Real Estate Transactions by Individuals in Bulgaria — Purchase, Flip, Taxes and VAT (2026)

Who is affected by these rules

The rules in this article apply to individuals — both tax residents under Art. 4 PITA and non-residents earning income from a Bulgarian source. Transactions covered include:

• Residential properties — apartments, houses, villas, studios;
• Non-residential properties — shops, offices, warehouses, parking spaces;
• Plots of land — urban regulated plots (UPI), agricultural and forest land;
• Limited property rights — building right, right of use.

This article does not cover transactions by legal entities — these are subject to a separate regime under the Corporate Income Tax Act (CITA). For the general procedure for property purchase, see our separate publication.

Purchase — taxes and fees you will pay

When acquiring real estate, the individual bears several taxes and fees. Customarily the buyer pays them all, unless the preliminary contract provides otherwise.

When the seller is an individual (not VAT-registered), no VAT is charged, regardless of whether the building is new or old.

Sale — when it is exempt from tax

Art. 13(1)(1) PITA sets out three independent exemption hypotheses. Each operates separately — it is sufficient to fall into one of them to avoid tax.

Hypothesis 1 — one residential property held for more than 3 years

Exempt is the income from the sale of one residential property per calendar year, provided that more than 3 years have passed between the acquisition and sale dates. It applies only to properties of residential character — apartment, house, villa, studio. It is irrelevant whether the property is the main home or a second home.

Hypothesis 2 — up to two properties held for more than 5 years

Exempt is the income from the sale of up to two properties per calendar year, if more than 5 years have passed between acquisition and sale. This hypothesis covers both residential and non-residential properties (plots, shops, offices, warehouses).

Hypothesis 3 — agricultural and forest properties

Exempt is the income from the sale of agricultural and forest properties held for more than 5 years, without any limit on the number of transactions.

Sale — taxable transaction

When the transaction does not fall within any of the three exemption hypotheses, Art. 33 PITA applies — 10% tax on the positive difference between the sale price and the acquisition price.

How the tax base is calculated

• Sale price — as agreed in the notarial deed (if lower than the tax assessment, the NRA can tax on the higher value).
• Less acquisition price — documented by notarial deed, gift contract or inheritance certificate (for inherited property — tax assessment at the date of death).
• Less documented improvements — renovation invoices issued in the seller’s name.

Statutory recognised expenses — 10%

Under Art. 33(1) PITA, the tax base on the sale of real estate is calculated as the positive difference between the sale price and the acquisition price, reduced by 10% statutory deductible expenses (which do not need to be substantiated by documents). This means the effective tax rate is 9% (10% tax on 90% of the profit).

Loss carry-forward — not permitted

Art. 33(6) PITA expressly prohibits carrying losses from one transaction to another or to the following year. A loss on a sale stays “at zero”.

Declaration

The income is declared in Annex No. 5 to the annual tax return under Art. 50 PITA, with a deadline of 30 April of the year following the year in which the income was received.

Flip — buy, renovate, resell

A classic flip is the purchase of a property (often with bank financing or off-plan at “Act 14”), renovation, and resale within 6 to 24 months for profit. From a tax perspective, a flip is a borderline case — it can be private property or business activity depending on the circumstances.

When a flip is “private property”

• A single transaction without a pre-existing resale plan;
• Own-use planned, but not realised (job change, separation, health reasons);
• No systematic attraction of third-party capital;
• Renovation for own use, not “staging for sale”.

Indicators of business activity

The NRA and the case-law use the following indicators to reclassify a flip as an independent economic activity:

• Financing by a short-term loan refinanced after the resale;
• Home staging — professional styling for sale (photography, visualisations, marketing campaign);
• Engagement of permanent teams — architect, construction firm, broker on retainer;
• Advertising the property before renovation is complete;
• Multi-party financing with profit-sharing;
• Systematic pattern — more than one similar project in the last 12–24 months.

When the NRA reclassifies as a business activity

The “3 deals in 12 months” myth — wrong

Older NRA practice and earlier audit assessments often applied the formula: “three or more transactions per year = business activity”. This is not a statutory criterion. Neither PITA nor VATA contains a magic number of three transactions. Relying on such a threshold in an audit assessment can be successfully challenged.

The correct statutory framework

Under Art. 3(2) VATA, “independent economic activity” is an activity carried out regularly or as an occupation, including intellectual activity practised as a free profession. Art. 1(3) of the Commerce Act supplements the definition of a trader — carrying out commercial transactions as an occupation.

Two cumulative criteria from CJEU case-law

1. Organisation of resources “as a trade” — the dominant criterion. If the individual uses means similar to those of a trader (professional teams, marketing, flip loans, home staging), this indicates business activity.
2. Systematic nature — the activity is not incidental but repeated with an intent to continue.

CJEU cases C-180/10 and C-181/10 (Słaby, Kuć)

In the joined cases C-180/10 and C-181/10 (Słaby, Kuć), the CJEU clarified:

• The ordinary exercise of the right of ownership (sale of personal properties) is not business activity;
• Subdividing one plot into smaller plots for sale is not automatically business activity;
• Business activity arises when the owner takes active steps to market the property — infrastructure works, utilities, marketing campaign, similar to those of a real estate trader.

This case-law binds Bulgarian courts and the NRA via Art. 19 TFEU and is a decisive argument when challenging reclassification.

Practical scenarios

Scenario 1 — NOT a business activity

Ivan inherits three properties from his parents. In the same year, he sells them all because he cannot maintain them and lives abroad. Classification: ordinary exercise of the right of ownership. The income falls within the exemption under Art. 13(1)(1) PITA if the properties were held for more than 5 years (for inheritance, the period runs from the notarial deed).

Scenario 2 — clearly a business activity

Maria buys 4 apartments at “Act 14” from a developer, finances the renovation with a loan, hires a permanent construction team and resells at “Act 16” for profit within 10 months. Classification: business activity under Art. 3(2) VATA — 15% combined tax + mandatory VAT registration once turnover exceeds EUR 51,130.

Scenario 3 — hybrid case

Peter buys an older apartment, lives there for 6 months, carries out a major renovation and sells it. Classification: borderline — depends on intent at purchase, marketing activities, and whether he undertakes a similar project the next year. Pre-transaction tax analysis recommended.

Scenario 4 — land plot with infrastructure works

Denitsa buys a large plot, subdivides it into 5 UPI, builds access roads, electricity and water supply, and sells the plots individually. Classification: under CJEU Słaby/Kuć — business activity, because the owner takes active steps similar to those of a trader.

Scenario 5 — building right against compensation in apartments

Landowner grants a construction right to a developer and receives apartments in the new building, which are then sold. Classification: ordinarily treated as business activity if more than two units are sold, or if the initial arrangement is structured for resale.

VAT regime for business activity

When the activity is reclassified as independent economic activity, VAT obligations also arise.

Mandatory registration threshold

Under Art. 96 VATA, mandatory registration is required when taxable turnover exceeds EUR 51,130 (BGN 100,000) over the last 12 consecutive months. Exceeding the threshold triggers a 7-day deadline to file the application. See our separate article on VAT registration procedure.

New vs. old buildings

Voluntary registration and option to tax

If the buyer is VAT-registered and wants to deduct input VAT, the seller can opt to tax an otherwise exempt supply (Art. 45(7) VATA). This is useful for B2B sales of offices and shops between traders.

Sanctions for non-reclassification and missed filings

If the NRA, during an audit, establishes that you carried out business activity without declaring it, the risks include:

• Additional tax assessment — 15% combined tax (10% corporate + 5% dividend) for legal entities, or PITA as a sole trader for individuals;
• VAT arrears — for 5 years back, at 20% of turnover;
• Late-payment interest — BNB base rate + 10 percentage points per year (Art. 1 of the Act on Statutory Interest);
• Fine — 10% to 15% of the concealed tax (Art. 80a PITA and Art. 180 VATA);
• Audit by analogy under Art. 122–123 of the Tax-Social Insurance Procedure Code — the NRA may determine the tax base by market comparables if documentation is lacking.

The limitation period for establishing liabilities is 5 years from the end of the year in which the return was filed (Art. 171 TSIPC).

The official NRA position on declaring income from the sale of property is available on the NRA website.

Frequently asked questions