tax when selling

[simon and kate]

does anyone know how much tax you have to pay after you have sold foreign property?

thanks!

[Garyjs]

I think that capital gains tax in Bulgaria is presently 10%

If you bring money back to the UK you may have to make up the difference, I think that UK rates are presently 18% however I missed the Budget as I was in Bulgaria at the time, so uk rates may well be set to hit 40% again

My Bulgarian solicitor informed me that you could sell 1 apartment per year free of capital gains tax, now that has just changed, if you keep the property for 3 years it is then free of capital gains tax, not too sure if he is correct, but that what he told me 3 days ago

It is important to note that if you do sell, you may have made a large capital gain even if you sell at a loss, depending on what price was put on your title deeds when you purchased

I am not sure what other taxes are involved when selling

I am no expert, hopefully 1 will come along soon with more info

Good Luck

Gary

[ptoner]

Hi

If you are UK resident and UK taxpayer then you are liable to pay capital gains on your world wide assets, so once you settle your tax in bulgaria (I think there is none as they treat you more favourably), you need to declare your capital gain in your UK Tax return and pay tax if any due.

Due to double taxation agreement between bulgaria and UK, you would be allowed to offset any bulgarian taxes paid off the UK liability.

The amount you have to pay depends on what the gain is.

you are allowed to make £10,000 without paying any capital gains, then anything over this is taxed at 18% for basic rate tax payers or 28% for higher rate tax payers. If the property deed/notary is in joint names, then you are allowed 2x 10,000 allowance, allowing you to make £20,000 profit tax free.

The profit is the difference between the price on the deeds and the price when sold. So lets say deeds say £50K and you sold for £70K, then allowing £10K tax free gain, you pay 18% of the other £10K gain = £1,800
If you currently are a higher rate tax payer you will owe tax mane £2,800

There are various rules and ways to reduce the gain I believe (renting out the apartment gives you more allowance, declaring the apartment as your primary principle residence for a short period), but there are implications of doing these and you should consult with a tax adviser to understand whats possible and whats not advisable!

Now if you dont tell the UK tax man about the gain you might this think you can avoide UK capital gain, but looks at how off shore bank accounts which were once safe havens are having to declare and tell revenue about money you may have "hidden", don't think it will be too long before our greedy government forces other countries or banks in Bulgaria to inform them of sales or monies held in foreign accounts...

Hope this helps a little, but its a huge area and not simple Question & Answer

Paddy

[simon and kate]

There's two of us on the deeds, so we can make 20k profit before we pay capital gains tax? I very much doubt we will make 20k profit, so does that mean we won't have to pay any tax just solicitor fees?

[ptoner]

Yes you would be allowed to make 20K profit without any tax due.

See the HMRC website for more info:

http://www.hmrc.gov.uk/cgt/intro/basics.htm

although it doesn't seem to mention the new higher rate of tax 28% mentioned in the budget this week.

Please note, you need to check what price is on your deed, not the price you paid, in order to calculate the profit.

It has been normal practice of putting lower price on the deeds in Bulgaria to avoid or lower local tax, so in my example if you paid 50K and only 30K is on the deeds,and sold for 70K, HMRC would see this as 40K profit not 20K - beware!

Not sure how to get round this one... if anyone has encountered this on resell would be interested to know how they got round it....

Paddy

[simon and kate]

To be honest the price on they have put on the contract is one of my concerns, they seem to have put everyone down by 40%, but surley we all have proof from the very first contract we signed and all the bank transfers?

[ptoner]

I made sure FN put the actual price I paid on the Notary document (in euros). However it also states the "Tax Value" which is in Leva and is approx 50% of the price I paid.

So there are two numbers on my deeds.

I agree with you the lower price is a bit worrying, not sure how resales handle the actual price Vs tax value price .... maybe someone else has experience on this ?

Think the lower tax value is used in Bulgaria to keep the Notary fees on purchase lower....... but hopefully it doesn't impact your UK tax

[simon and kate]

well, I've looked through all of our paperwork, the 1st contract we signed states the amount we actually paid. The deeds/notary are in Bulgarian, so god knows what they say BUT we did make them type out a reciept with how much we paid, which is the same as the 1st contract. I had completely forgot we asked them to make a reciept out for us!

[mirador]

Hey does this mean someone has actually managed to resell an apartment ???

[simon and kate]

lol nope, just looking into it

[mirador]

gorget it unless u want to give it away - the english were conned again to fund the building then it gets
sold off to the russians on the cheap..........sorry but its true . there is no resell market at all

[irina_k]

Mirador,

I wouldn't be so sure about the construction funded by British and when complete sold out to Russians on a cheap intentionally, through Bulgarian developer's ill will. What you say is (on the face of things) true, but IMHO is solely due to the economic downturn, you forgot the time factor. It's hard for me to believe that a developer with a pretty solid standing on Bulgarian market like Fort Noks would dream of putting his reputation at risk with his prospective clients from UK. Within a month from my purchase (at a negotiated price of 10% lower from the initial one) the prices went down by 5K - and I have noone to blame for it but the crisis... Just a month between you viewed as a family investment star and a commercial failure I am fortunate that my family looks philosophically upon it
From what you write I gather you want to resell your property? Did you try the Russian market? I am not saying it's much livelier that that of UK, but, until an alternative source of energy is found, it's still alive and kicking.

Regards,

Irina

[June]

Firstly I think that we all have to remember that there was no re sale market when people bought in Bulgaria, it is only now that the resale market is starting to emerge. Not in peoples favour. There is a saying all over the world a property is only worth what people are prepared to pay.

Capital gains has to be paid on the profit that you have made, if you have owned the property in Bulgaria for over 3 years then no capital gains tax has to be paid to Bulgaria.

The problem is that not everyone has the correct payment on there notary deeds, so if your notary deeds states less than you paid your profit is based on the notary deed.

Prices for resales are rock bottom at the moment, so if you can just sit on your property and not sell this would be the best option, to sell at the moment you probably would be making a loss.

My advise to anyone at the moment is to sit back dont sell and wait and see what the market will do, but dont expect to make money by selling at the moment

[purkyuk]

Your right CGT is wavered after 3 years for BG residents, but not for non-residents, i.e. you still have to pay CGT or 'withholding' tax regardless of the years you've owned (7-9% of profit, minus expenses).