Donation Tax in Bulgaria — When It Applies and How It Is Calculated (2026)

Legal framework

Donation tax in Bulgaria is governed by the Local Taxes and Fees Act (LTFA), Articles 44–51. The LTFA regulates both the substantive and procedural aspects of taxation, with the following key features:

• Object of taxation — the tax applies to property acquired by way of donation, as well as to any other gratuitous acquisition of property, including the remission of debts (Art. 44, paras. 1 and 2 LTFA). The law treats debt remission as equivalent to a donation, insofar as it results in a transfer of value without consideration.
• Taxpayer — under Art. 45 LTFA, the tax is payable by the acquirer (the donee). Where the parties agree that the donor will bear the tax, such an arrangement is effective only in their internal relationship — vis-à-vis the municipality, the donee remains the liable party.
• Exchange (barter) — in the case of a barter agreement between assets of unequal value, the tax is owed by the party who acquires the more valuable asset, calculated on the difference. Barter thus follows the logic of a partial donation.
• Foreign-situs property — where the property is located abroad but the donor or donee is a Bulgarian resident, the applicability of the LTFA should be assessed together with any relevant double taxation treaties.

Donations are also regulated by the Obligations and Contracts Act (OCA), which defines the form, validity and possibilities for revocation of the donation contract (Arts. 225–227 OCA). The two regimes interact as described below.

Tax base (Art. 46 LTFA)

Determining the tax base is the first practical step in calculating the tax due. Under Art. 46 LTFA, the base varies according to the type of property:

• Real estate and limited rights in rem — the tax base is the higher of the agreed price and the tax assessment value determined under Appendix 2 of the LTFA. The tax assessment is calculated by the municipal authority based on area, location, construction, age and other parameters. In donation transactions, where the parties typically state no price or only a symbolic one, the tax assessment value is used.
• Motor vehicles — the base is the insurance value of the vehicle at the time of the transfer. This is the same value used for comprehensive (Casco) insurance and is calculated on the basis of factory specifications, mileage and depreciation.
• Other property — for movable goods, shares, company interests, receivables, etc., the tax base is the market price of the property at the date of the transaction. Where a dispute arises as to market value, the municipality may appoint an expert or use data from independent market sources.

If the donee acquires property as a co-owner or receives only an ideal share, the tax base is determined proportionally to the acquired quota.

Tax rates (Art. 47 LTFA)

Donation tax rates are not fixed centrally — the LTFA sets statutory ranges, while the specific rate is determined by the municipal council of the relevant municipality through its local tax ordinance. This means that the rate on the same donation may differ between Sofia, Plovdiv and Varna within the statutory limits.

For reference, in the Sofia Municipality the approximate 2026 rates are: around 0.7% for siblings and their children, and around 5% for third parties. It is advisable to check the current ordinance of the relevant municipality before any transaction, as municipal councils may amend rates annually upon adoption of the local budget.

The tax is calculated on the tax base set out in section 2. For example, the donation of an apartment with a tax assessment value of BGN 200,000 from an uncle to a nephew (classified as “other persons” for tax purposes) at a rate of 5% results in tax of BGN 10,000. By contrast, if the donee is the donor’s child, no tax is due.

Exemptions (Art. 48 LTFA)

Article 48 LTFA contains a detailed list of scenarios in which donation tax is not due. These cover socially significant cases in which the legislator has determined that taxation would be inappropriate:

• Spouses — donations between spouses are fully exempt from tax, regardless of the value of the property transferred.
• Direct relatives in the ascending and descending line — children, parents, grandchildren, grandparents, great-grandchildren, etc., without any limitation on the degree of direct-line kinship. The law treats the horizontal transfer of property within the family estate as exempt.
• The State, municipalities and budget-funded organisations — donations in favour of state and municipal structures are exempt.
• Bulgarian Red Cross — a specific exemption granted in recognition of the organisation’s humanitarian mission.
• Educational, healthcare, scientific, social and cultural organisations — provided that they are duly registered under the applicable laws and the donation serves their core activities.
• Bulgarian Chamber of Commerce and Industry (BCCI) — expressly listed in the statute.
• Customary gifts — gifts of a customary nature (e.g. for holidays, anniversaries) are exempt, provided they do not exceed customary limits and do not conceal material gratuitous transfers.
• Aid under statutory acts — aid, scholarships, compensation and similar benefits received gratuitously under a statute or regulation.
• Donations between relatives up to the second degree on the occasion of marriage — traditional wedding gifts enjoy a special exemption regime.
• Donations for humanitarian purposes to persons with disabilities of 50% or more — granted to persons with reduced working capacity or permanent disabilities at the stated level.

The exemption applies ex officio, but the donee must still declare the donation and prove the grounds for exemption (birth certificate, marriage certificate, medical commission decision, etc.).

Form of the donation

The form required for the validity of a donation contract is regulated by Art. 225 OCA and by the special laws governing the respective types of property. Failure to comply with the statutory form renders the transaction void:

A particular feature of the notarisation of signature and content for LLC shares is that it must be carried out simultaneously — i.e. the notary certifies both the signatures of the parties and the content of the contract in a single act. This form was introduced in 2018 as a measure against “company theft” and is mandatory for all transfers of company shares, including donations.

Declaration and payment (Arts. 49–50 LTFA)

Following the execution of the donation, the donee must declare it before the competent municipality and pay the tax due within the statutory deadlines:

• Declaration deadline — two months from the acquisition of the property. The declaration is submitted to the municipality at the location of the real estate (for real estate donations) or at the permanent address of the donee for other types of property. A standard declaration form approved by the Ministry of Finance is used.
• Payment for real estate and motor vehicles — the tax is paid before the notarial transaction is executed. The notary must verify payment of the tax prior to formalising the deed — without proof of payment the transaction cannot be completed. This effectively makes the notary a guarantor of tax collection.
• Payment for other property — for movables, cash, receivables, company shares and joint-stock shares, the tax is paid within the two-month declaration period.
• Interest and penalties for delay — late payment triggers statutory default interest, and failure to declare may result in administrative fines under the LTFA.

Notaries have a statutory obligation to notify the municipality of the transactions in which they have formalised donations, providing an additional control mechanism for tax compliance.

Revocation of a donation (Art. 227 OCA)

Unlike contracts for consideration, a donation contract may, in certain cases, be revoked at the request of the donor. The grounds are exhaustively listed in Art. 227 OCA and are interpreted strictly by the courts:

• Wilful attempts on the donor’s life — where the donee has wilfully attempted to take the life of the donor, the donor’s spouse or child, or has been an accomplice to such an attempt. The mere attempt is sufficient; a criminal conviction is not required.
• False accusation of a crime — where the donee falsely accuses the donor of a crime punishable by imprisonment of no less than three years, unless the offence is prosecuted only upon complaint by the injured party and no such complaint has been filed.
• Refusal to provide support — where the donee refuses to provide the donor with support which the donor needs. This ground is particularly relevant in inter-generational donations and requires proof of actual need.

An action for revocation must be brought within one year of the donor becoming aware of the ground (Art. 227, para. 3 OCA). This is a preclusive period, after the lapse of which the right to seek revocation is definitively extinguished.

Article 227a OCA also provides for a special ground — revocation upon the birth of a child after the donation, where the donor was childless and subsequently had a child. In such cases, specific rules protect the interests of the newborn statutory heir.

Upon revocation, the donee must return the property; if it has been transferred to bona fide third parties, the donee owes its monetary equivalent.

Hidden donations — risks vis-à-vis the NRA

One of the most topical practical issues is the so-called “hidden donation” — a transaction formally structured as a sale but substantially amounting to a gratuitous transfer. The National Revenue Agency (NRA) has the power to re-characterise such transactions and apply the donation tax regime. Typical indicators of a hidden donation include:

• A price significantly below market or tax-assessment value — where the sale price is disproportionately low compared with the objective value of the property.
• Absence of actual payment — lack of bank transfers, receipts or other evidence that the price has been paid.
• Family or close relationship between the parties — transactions between relatives who do not fall within the exempt categories are scrutinised more closely.
• Economic implausibility — transactions in which the seller has no reasonable economic benefit and the circumstances do not justify the structure used.

The consequences of re-characterisation are assessment of donation tax, default interest and administrative penalties. In certain cases, the NRA may also raise the question of tax evasion. For transactions between closely related parties at values materially diverging from market levels, we always recommend consulting a lawyer beforehand.

Donation vs. inheritance — comparison

Clients often hesitate between transferring property during their lifetime through a donation and leaving it to statutory heirs through inheritance. The two regimes have significant differences, which can be summarised as follows:

From a tax perspective, the two regimes are almost identical in terms of rates. The main differences lie in the tax-free threshold applicable to inheritance and in the flexibility and reversibility of donations. The choice should be based on an overall assessment of family and estate circumstances, including the reserved shares of statutory heirs.

Frequently asked questions