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VAT on property sale
 
 
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queserasera
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PostPosted: Wed Oct 18, 2017 7:52 am 
Post subject: VAT on property sale
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Does anyone know the rules on VAT when selling a property via a company?

My understanding is that you are allowed to make 50k lev profit before VAT is payable.

But is this "profit" the actual selling price I achieve, or is it the selling price less the amount I originally paid?
  

Last edited by queserasera on Wed Oct 18, 2017 1:24 pm; edited 2 times in total
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Seedy
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PostPosted: Wed Oct 18, 2017 8:19 am 
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It's perhaps a little more complicated than it appears: in principle, Art. 96, Para. 1 of VATA (Value Added Tax Act) requires mandatory VAT registration for any person/entity having a taxable turnover of 50,000 leva or more for a period not longer than the last 12 consecutive months prior to the current month. The person/entity is obliged to file an application for VAT registration within 14 days of the expiry of the tax period in which such turnover was reached. So your company could be liable to pay not only VAT but also a fine for non-registration. In addition, if you include a chunk of the money as "Furniture" then it would still be part of your company turnover, and hence included in the overall figures.

The fly in the ointment is that it's possible that the VAT authorities could decide that you should have charged VAT on the transaction but you would be unable to reclaim that VAT element since you were not, as required, registered and hence unable to include that element.

Let me say that that last part is purely theoretical but who knows what MIGHT happen: after all, Тук е България! Very Happy

If I were you, I'd take most of the VAT advice that your lawyer is offering you under advisement and do what he should be doing, ie consult a proper Tax Accountant. Incidentally, make sure that your lawyer and the Tax Accountant, if you decide to use one, give you written receipts for any fees they charge you, made out to your company.
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queserasera
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PostPosted: Wed Oct 18, 2017 8:25 am 
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Thanks Seedy,

So the price you paid for your property originally is completely ignored? Seems a bit harsh if you pay 50k lev for a property, sell at 50k lev and then have to pay 20% tax on it!

I think the "get out" my lawyer is suggesting is to send the money for the furniture separately and therefore not involve it in any of the Company dealings.
  
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Moscow_Wolf
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PostPosted: Wed Oct 18, 2017 8:36 am 
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How long have you (OP) had the property? I don't know much about this VAT lark on buying and selling domestic property, but I recall my Lawyer saying something about a 3 year rule, but as I have no intention of selling anything at the current time, it went over my head.

Is there a Bulgarian equivalent Capital Gains tax when selling a property here owned by a registered Bulgarian Company or, for that matter, a Private Person?

I have always paid some kind of government tax at the purchase point of my properties whether on my company or private name, but I believe that was a tax on the difference between the Government valuation (which is usually quite low) and the purchase price. I have never been in a position previously to claim anything back, but I have only during this past week received my Bulgarian VAT registration on one company that is active as opposed to the other which is basically a Holding Company.

The other spanner in the works for me is that I have for years been paying the 'Self Insured' contributions to the Bulgarian National Health Insurance Fund and now, my Accountant is telling me that as a Retiree (due to a small UK Army Pension), I will have to pay circa 36 Lv. per month, but I am awaiting clarification on that matter.

Right, any more threads I can meander off and on today! Laughing
  
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queserasera
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PostPosted: Wed Oct 18, 2017 8:45 am 
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Hi Seedy,
I've had property for about 6 years and I think I'm right in saying that if my purchase was as an individual, not a company then I wouldn't have to pay any Capital gains tax either (one sale after owning for 3 year rule).
But as it's a Company sale I have no idea other than the mention of VAT, logically you think the original purchase price would be taken into consideration when levying vAT on the sale price. But who knows?
Thanks
  

Last edited by queserasera on Wed Oct 18, 2017 1:21 pm; edited 1 time in total
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Seedy
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PostPosted: Wed Oct 18, 2017 8:56 am 
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Don't forget that the Law, and taxes, are for "their" benefit, not "ours"! Very Happy

The important thing is to get things exactly right before you start the process: getting some not-quite-right advice from a lawyer who thinks he knows about Tax Accounting (or from some stranger on the internet, for that matter Wink ) can easily lead to problems down the line. Best to stump up some dosh for an expert's opinion.

I don't know the whereabouts of you or your house in BG but I do know of a good VAT accountant who may well be able to help you. I haven't used him myself but he is highly recommended by a good friend of mine - PM me if you want to know a bit more. I should add that I'm not sure if he speaks English or not, and I don't think that he's especially cheap either but "you get what you pay for".
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Moscow_Wolf
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PostPosted: Wed Oct 18, 2017 9:55 am 
Post subject: Re: VAT payable on property sale
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queserasera wrote:
Does anyone know the rules on VAT when selling a property via a company?

My understanding is that you are allowed to make 50k lev profit before VAT is payable.

But is this "profit" the actual selling price I achieve, or is it the selling price less the amount I originally paid?

Logic would tell me it is the second option, but my lawyer is telling me that I need to have a big chunk of my sale price designated as "furniture" to avoid paying VAT. But if the second option is correct then I would be under limit anyway!

I've written back to my lawyer for clarification but just wondered if anyone had experience of this issue?


Been looking at this in closer detail and beginning to understand (I think) what your Lawyer is suggesting, but I might well be wrong.

I'm guessing that your Company is NOT VAT registered and that you therefore didn't claim any VAT back at the time of purchase?

IF your property purchased on a Bulgarian Company sells for more than 50k BGN then, that is the company threshold of turnover when you're company is obligated to register for VAT. Hence, if over that price, VAT will become payable by your Company on the sale (or, you will have to add VAT to your selling price).

As far as I understand it, the VAT has nothing to do with profit, but with the turnover limit of 50k BGN before a Company must register for VAT. However, there are Corporate Taxes at 10% and the Bulgarian version of Capital Gains Tax at 15% to add into the equation.

There is a lot of information out there on the Internet, but knowing how current it is when the articles don't have a date to them makes it difficult to know what is current or outdated. I attach the last link that I gleaned my ideas from, but you would be well advised to take proper professional advice in this matter as what I am reading indicates that you could pay Capital Gains (version) here and also be subjected to paying it again in the UK (if you're a UK citizen domiciled there). Good luck and please report back on any professional advice given as it might save some of us a Bob or Two in the future:-

https://www.justlanded.com/english/Bulgaria/Bulgaria-Guide/Money/Other-taxes
  
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Seedy
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PostPosted: Wed Oct 18, 2017 9:58 am 
Post subject: Re: VAT payable on property sale
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Moscow_Wolf wrote:
... please report back on any professional advice given as it might save some of us a Bob or Two in the future...


Says Moscow "Owt For Nowt" Wolf... Wink Very Happy
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moonlight
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PostPosted: Wed Oct 18, 2017 11:48 am 
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Our company lawyer obtained the gov valuation of the property, deduced a sale figure (for nota act) which would be below the vat threshold. Then it goes along as 'normal', i.e. notary act cash at notary, and the balance 'as you wish'!

Regards.

P.s. a sale of furniture seems ok if documentation is required by the buyer?
  
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queserasera
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PostPosted: Wed Oct 18, 2017 12:33 pm 
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Thanks everyone, I will report back when I have more information as it may help someone else in the future.  
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Seedy
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PostPosted: Wed Oct 18, 2017 1:07 pm 
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moonlight wrote:
Our company lawyer obtained the gov valuation of the property, deduced a sale figure (for nota act) which would be below the vat threshold. Then it goes along as 'normal', i.e. notary act cash at notary, and the balance 'as you wish'!

Regards.

P.s. a sale of furniture seems ok if documentation is required by the buyer?


People who employ "lawyers" who break the law might want to ponder the implications of that concept and just how much they can trust them.

I imagine that he/she isn't stupid enough to leave any documentary evidence that you were advised to take such a course of action and the anti-money laundering laws here are very strict (with the proviso that, like in every other country, the Big Boys have no trouble evading them and the Little Guy is invariably the sacrificial lamb). If you get caught you can kiss your property, money and freedom goodbye. Just why people have the arrogance to think that they should behave dishonestly - and openly brag about it - totally defeats me; apparently the rules are only there when and if it suits them.... Rolling Eyes Evil or Very Mad

There is a strict limit on the permitted value of any transaction which can be paid wholly, or partly, in cash; bank payments with a cash "top-up" to attempt to evade this limit are illegal: both buyer and seller are jointly and separately liable, and BG court decisions are enforceable in the UK and elsewhere.

Sale of furniture belonging to the company is part of its turnover and counts towards the 50K figure; if you sell it as a private owner you'd better have receipts if the authorities decide to take a look at the sale.
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moonlight
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PostPosted: Wed Oct 18, 2017 3:13 pm 
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All absolutely correct Seedy. To join the Legal Profession there seems to be certain 'conditions'.
Exchange ones morals for arrogance.
Scruples must be avoided at all cost.
Believe unquestioningly all the client tells you, but...
Charge them accordingly.

I am not a lawyer, so the "arrogance" remark must be directed elsewhere?
My post described loosely what happened in my case, the longer version entailed a mountain of official documents between my accountant (another honest profession), 3 lawyers (again all honest?) and a very indignant and haughty company official in Sofia. All in all, not cheap!

Regards

P.s. payments were made by bank transfer , except a 'small brown paper package to me as a birthday present'.
  
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