Paper/Speech Details of Conference Program for the 16th NISPAcee Annual Conference Program Overview V. Working Group on Public Sector Finance and Accounting Author(s) Nadezhda Bobcheva Oborishte DIstrict (Part of Sofia Greater Municipality) Sofia Bulgaria Title Property tax in Bulgaria File Paper files are available only for conference participants, please login first. Presenter Abstract Property tax is a major local tax in Bulgaria Its prime role is to provide a local source of revenue to finance municipal services. Property Tax in Bulgaria is a tax on immovable property, i.e. buildings and landed properties in the so-called “construction boundaries” of the settlements as well as the landed properties out of them, located on the territory of the country. The tax is paid regardless of whether the property is used or disused. The tax is determined in the Local Taxes and Local Fees Act. Consequently, the National Assembly decides on what to tax (the tax base), how to value the property (valuation) and to what extent the property should be taxed (the tax rate). The size of the tax is determined as a multiplication of the tax evaluation for the real estate and the tax rate, which is 1.5 %o for the whole country. The rate is reduced by 50% if the property is the taxpayers residence or by 75% for a disable person. Due tax is calculated as a derivative of the basic tax assessment and the index for location. The index for location has the role to take into account the specific territorial and economic features of different municipalities. There are other indexes that have influence along with the already mentioned index for location. These are indexes for infrastructure, individual characteristics, stature, and amortization. All these indexes have minimal size and are uniform for all settlements in the country. At present in Bulgaria is used the area-based approach, which is not related to a property’s market value but to its size. The tax is levied at a prescribed rate per sq.m, which varies depending on the use of the property, its location and the functional type of the city. Taxable items are the land and buildings; the tax applies to all property regardless of whether used or disused but excludes land and buildings used for agricultural purposes. The taxpayer is ‘the owner of the land, buildings or rights’. Where a property is owned by more than one person then each person is liable proportionally to the extent of his/her ownership. The tax is payable in quarterly instalments on 31st March, 30th June 30th September and 30th November and with a 5% discount payable if the total amount is paid by 31st March. The area-based approach has been adopted due to a lack of property information, an underdeveloped property market as well as insufficient resources to enable the development of alternative systems. The idea was to utilise its advantages - few data requirements, lower technical requirement, computerisation and lower administrative cost. The tax is based on self-reporting and self assessment. It is important to notice that an area-based approach has a lot of disadvantages like non-uniformity of the burden, it is not related to income of the owner and it does reflect the overall economic growth. Starting 2005, all local taxes are collected by the revenue departments at municipalities. This makes accountability “easy” to implement and monitor. Indeed, in small municipalities people know each other and “social control” has been implemented. Employees from the municipality of Alfatar declared higher tax collection since the establishment of the Municipal Tax Office. Property tax in general provides a stable revenue source to local government and is simple to administer and collect. However, it should be noted that property tax does not contributes a significant amount to the local budget. For example, in the municipality of Silistra, property tax revenues total 1.8% of local budget (2005). However, in the municipality of Alfatar property tax revenues keeps share of almost 3% (2003-2005). The main challenge to be faced by Bulgarian local governments is the tax base (value of property) which needs to be re-valued on a regular basis otherwise it gets rapidly eroded by inflation and by recent developments of the Bulgarian real estate market and becomes costly to collect.
