20% VAT on new building sales - Bulgaria discusses amendments to the law on value added tax

A new increase in property prices in Bulgaria may be caused by changes in the VAT Law, which stipulate that individuals must pay the state 20% when selling a new construction property.

The Ministry of Finance of the Republic of Bulgaria proposes to introduce a 20% VAT rate on the sale of new housing. The amendments to the VAT Act provide that individuals will pay the state a 20% value added tax on the sale of new housing. According to the proposed amendments, the tax will be charged on the sale of new property if the transaction is carried out within five years of receiving the exploitation permit. The amendments will also affect the sale of regulated land owned by individuals, as well as persons with the right to build.

The Ministry of Finance submitted this proposal for discussion at the end of 2024. The amendment states that taxpayers (individuals) who sell a new home must register for VAT before the sale. Another important circumstance: the obligation to pay VAT for an individual arises when making at least three sales of real estate within 12 months. Thus, the changes will not affect persons who sell property from time to time.

One of the reasons for the introduction of additional taxation by the Ministry of Finance is the fight against VAT fraud by individuals. The adoption of the changes will increase budget revenues and equalize the conditions for individuals and legal entities. Currently, there are many questions and criticisms from experts regarding the goals and consequences of such changes.

It is interesting that despite the tightening of the rules for mortgage lending, adopted in 2024 by the BNB, there is currently no decline in the number of mortgage loans. We recall that from October 1, 2024, restrictions on the ratios of the volume of the issued loan to the value of the collateral and the cost of debt service to the client's income, as well as the maximum loan repayment term in Bulgaria, came into force.