Taxes on sale of movable or immovable property
This article will provides an introduction to the procedure for taxation of income of natural persons originating from transactions relating to the sale and exchange of movable and immovable property.
Such income is taxable, depending on the tax status of the natural person in question (i.e. depending on their classification as 'local' (Art. 4 ITNPA applies) or 'foreign' (Art. 5 ITNPA applies).
Taxable income originating from the sale or exchange of immovable property, including property rights on such property is determined by way of decreasing the positive difference between the sale price and the acquisition price of the property by the expenses amounting to 10 per cent - Art. 33 ITNPA. Consequently, taxable income is the income formed in cases where the property is sold at a higher price than the original acquisition price.
There are several exceptions. Non-taxable income includes:
- income from one immovable housing property, provided that it belonged to the person in question for a period longer than 3 years (i.e. more than 3 years have passed between the date of its acquisition and the date of the sale or exchange);
- income from up to two pieces of immovable property, or agricultural property and forest land plots regardless of the number thereof, providing that the time elapsed between the date of acquisition and the date of sale or purchase is more than 5 years;
- income from agricultural property and forest land plots regardless of the number thereof, providing that the time elapsed between the date of acquisition and the date of sale is more than 5 years.
The taxable income is the positive difference between the sale price and the acquisition price at the time of sale or exchange of:
- road, air and water means of transport;
- works of art, objects for collections and antiquities.
Determination of the annual basis of taxation upon the sale or exchange of real estate paid in instalments
When the sale price is paid in instalments in different years of taxation, for each of those years the taxable income is determined by a special statutory formula.
Transfer of an establishment of a sole proprietor
Taxable income upon transfer of an establishment of a sole proprietor accompanied by a removal of the sole proprietor from the Register is the positive difference between the sale price agreed under the contract and the equity of the establishment (Art. 33 (11) ITNPA).
Submission of an annual tax declaration
The local natural person (the seller) needs to submit an annual tax declaration in a standard form. It is important to note that the declaration is also submitted when the selling price is equal to or less than the acquisition cost of the real estate. In cases where there is a positive difference between the selling and purchase price, the person is obliged to also pay the tax due.
Foreign natural persons submit an annual tax declaration for the taxable income on the total annual basis of taxation.
When a local natural person has his tax and compulsory social security contributions withheld in another country, the person needs to attach to his annual tax return certificates showing the amount of the tax and the compulsory insurance contributions paid abroad, the same being issued by the competent authorities of the other state.
Time limits for the submission of the annual tax declaration
The annual tax declaration needs to be submitted not later than 30 April of the year subsequent to the year during which the income was received - Art. 53 ITNPA. The tax due is submitted within the same time limit.
Persons who submit an annual tax declaration by 31 March electronically discount 5 per cent of the imported in the same period of the tax amount in the annual tax return, provided they have no enforceable public obligations at the time of filing the declaration and the tax amount is paid within the period under Art. 67 para. 4 of the law.
Those persons who submit their annual tax declaration prior to 31 March of the subsequent year electronically, enjoy a 5 percent discount of the amount payable under the annual tax return provided that they do not have public liabilities subject to compulsory execution as of the time of filing of the declaration and the payable tax has been paid within the time limit under Art. 67 (4) of the Act.
Venue of submission of the annual tax declaration
The annual tax declaration is to be submitted with the territorial directorate of the National Revenue Agency by the residential address of the natural person, including the sole proprietor, who is the bearer of the obligation to pay the tax.
In those cases in which the annual tax declaration of a foreign natural person is submitted by proxy having a residential address within the country, the declaration is to be submitted with the territorial directorate of the National Revenue Agency by the residential address of the proxy.
Except for the cases referred to above, the annual tax declaration is to be submitted with the Sofia Territorial Directorate of the National Revenue Agency.