Property tax/stamp duty

From what I've heard, a lot of people do this and it results in the seller paying lower taxes on the sale of the property (capital gains tax), and you paying lower fees at the notary (2% of house value for municipal tax I believe).

However, if you then decide to sell the property yourself further on down the line, and you declare the value as what you actually sell it for, your capital gains tax will be much higher, as the difference between what you "bought" the property for and what you are now selling it for would be much larger. The only way around this would be to keep under-declaring the value of the property, which is also dependent on the future sellers being okay with that.

We're in the same boat, with wanting to buy a property. But I will be insisting on it being declared at the value we buy it for, as we may want to sell it in the future. Plus, depending on the price of the property, the money saved initially, doesn't add up to much. For us it would save around 700 euros.

I'm sure it's not legal, but would love to hear more views on this though. Specifically, is the amount you pay in municipal tax at the notary when you buy the house, the same amount that you have to pay to the municipality every year? If it is, then, I guess the savings of under-declaring would add up over time.

Also, here's a useful tool I found on roughly calculating how much all the fees will be, depending on location and price of house.

It's by a law firm, so you can ignore their personal fees, but it gives a good breakdown of notary and municipality fees.

Just fill in the first 3 sections and click "Calculate".

http://www.bulgariancompanies.com/prope … _bulgaria/

And here's another one:
https://www.mybgagent.com/notary-fee-calculator

It is common place it's not legal don't to it. U r reducing the sellers tax bill but increasing yours.

Yes, I also heard it's a thing sellers do to reduce any capital gains tax they need to pay. It saves the buyer a little in the tax at the time of sale, but then they're likely to have to pay more capital gains tax if they sell. As John  said, it's widespread practice, but not legal.
AFAIK the value on the notary deeds doesn't affect the annual municipal tax.

Taken some legal advice on this matter today as when we buy it has to be above board. Here is what they said.....
This is a very common practice here, but it is not legal. It is even a crime, because you have to sign a declaration before the notary declaring what is the real price. If you declare something different, this is a false declaration, which is a crime.
I strongly recommend not to do this. It is better to pay some more taxes, but not to start in Bulgaria with a crime.

As mentioned by several here, it is officially illegal. However, it is unlikely to result in legal repercussions. (It probably has had the effect of reducing the % of the underdeclaration.)

The main effect is reducing the gain for the seller (now), and increasing it for the buyer (you, later). But it also reduces the transaction cost, and (usually) your annual property taxes.

It is very common, and sometimes hard to avoid.

I came in thinking i would insist on correct price, but the sellers are often adamant. Even construction companies doing new builds do this.

If you absolutely insist, they may add x thousand on to the price to compensate for the lower net they get out of it.

Overall, the transactions cost are less than 10% (for the buyer). Maybe 3% for realtor's commission, same again for transfer tax, maybe around 1-2% for the notary.

Hi all.
Today is my first day on the forum and have been very interested in the posts I've read.
I have a Couple is questions I'm hoping I can get some answers on so here goes.
I've lived in BG for many years and have recently sold my house although reluctantly which was purchased in a company name.  I am currently in the process of purchasing another home in a different location and am being confronted with differing ideas.  I have been told by my realtor that he can arrange for our new home to be purchased in our names and the land to remain in the name of our company.  I can see some of the advantages of this eg; lower electric bills, lower municipality taxes etc but is this legal and long term is it likely to be advantageous.
The seller is currently through their realtor trying to get me to reduce the sale price on paper and I'm very reluctant to do so primarily because it's illegal and doesn't benefit me in any way only the seller. 
There are other construction's if one chooses to follow this route.  Should you wish to insure your home you can put any value you choose on it but in the event of a total replacement due to fire, earthquake or other disaster you will only receive the value that appears on your title deeds and not that which you insured it for.  In the event of a compulsory purchase by the government for let's say a motorway you will also only receive that which is on the deeds.
Thanks for listening looking forward to any comments or advice you may have.

Welcome to expat.com @miksandstrum!

It's the land that causes the company requirement, so I suppose it makes sense that it would be possible (and legal) for you to buy the house personally, and the land in your existing company. Sounds like a bit of a faff to me, and I'm not sure how advantageous it would be. This is the first time I've heard of it, but perhaps it's more common than I realize. To find out the exact pros/cons, you probably need to consult a lawyer or other real estate expert. I'd personally do exactly what you did before (i.e. use the company to hold the house and land), unless your realtor has some strong arguments for doing something different.

As discussed previously in the topic, the lower declaration is officially illegal but very commonplace. It lowers the seller's capital gains and hence tax payment, and this is the main reason for its popularity. (However, this is not the only reason: it also lowers the transaction fees and property taxes, both of which are down to you, the buyer.) If you can say "no" and not lose your seller, or you can easily find another property, then it isn't a difficult decision. If it's an urgent purchase or you can't afford to lose the property, then I suppose you might be more tempted to agree. As it's about lowering his tax payment, you'll find that, mostly likely, if you do refuse, the seller will want a higher selling price (to get the same net amount).

As to the value on the notary deed being used for insurance purposes, that sounds incorrect. Someone might have bought a house 20 years ago for 1,000 leva! When I purchased some house insurance last year, they asked me to specify values for contents and replacement. The cost varied based on the total I asked for. So I am confident they pay this, rather than looking at my deed.

Compulsory purchase might be a different story, but it still sounds pretty harsh if they can buy based on the price 20 years ago. In the UK (and most countries) the compensation is based on the open market value. But perhaps there is some legal relic of communist times that hasn't been updated. You sound pretty certain, but I'd be surprised if this were still the case. :-)

A quick search online  turns this up (in relation to Bulgaria and other Eastern European former communist countries, or "transitional economies"):

"After 1990 the newly elected democratic governments changed the constitutions to permit and protect private ownership of land. However, compulsory purchase is essential in a market economy to deal with certain aspects of market failure. In spite of their commitment to the inviolability of private property, the transitional economies have had to develop compulsory purchase procedures and means of assessing compensation."

So... overall... illegal, and not recommended. But if you like your new house, it will probably be easier to just go with the flow. And, in my opinion, unlikely to result in any negative repercussions (the notary police knocking on your door, arguments about the insurance value or compulsory purchase value).