Bulgaria's new, higher tax values for property have caught businesses off guard, but some in the sector see an upside too. The big question is how this will hit the property market, and what experts expect.
In most real deals now, the gap between the market price and the official tax value isn't measured in percent any more — it's measured in multiples. That's why brokers think the update comes late and won't move property prices at all.
Bilyan Shenkov, broker: "The hardest hit are people who dodge taxes, because if 35,000 euros was the minimum value, now it'll be 70,000 or 80,000. Step by step it'll get closer to the real value, because let's be honest, the real value is quite far from the tax value."
For ordinary owners, though, the change may bite. Goran owns a property outside Sofia and says the higher tax will cost him more.
Goran Stoyanov: "Of course it'll hit people's pockets, and that's not nice. Any extra cost is a bad thing."
Broker Bilyan Shenkov gives the example of a flat in central Sofia to show the gap between where things stand now and where they're heading:
Bilyan Shenkov, broker: "Say you have a 100-square-metre flat near the Doctors' Monument. The yearly tax is around 170 euros, but the property is worth about 500,000 euros. Is that in proportion? The tax will probably go up — yes, instead of 170 euros we'll pay 300 — but even then the ratio isn't that big."
If you compare Bulgaria with somewhere abroad — Madrid, say — you'll see the cost of buying property here is still low. Shenkov says taxes in Spain are much higher, but that doesn't slow the market down there at all.
Bilyan Shenkov, broker: "Notary fees and the local tax in Sofia come to about 4%. In Spain, the transfer tax is 10%, plus other costs on top. The gap is several times over, and it doesn't affect the market there one bit. Here, it's still pretty cheap to buy a property."
Businesses insist the current tax values are out of date and need to go up urgently, because they haven't kept pace with rising market prices. Tsvetan Simeonov, head of the Bulgarian Chamber of Commerce and Industry, says the main thing is that the values must be set fairly.
Tsvetan Simeonov, head of the Bulgarian Chamber of Commerce and Industry: "The human factor has to be kept out of this. The real value of a property can only be found where there's a public sale involving court enforcement officers, or when a property is sold at auction."
Simeonov points to the new tax breaks for families as a step in the right direction. At the same time, though, businesses are asking why the tax will be worked out over a 5-year period, and how the 33% rate was arrived at.