Bulgaria is the least written-about of the markets we cover, but for some the most rational: prices are low, the flat ten per cent income tax is among Europe's lowest, and the country is inside the EU. Both the transaction and the running costs are small in absolute terms – which in turn means the Swedish side of the calculation weighs more heavily here than in any of the other countries.
What you pay when you buy
- Municipal transfer tax, the level of which is set by the municipality where the property is located and therefore varies across the country.
- Notary fees on a fixed scale, plus the land registry fee.
- Check carefully what you are actually acquiring: buildings and land can be treated separately in law, and title to the land beneath a building does not always follow automatically. This is the most common source of unpleasant surprises on the Bulgarian market.
Ongoing taxes while you own
An annual municipal property tax is charged on the rateable value, together with a waste collection fee. The levels are low compared with Western Europe. Rental income is taxed at the flat rate of ten per cent. In resort areas, complexes with pools and shared facilities normally carry substantial maintenance charges – in practice often the largest running cost.
When you sell
Bulgaria taxes capital gains on the sale of property, but exempts, under certain conditions, the sale of a home held for a longer period. The conditions concern, among other things, how many properties have been disposed of during the year and how long they were held – worth checking before you fix the timing of a sale.
How this affects your Swedish tax
- A tax treaty exists between Sweden and Bulgaria. Immovable property is, as a main rule, taxed in Bulgaria, while the state of residence relieves double taxation.
- Low Bulgarian tax means a limited credit. If you are unlimitedly liable to tax in Sweden, rental income and capital gains are taxed here, and ten per cent in Bulgaria rarely covers the Swedish tax. The difference is paid in Sweden.
- Deferral on replacing a permanent home may be available since Bulgaria is within the EEA.
- Bulgarian tax residence essentially requires a stay of more than 183 days or that your centre of vital interests is there – and even then, the Swedish substantial connection test still applies.
The mistakes we see most often
- Buying in a resort complex without modelling the maintenance charges over time.
- Acquiring a building without a clear right to the land.
- Assuming ten per cent is the final tax – for someone still in Sweden it is only a creditable amount.
- Not reporting the foreign holding in the Swedish tax return. Information is now exchanged automatically between countries.
About the author and NORTH INVESTMENTS
Felix Schöttle is a lawyer specialising in Swedish and international tax law, assisting individuals and companies with cross-border tax matters through NORTH INVESTMENTS.
This article describes the main features of the rules and is intended as general information only. Rates, fees and exemptions change and often differ between regions and municipalities – always confirm what applies to your transaction. It does not constitute tax or legal advice; professional advice should always be obtained based on your individual circumstances.
