a 71 years old  x lorry driver , my wife was a shop keeper .We worked hard all our  life and now  just want to enjoy our time together . Thanks again for your reply .

I can certainly sympathize with your story.

I definitely understand your frustration, especially as it rather "adds insult to injury" after having to sell your house at a loss in the first place. (Or perhaps after twigging, some years after the event, that an unscrupulous lawyer/real estate agent - there are many of both - took advantage of you.)

However, I am surprised that you had not considered the "real price" vs. the "declared price" issue as this is not something unique to Bulgaria, there are many countries where this takes place.

Why? Because the seller can reduce his capital gains tax (so if he gains, you lose later)… and the buyer saves on the transaction fees (in many countries it's custom for the buyer to pay the transaction costs and transfer taxes, so you did save money on the purchase because of the lower declared value). The buyer also saves on annual property taxes because it's based on the purchase price.

I think that saying Bulgaria allows this is quite harsh. The law is clear that the correct price must be stated, and there are penalties for not doing so. However, it is a very common practice (not just in Bulgaria), and a little hard to enforce (as long as the declared price is not completely crazy, like buying a flat in Sofia for 50 euros/m2 when the normal price level is more like 1200 euros/m2 say).

Also, even though the notary deed is in Bulgarian, the price is clearly stated in leva (so it is quite easy to see what the declared price is).

However, even though it's illegal, it's still quite common in Bulgaria, and many sellers will insist on it. There are even reputable construction companies building new apartment blocks that will under declare the price and require a wedge of cash delivered to their offices. I think while most of us would agree it's a "bad thing", in practice it's something than many buyers will experience in Bulgaria.

Part of the appeal is that it's one of those "victimless" crimes where the victim is the government... and people tend not to get too worked up about it. Is it "fraud"? Well, yes, as far as the government is concerned (hence why it's illegal). But I don't think you were a "victim of fraud" as you state. (Or, you may have been because the intermediary took a massive commission, but not by virtue of the under declaration itself.)

The good news is that the amount is relatively small. And you certainly did save some money on the transfer taxes... and some money on your annual taxes while you owned the property... so it's not all bad news.

If you've gone back to dear old Blighty (or other EU country) and don't intend to return, I'm sure you can sleep soundly, knowing that there's no way Bulgaria will chase after you for this "debt". For anyone with other interests/properties in Bulgaria, then they'd have to pay up.

Overall, while I know it's easy for me to say that it's not a lot of money, in the grand scheme of things it isn't. 750 euros doesn't buy much these days (as you've no doubt found if you've moved back to the UK). It's certainly not enough to lose sleep over. I think it's one of those times you write it off to experience, and move on.

Hi thanks , At the time we purchased I had never heard of the purchase differences , and it was not explained to me . The house cost x amount I was asked for that amount plus costs I gave it . Power of attorney was given to a member of the estate agents team and he signed on my behalf .All documents were in English and Bulgarian . What was not in English was explained in English to me  by email  ,but never these differences . I would not have agreed to the lower. Also later we sent more money for alterations and cesspit and repairs. Some of which was never done. When we queried this we were told the company had split .We wrote it off . ( I know most of them  they are still going ) but i m not getting involved .I put this down to my lack of knowledge ,my ignorance and the trust I felt for the team we were dealing with . Honest they were very friendly until we queried the work not being done and asked what happened to the money we sent them for it .We never got that back either. I value and appreciate all your inputs .It always helps to know there are people who care and  may know things I don't ,all advice is helpful whether it s what I want to hear or not . Thanks again.

It's good you're being philosophical about it.

Don't think you're alone, many of us will have lost a bit of cash to unscrupulous "workers". In many places they think we're "rich gringos" and can afford it!

I think the fact that you house sale was recorded at full price means perhaps there is some progress on the under declaration problem.

Checking the accountant calculation: 5608 euros (sale price) = 10,994 leva. Official purchase price = 2,000 leva. Gain 8,994 leva. 15% tax = 1349 leva. = 616 £

I believe this gain is only taxed if you a non-resident Brit (using it as holiday home). I think residents/Bulgarian are exempt if its your main residence and held for more than 5 years.

Hi your calculations are  correct . From what I ve read they don t  call it capital gains although it s everything but name, Its a tax on the profit ,or something like that . Beside that amount  I sent a lot of money over for repair s and alteration s ,a lot of that did nt get done. I put my trust in people who took advantage and now, I ve had enough. Again, Thanks for your reply

Hi,
I was speaking to you before and have sent you a private message, I'm not sure if you got it?

hi  no i have nt

Hi
I have been reading this thread with interest. 

I am in the process of selling a 1 bed flat that I have been using as a holiday home for 12 years or so.  The company that I bought off say they have found a buyer and have offered me a Nett amount of Euros after all commission and fees.  I have this information by email only.  They have sent me a PoA to sign to allow either of 2 of their staff to complete the sale for me.  However, I am concerned that the PoA says nothing about the sale price (in fact I do not know the sale price, only the Nett price to me) or who it is being sold to and seems to allow them to sell for any amount of money.  I can get this changed to include a minimum sale amount I think.  But I think I should also have a contract with them as agency showing the amount I will receive - is this normal practice? 

Also, its not clear if I would have to pay anything extra such as the Capital Gains you are speaking of if the authorities could come after me for any other costs. I originally purchased in 2008, but have also a notarised deed from 2010 where I bought out my ex partner - that does have a realistic statement of the value of the apartment in Lev - I assume this would be valid as the most recent title deed in terms of proof of value - the current sale I would doubt is any higher than this, or only minimally.

Any advice would be really helpful as I have yet to sign and get notarised the relevant documents so I have time to avoid being conned or taken advantage off.  I am doing the transaction from the UK

Thanks in advance

Hi I put my trust in the  estate agents who I bought the house through and gave POA to one of them I also trusted the translator ,a different estate agent who eventually  sold the same house for me ,  I can honestly  say that I should not have trusted any of them .They stole thousands from me. You need to know how much you bought your house for on both occasions and take a good look at the documents in Bulgarian from the notary and any one involved in that sale telling you what you paid for the house and including taxes . . If  the documents show the correct amount you know you paid for it, then that s ok . But it may NOT . and that is what you must be careful about .If you sell it for more than the documents claim you bought it for then you will be asked to pay what we would call  capital gains , but they just say it s a profit on the sale and you could be asked to pay it again in the UK . I dont wish to alarm you but read up on it very carefully so you know the best way to deal with the sale . Even ask a British accountant or solicitor who may have knowledge  of Bulgarian law . Be careful dealing with them .  please don t  trust any of them, sadly  I did and regret it very much .

Any one buying or selling must have an attorney and a notary.   Must have the correct price paid for the purchase or sale and never sign a POA except to the Attorney.  I hear this over and over again. 

You buy a property for E30,000 and the deed says you paid E4,000.   When you sell , the Broker wants a POA, will pay you E20,000 and sell it to the new owner for E30,000 plus a 10% commission.  You will then be liable for the taxes between E4,000 and E33,000 at 22%. 

I hear this story every day.   There is no licensing or regulations for brokers in Bulgaria.  Finding a credible attorney and a notary is a must.  Pay the E500 to get the right advice.

Hi guys , I'm after some advise please.
I had a house built about 9 years ago but am now in the process of selling it for £80,000 odd. I had it built by a builder who was always paid cash by me ( roughly the same £80,000).
I have NO receipts available. . Am I going to be stung for capital gains here?
I'm not even going to mention the mortgage payments paid over the years for it .
Are there any ways around this ?

Hi sorry to read of your problem . The only thing I could suggest is you search for an accountant in the UK that deals with foreign accounting and hope they can help you. then a solicitor that deals with Bulgarian law and can guide you  . I don t know if any of this may help but having had problems of my own with Bulgarian law and so many people sent some friendly  advice .to quote a line .every little helps . I wish you all the best and hope you work it out .

Cheers Tony . Will do

I bought in 2016 for 115000 euros (100000 declared at notary that I was aware of ) via a Company - as was required for foreign buyers purchasing property with land.

I am now in the process of selling for around the same 100000 euros mark. Never received any VAT back at anytime.

does anyone know what tax I will need to pay? There will be no profit but I'm not sure if there are different rules for Companies (which I know I will have to pay to liquidise).

@cherylcollier400

None

I bought in 2016 for 115000 euros (100000 declared at notary that I was aware of ) via a Company - as was required for foreign buyers purchasing property with land.
I am now in the process of selling for around the same 100000 euros mark. Never received any VAT back at anytime.
does anyone know what tax I will need to pay? There will be no profit but I'm not sure if there are different rules for Companies (which I know I will have to pay to liquidise).
-@cherylcollier400

if there has been no gain - and your paperwork reflects that ie correct prices declared - there should be no tax to pay in that respect. Other taxes and fees will depend on your lawyer/agent/notary. What area is your property in?

Hi Guys,

I'm sorry to drag up this old thread, but after a conversation last night with someone I may be buying a property from, I need some advice.

This is a private purchase, no agent involved. The property was bought by the current owners about 14 years ago, for 50k euros. Its currently advertised for £39500, which at today's rate is around 46k euros.

When they bought the house it was fully furnished and the seller asked them for 15k euros in cash and the price of the house at 35k euros.

They were informed that this was common practice in Bulgaria and the seller told them that the 15k euros  was for the furniture.

In the conversation last night they asked if I would do the same, to save them paying too much tax.

I'm not entirely happy about this, but I wanted to clarify something. I may be wrong, but surely when you sell a house, you only pay tax on profit.

The house being down valued to 35k euros when they purchased and sold at 46k euros, will officially give them a profit of 9k euros, so I'm assuming a tax bill for 900 euros.

They have done some work on the property, so I would expect that if they have receipts, they could use those to offset the tax, as that reduces their profit.

Am I correct in this assumption, or am I completely off the mark?

As far as Im aware, the tax of 10% is only paid on any profit they make. If they sell at a loss there is no tax to pay.

From what Elaine says, the house is being sold now for 46k but is shown as being bought for 35k (+ an extra 15k for furniture that wasn't mentioned on the official documents). So that would show a 9k profit, presumably less whatever they've spent improving the property.

I don't see anything dishonest with the sellers doing the same thing and dividing what you pay between the actual property price that's declared at the notary and a separate agreed price for the furnishings. It also means you won't be paying higher council tax because of the furniture, dog beds, etc. It's not unusual to see houses advertised with two prices, one without furniture and fittings and one with them.

According to other comments further up the thread, if they have resident status and it's been their main home for 5 years, there shouldn't be any tax on profits, anyway. I don't know this for sure or whether that was someone muddling up UK law, where that is the case, with Bg law where possibly it isn't.

@janemulberry

Hi Jane  that's interesting point about the 5 years.

Can anyone confirm if that's correct?

Also regarding proof of improvements, do they have to be carried put by a tradesman, or can you claim for materials, if you do the work yourself?

I don't know, but I think if they have evidence of money spent it should count against profits. I'm not planning to sell my house but I'm saving all the receipts just in case. Harder to prove the labour costs though as they've all been paid in cash.

A quick Google suggests that if they have Bulgarian residence and have lived in the house as their primary home for 3 years and are moving to a different home in the EU, they should be tax exempt. Though it's a little confusing, as if they return to the UK they might have to pay the CGT on it in the UK instead.

From a Bulgarian law firm's site:

Capital Gains Tax

The rate of tax on capital gains in Bulgaria is a flat rate of 10 percent. Capital gains are usually taxed as income; however the following assets are exempt:

Any one residential property per year, regardless of when acquired if used as the main home or not, if owned for more than 3 years.

Two properties which have not been the taxpayer's main residence, if owned for more than five years.

Any number of agricultural and forest estates provided they have been owned for at least five years.

Cars and other road vehicles, aircrafts and vessels owned for at least one year.

Assets received by gift.

Certain types of movable property, including shares in a Bulgarian quoted company.

Foreigner residents of Bulgaria

For a foreigner resident disposing of property there may be no tax liability in Bulgaria, but their capital gains tax will be due on the gain (calculated under their country of residence rules).

In Bulgaria, it is not uncommon for the lower valuation of the property used to calculate the local taxes to be put on the title deeds. This is often significantly lower than the purchase price and means that any eventual gain for worldwide purposes will be higher because a lower price was used on this title deed. Thus, individuals often end up paying tax they don't need to pay.

@janemulberry

That's really helpful. Thank you 🙂