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Letting out properties
Emil Popov
Letting out properties
Emil Popov
tax consultant
director of Moore Stephens BulMar
www.msbulmar.com
Taking into consideration the new Value Added Tax Act, letting out land, whether agricultural, forest land or regulated land property, it is tax-exempt.
In this connection the law has two provisions. First, letting out equipment, machinery and fixed structures or structures built under the surface are taxable and second, letting out whole camping or caravan sites, vacation camps, parking lots, and other similar are also taxable.
Following this line of the new VATA regulations, if for example you are owner of a gas station, which you would like to let out, there are two types of deliveries: letting out the land on which the gas station is built and which land is tax-exempt and the building of the gas station itself, the posts and the underground cisterns fixed to the building, all of which are taxable.
Of course, according to the act you have the right to choose the whole delivery to be taxable (including the land), but this is to be agreed by the tenant, because they might not agree to pay additional VAT as cash flow, especially after the VAT account became irrelevant.
According to the VATA letting out residential building or part of it to a private individual that is not a merchant (which means not registered as Sole Proprietor according to the Commercial Act) is tax-exempt.
The Act has a clause according to which the accommodation in hotels, motels, villa and tourist settlements, separate rooms, houses, bungalows, camping or caravan sites, hostels, inns, caravansaries, boarding houses, vacation camps, holiday houses, balneological centers and sanatorium complexes is taxable.
No one knows why, but in their attempt to make a full list of all possible accommodations, the legislator had missed the accommodation in apartments, which is rapidly spreading, especially in Sofia, so, if you are giving accommodations in apartment, this will be tax-exempt.
Another example: you are private individual and have your own five-storey building, the ground floor of which is occupied by shops, the first floor – by offices and the rest
floors – by apartments let’s assume that you have let out all of them Right after your income from the rent of the shops and offices exceeds 50 000 levs for the last 12 months no matter the fact that you are private individual you will have to register under the Value Added Tax Act to start making out VAT invoices to accrue VAT on the rents of the shops and the offices to keep a register of the VAT sales and register of the VAT purchases only for the right of input VAT and to submit each month VAT return and to pay the due VAT no later than the 14th day of the next month You wouldn’t be able to use the expenditures you have made for the maintenance of the building including expenses for door keeper security maintenance of the common parts etc as well as the expenses for amortization of the building to reduce the due income taxes because according to the Value Added Tax Act you have the right to use as expenditure only 20 normatively tax deductible on the rent income and the insurance contributions made throughout the year The rest of the sum is taxable according to the personal income tax table between 20 and 24 which is extremely unfavorable for greater earnings But according to the VATA you can include all listed expenditures made for the maintenance of the building in the purchase register and to use the paid VAT for the expenses as input VAT I would also like to stress on the fact that you have the right to receive partial input VAT because you are providing taxable letting out shops and offices as well as tax exempt letting out apartments services The coefficient with which the input VAT is corrected is result by dividing the tax base by the amounts of the shop and office rents taxable by the tax base from all received rents taxable and tax deductible If in the same example you are letting out from the behalf of your own single member company you could register all need expenses for the maintenance and the management of the building as well as the expenses for the amortization of the building and the corporate tax on the earnings will be only 10 the lowest in Europe
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ПРОДАЖБА НА ИМОТИ, Емил Попов - данъчен консултант, директор на Moore Stephens BulMar |
| 28.02.2007, Март '2007 |
| При продажбата на имот в общия случай трябва да се определят следните неща: д... |
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Отдаване под наем на имоти, Емил Попов - данъчен консултант, директор на Moore Stephens BulMar |
| 06.02.2007, Февруари'07 |
| От гледна точка на новия Закон за ДДС отдаването под наем на земя е освободен... |
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