Underdeclared Price in a Notarial Deed for Property Sale — Tax and Criminal Risks (2026)

What “underdeclared price” in a notarial deed actually means

An “underdeclared” (or “understated”, “below-actual”) price means that the parties record in the notarial deed a sum that is lower than the price actually paid and received. The difference is usually settled in cash or outside the banking system — the so-called “part under the table”.

Three typical scenarios

Why people do it — the illusory “tax saving”

• The buyer lowers the local transfer tax under Art. 47 LTFA (0.1–3% of the price, depending on the municipality).
• The buyer pays a lower notary fee (which is proportional to the deal value).
• The buyer pays a lower Property Register recording fee (0.1% of the value).
• The seller reduces personal income tax under Art. 33 PITA — 10% (effective 9%) on the positive difference between acquisition and sale price.
• A corporate seller reduces its corporate income tax base and, where applicable, VAT on taxable supplies.

The theoretical saving is 3–10% of the “hidden” portion of the price. The real exposure is up to 6 years of imprisonment and full tax reassessment.

Legal framework — five acts meet in one deed

A property sale concluded by notarial deed sits at the intersection of several statutes:

• Property Act and Obligations and Contracts Act (OCA) — validity of the transaction;
• Notaries and Notarial Activity Act (NNAA) — procedure for executing the deed;
• Local Taxes and Fees Act (LTFA), Arts. 46–47 — local transfer tax;
• Personal Income Taxes Act (PITA), Art. 33 — tax on gain from sale;
• Criminal Code (CC), Arts. 255 and 313 — tax fraud and false declaration;
• Cash Payments Restriction Act (CPRA) — mandatory bank transfer for payments ≥ EUR 5,113;
• AML Act (MAMLA) — customer due diligence by the notary.

Art. 46(2) LTFA — the statutory floor

Key safeguard: “The tax is determined on the price of the transferred property, and where that price is lower than the tax valuation — on the tax valuation.” In practice, a deed cannot be executed below the municipal tax valuation. That valuation is the floor.

Art. 47(1) LTFA — rate of the local transfer tax

The rate is set by each municipal council within a range of 0.1% to 3% of the price (for 2026). Typical rates: Sofia 2.5–3%, Plovdiv 3%, coastal municipalities 2.6–3%, smaller municipalities 0.1–2.5%.

Tax risks for the seller

Tax under Art. 33 PITA

When a resident individual sells real estate, the positive difference between sale and acquisition price is taxed at 10% PIT, with a 10% statutory deductible expense allowance (Art. 33(3)) — effective rate 9%.

Critical point: if the notarial deed for the sale shows an underdeclared price while the acquisition invoice reflected the full price (the seller originally bought at full value), the result is a negative or minimal taxable difference. This looks favourable — but only if no downstream link (NRA, subsequent buyer) challenges it. On audit the NRA will:

• Obtain an expert valuation as of the date of sale;
• Analyse the banking flows of both buyer and seller;
• Trigger a source-of-funds audit on the buyer (the more common path).

Exemptions — when the sale is not taxable at all

Under Art. 13(1)(1) PITA, the following are exempt:

• One residential property sold ≥ 3 years after acquisition;
• Up to two properties sold ≥ 5 years after acquisition;
• Agricultural land acquired by restitution or inheritance.

In those cases underdeclaring brings no PIT benefit for the seller — the motive is only on the buyer side, or it is driven by laundering. See our article on property sales by individuals.

Corporate seller

• 10% corporate income tax on the positive result;
• VAT where the supply is taxable (new buildings within 5 years of Act 16, or residential units sold by a developer under specific rules);
• When the price is understated — NRA applies Art. 15 and Art. 16 CITA (avoidance of taxation / arm’s length principle).

Tax risks for the buyer

“Saving” at the moment of the deal

Example: purchase of a Sofia apartment. Actual price EUR 200,000; declared price EUR 100,000.

• Local transfer tax at a 3% rate: EUR 3,000 instead of EUR 6,000 — saving EUR 3,000;
• Notary fee (proportional tariff): saving ~EUR 500–800;
• Property Register fee (0.1%): saving EUR 100.
• Total “saved”: roughly EUR 3,600.

Hidden costs and risks

1. Low acquisition price haunts the next sale

If the buyer later sells at full market value, the gap between EUR 100,000 (declared acquisition) and EUR 230,000 (future sale) generates PIT of 9% on EUR 130,000 = EUR 11,700. Had the full EUR 200,000 been declared, the taxable gain would have been EUR 30,000 and the tax only EUR 2,700. Net loss EUR 9,000 — substantially more than the EUR 3,600 “saved” on day one.

2. Source-of-funds audit

In an audit of an individual, the NRA tracks the accretion of assets. If the buyer reports EUR 60,000 of annual income and acquires a property for EUR 100,000 but actually pays EUR 200,000, the bank flows or witness evidence will reveal the gap. Consequence: additional PIT on the undeclared amount plus interest and penalties.

3. Setting aside the sale — only the declared sum is restored

If the sale is later declared null and void, challenged by the seller’s creditors, or rescinded on another ground, the buyer recovers only the declared price. The “under the table” portion is lost without evidence of payment. This is the single biggest financial risk.

4. Criminal liability

The buyer signs an affidavit before the notary as to the reality of payments. Submitting false information is a crime under Art. 313 CC — up to 3 years of imprisonment or a fine of EUR 51–153.

Criminal liability — Art. 255 and Art. 313 CC

Art. 255 CC — tax fraud

Base penalty: imprisonment from 1 to 6 years and a fine up to EUR 1,023 (BGN 2,000). Aggravated forms:

• “Large scale” (above EUR 1,534 / BGN 3,000 of evaded tax): imprisonment 2–8 years;
• “Particularly large scale” (above EUR 6,136 / BGN 12,000): 3–10 years + confiscation;
• Participation of two or more persons (seller + buyer acting in concert): aggravated form.

Art. 255 is a result crime — actual damage to the budget is required (i.e., the tax paid must be lower than the tax due). If the tax is in fact paid (e.g., by another party), Art. 255 does not apply — the applicable norm then is Art. 313.

Art. 313 CC — false declaration before an authority

Whoever confirms an untruth or withholds a truth in a written declaration made before an authority is punished by imprisonment of up to 3 years or a fine of EUR 51–153 (BGN 100–300). Paragraph 2: for aggravated cases — up to 5 years.

The notarial affidavit — a mandatory document

Under the latest amendments to the NNAA, notaries are required to obtain from both buyer and seller a written declaration on the actual payments. Failure to provide such a declaration, or providing false information in it, is a separate offence. The notary must refuse to execute the deed where the declaration is not provided or where there are obvious inconsistencies.

Cash Payments Restriction Act (CPRA)

Art. 3 CPRA prohibits cash payments equal to or exceeding EUR 5,113 (BGN 10,000). For property transactions above that threshold, payment must go through a bank transfer or deposit to an account. The ban also captures linked payments — splitting a single payment into tranches below the threshold does not circumvent the rule.

Sanctions under CPRA

• Individuals: fine of 25% of the sum paid in cash, not less than EUR 255;
• Legal entities: property sanction of 50% of the sum;
• Repeated offence — double the amount.

Implication for underdeclared price

If the actual price is EUR 200,000 and EUR 100,000 is declared in the deed (paid via bank), the remaining EUR 100,000 “in cash” constitutes a double breach:

• CPRA — cash payment above the threshold (25% fine = EUR 25,000);
• CC Art. 313 — false statement before a notary.

Bank statements reviewed in audit or source-of-funds proceedings expose the discrepancy.

MAMLA — the notary as “gatekeeper”

Notaries are obliged entities under the AML Act (Art. 4, item 16). Real estate transactions require mandatory customer due diligence (CDD) under Art. 10 MAMLA:

• Identification of the parties;
• Identification of the ultimate beneficial owner;
• Substantiation of the source of funds;
• Risk assessment (real estate transactions score as high risk);
• Ongoing monitoring.

Where money laundering is suspected, the notary must file a suspicious activity report (SAR) with SANS within 3 days (Art. 72 MAMLA). Tipping-off the client is prohibited.

In practice, an understated price + “under the table” payment + opaque banking flows frequently trigger a SAR. See our article on CDD/KYC under MAMLA.

NRA audit — instruments and findings

Source of funds (audit of an individual)

Under Art. 122(2) TIPC, the NRA may determine the tax base by an indirect method where:

• The taxpayer has failed to file or has filed a false return;
• The taxpayer’s expenditure clearly exceeds the reported income;
• Asset accretion cannot be matched to legitimately documented sources.

A buyer who actually pays EUR 200,000 while reporting EUR 50,000 of annual income falls squarely into “manifest mismatch”. The NRA will treat the gap as undeclared income — taxable at 10% PIT plus statutory interest.

Fair market valuation (audit of the seller)

On a property sale, the NRA can commission a fair-market valuation. If it finds the declared price materially below market (typically more than 20% deviation), PIT is recalculated at market value under Art. 33(11) PITA.

Information exchange

• The Property Register feeds data automatically to the NRA;
• Banks report transactions above defined thresholds;
• DAC6/DAC7 and MAMLA SARs — cross-checked through SANS;
• Notarial declarations are archived and accessible to enforcement bodies.

The statute of limitations for assessment is 5 years (ordinary) and 10 years (absolute) under Art. 171 TIPC. See our article on prescription before the NRA.

Practical recommendations — how to protect yourself

For the buyer

1. Declare the actual price. A 3–4% saving today can cost 10–15% on the next sale.
2. Pay through a bank. Anything above EUR 5,113 — mandatory. Below the threshold — still recommended for traceability.
3. Keep the full paper trail. Preliminary contract, invoices evidencing the source of capital, bank statements, deed — for at least 10 years (absolute prescription under TIPC).
4. If you suspect understatement — walk away. Do not sign a notarial declaration that you know to be false.
5. Do not enter into a “scheme with the seller”. Concerted action is an aggravated form under Art. 255 CC.

For the seller

1. If the sale is exempt (after 3 or 5 years) — you have no tax benefit from understatement. Declare the full price.
2. Verify the original acquisition price. If it was declared low, the next sale will produce a high PIT. Keep documents on improvements (materials, renovations) — they add to the acquisition base.
3. Avoid cash payments above the threshold.
4. Report the income in your annual tax return. Failure to do so is a ground for tax fraud.

For a business owner (legal entity)

• Related-party transactions at arm’s length (Art. 15 CITA). Transfer pricing is mandatory.
• Document the fair-market valuation (certified appraiser).
• Transfers to the owner — risk of hidden distribution of profit (Art. 26 CITA).

Frequently asked questions