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Tax on Profit when Selling

When it comes time to sell your Bulgarian property, one of the first considerations for many is how much 'capital gains tax' they are likely to have to pay. Any tax you will pay on the profit you make when selling up, will depend upon where you are tax resident.

For the vast majority of Brits who are tax resident in the UK, the tax rules are the same at home and abroad: and there are sometimes ways of reducing the capital gains tax exposure. For those who are tax resident in Bulgaria, the situation is very simple and straightforward.



Whilst, Britons refer to tax paid on such profit as capital gains tax (which is payable in the UK), there is actually no such phrase in Bulgaria. You pay either corporation tax (if the property is owned via a company) or normal income tax (if you own the property as an individual). Whether it is capital gains tax, corporation tax or income tax it is all the same thing - a tax on the profit you make.

Here is an outline of the situation regarding tax, depending upon where you are tax resident.

UK Capital Gains Tax

There is an annual exempt (tax free) amount of 9600 pounds for each individual in the tax year 2008 - 2009.

Capital Gains Tax is charged on the total of taxable gain after:
- certain costs and reliefs that can reduce or defer gains
- allowable losses you have made on assets where CGT applies
- annual exempt (tax free) amount of 9600 pounds for each individual in the tax year 2008 - 2009

The Capital Gains Tax rate for the period above is 18%


Selling

Property owned by an individual - eg, sell an apartment in Bulgaria whilst resident in the UK
- with holding tax in Bulgaria on the sale of 10%
- remainder of capital gains tax to be paid in the UK

Property owned by an individual - eg, sell an apartment in Bulgaria whilst resident in Bulgaria
- no tax on the profit made on one property sold during a financial year (Jan 1 to 31 Dec in Bulgaria)
Note : no tax on the profit made on two properties sold during a financial year, provided you have owned the properties for more than five years


Property owned by a company - eg, sell a house in Bulgaria whilst resident in the UK
- 10% corporation tax on the profit to be paid in Bulgaria
- remainder of capital gains tax paid in the UK

Property owned by a company - eg, sell a house in Bulgaria whilst resident in Bulgaria
- 10% corporation tax on the profit to be paid in Bulgaria

Further information for those resident in the UK, can be obtained from the Government site at www.hmrc.gov.uk/cgt/index.htm

This information is for guidance only and should not be used to replace professional advice. We recommend to all Quest Bulgaria visitors that they seek professional assistance.