Under-Declaration of Bulgarian Properties: What You Should Know
Anyone looking to buy or sell property in Bulgaria is likely to come across the act of under-declaration. In short, this is the practice, at the point of completion of a property purchase, of declaring the price of that property at a level under the price in reality. While this is, in theory, an illegal practice, it almost has “de facto” legality given the prevalence of under-declaration in Bulgaria. Here is what you should know about this practice from property experts House Sales Bulgaria (http://www.housesalesbulgaria.com/).
When buying and selling property in the UK, you can’t imagine officially declaring the price of the property to be under the real price, no matter what the advantages. Anyone to do so would risk the property purchase falling through should the other party find out, and would face repercussions from the tax authorities. Not everywhere in Europe is as strict about these things, however, under-declaration having been common in purchases of property in Bulgaria and Spain, among other countries, for some time. In countries where under-declaration regularly occurs, the authorities are trying to clamp down on it across the board, Bulgaria included, so the likelihood is that the practice will be outlawed in Europe at some point in the near future. However, as it stands at the moment, if you are to buy or sell property in Bulgaria then you could well be involved in an under-declaration.
The advantages of under-declaring when buying a Bulgarian property is lower taxes and notary fees (because they are based on which is higher, the stated purchase price or the tax evaluation). Meanwhile, the seller has less income tax to pay and if the sale is being put through a company, the reduced income reduces the profit and therefore the corporate tax amount due. So far so good, but it’s important to remember that these are short-term advantages for the seller. When it comes to selling the property which was under-declared at the point of purchase, the seller will face a larger tax bill than in reality they should as it will seem as if their profit was greater – that is, unless they are able to state a lower price in the notary act, which is usually not the case.
In some cases, a seller of a property in Bulgaria can be persuaded to declare the real price rather than under-declare, but it is best that the buyer gets their lawyer to help negotiate this. The Bulgarian authorities have already increased tax evaluation values by around 10 per cent in a direct bid to claw back some of the tax revenue they lose with under-declaration so it seems that the days of under-declaration may be numbered.
For further information regarding issues affecting real estate in Bulgaria, go to http://www.housesalesbulgaria.com/.
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