The Bulgarian succession tax
According to the Bulgarian legislation regulating local taxes, succession tax is levied on estate succeeded by law or by will within Bulgaria or abroad by Bulgarian citizens as well as on the estate located within Bulgaria succeeded by foreign nationals. The succeeded estate includes the movable and immovable property owned by the decedent and the rights over such property, as well as their other property rights, receivables and liabilities at the time of opening of the succession, unless otherwise provided by legislative statute. The inherited estate is subject to deductions as to the obligations and tax reliefs laid down in Bulgarian law, or in those cases where it is inherited by the state.
Art. 38 lists the types of property that are tax free:
- property passed to the State or municipalities;
- ordinary household furnishings;
- pensions not received by the decedent;
- estate of Bulgarian citizens located abroad to which the succession tax of the respective state has applied.
Taxable persons are:
- heirs by law, such that as of 2004, succession tax in Bulgaria does not apply to the surviving spouse and the lineal heirs;
- testamentary heirs, beneficiaries and legatees;
- stateless persons are subject to the succession tax for inherited estate on the territory of Bulgaria, if the person in question has been permanently resident within the territory of Bulgaria (Art. 29 LTFA).
The heirs may waive the succession through a unilateral act and as a result, they are subject to the succession tax. The waiver needs to be express, written and recorded in a specific book at the District Court. In case there is more than one heir, the tax is due in accordance with their share, and the taxable amount depends on the degree of kinship and the size of the inherited share. The tax is determined and communicated to each co-heir - Art. 106 and Art. 107 TIPC.
Persons that have become heirs by law or will, legatees or their legal representatives are obliged to file a tax return in the municipality within six months, such that the period is calculated differently – starting from the moment of opening of the succession or of learning about the succession. Exempt from this six-month period is inherited property whose existence became known to the heirs or legatees after six months. In this case, the time limit is one month from learning about the succession and on the basis of a submitted declaration. Any declaration submitted in time by one heir benefits the other heirs as well. Failure to submit the declaration results in an administrative liability. Art. 33 is particularly important, because it determines the manner in which the taxable amount is calculated:
- real estate within the territory of Bulgaria - tax value under Annex 2;
- securities - market value;
- transport vehicles - insurance value;
- any other movable property and rights - market value;
The payment of the tax is due within 2 months after notification. According to Art. 41, banks are obliged to pay funds in the accounts of decedents to the heirs upon presentation of a certificate issued by the municipality, certifying that the funds have been declared in the succession tax declaration and the corresponding tax has been paid. This obligation also applies to life insurance payments.