taxes on house sale

Hi can anyone advise me please . I payed 18500 lev  ( 10500 euros ) plus taxes and cost s came to a considerable amount more . I sold it at a huge loss last year for 5608 euros . I have been told by my accountant in Bulgaria that I must pay 1,750 lev ( approx. £750 ) capital gains tax . When I queried this I was told that when I bought the house they said that i only paid 2000 lev for it to keep the Notarie s fees low . I have an email stating the price I paid and the  extra  costs in English but most documents are in Bulgarian . Nothing was told me at the time about theses fees and I was led to believe the cost of the house was as it said in the letter . Has anyone experienced this and do you have any advice . Thanks

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

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

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