The new VAT trap when selling property in Bulgaria: a breakdown of the rules, penalties and hidden details

All sorts of rumours are circulating among owners and estate agents: some frighten people with hundred-percent penalties, others talk about a limit of “two properties”. Let us go through, point by point, how the law actually works, what breaking it entails, and how the tax office (National Revenue Agency, NAP) tells a business apart from ordinary life circumstances.

The main changes: a threshold in euro and a “mine” in the turnover rules

Two fundamental changes have taken place in the legislation:

• The new threshold is tied to the euro: Instead of the previous 100,000 leva, the limit for mandatory VAT registration is now officially 51,130 euro per calendar year.
• Exempt transactions now count towards turnover: Previously, the sale of “old” property (more than 5 years since the date of Act 16) was a VAT-exempt supply and was simply not noticed by the tax authorities. From 2026, the amount received from such a sale is included in the turnover for registration purposes.

How does this work? The sale of an old flat by a private individual is still not subject to VAT (20%) in itself. But if the transaction price exceeded 51,130 euro, the citizen is obliged to file an application for VAT registration within 7 days.

Important: do transactions from last year, 2025, count?

Yes, they do. The law contains a clear transitional rule: if during 2025 a private individual sold property for more than 51,130 euro, the obligation to register for VAT arose automatically at the beginning of January 2026. If that limit was not exceeded, the counter was reset to zero on 1 January 2026.

Debunking the myth: where did the “two properties” rule come from?

The VAT Act itself contains no restrictions on the number of flats — only the amount of the transaction matters there. The figure of “2 properties” comes from a different law — the ЗДДФЛ (Personal Income Taxes Act), which governs income tax (10%).

Under the income tax law, you may sell only one residential property per year (your main home) without profit tax (if you owned the property for less than 3 years). If you sell more, a 10% tax on the net profit (the difference between purchase and sale) applies. And if a private individual regularly sells 3, 4 or more properties, NAP may treat them as a “hidden trader”.

What forgetfulness costs: penalties for missing registration

If you have crossed the 51,130 euro threshold and have not filed the documents with NAP within the 7-day deadline, two unpleasant things await you:

• Penalty for missing the deadline (Art. 178 of the ЗДДС): from 500 to 5,000 leva.
• Penalty for tax not charged (Art. 180 of the ЗДДС): Equal to the amount of VAT that should have been charged on the transaction.

Risk zone: If you sold an old flat (exempt from VAT), the 20% tax will not be assessed against you — you will only pay an administrative fine (around 500–1000 leva). But if you then sell a new property (less than 5 years since Act 16) or a plot of land, NAP will register you retroactively and forcibly collect 20% VAT on the value of the second transaction straight out of your own pocket.

A real-life scenario: is a chain of transactions during a move commerce?

The most common question: «We sold my father’s apartment in one city and our own apartment in another in order to move and buy a home in a third. But the new home turned out to be unsuitable because of the noise from construction work, and we sold it «at cost» (at the purchase price) in order to invest in a house under construction. The total of all the transactions exceeded €51,130. Are we now traders and do we owe VAT to the state?»

Answer: No. The law draws a clear line between commercial activity and the management of personal property.

In Art. 168v of the ЗДДС (VAT Act) it is stated that the turnover counted towards registration does not include the so-called «съпътстващи доставки» (incidental or occasional transactions). If the chain of sales is driven by genuine life circumstances, NAP has no right to treat you as a businessman.

Why such transactions are not treated as business:

• No profit-making purpose: If the apartment (as in the example with the construction noise) is sold at the purchase price («at cost»), there is no commercial intent. A business does not operate without profit.
• Everyday necessity: A family relocation, moving in with elderly parents, changing neighbourhood because conditions have deteriorated — these are personal, not commercial, purposes.
• Earmarked use of the funds: All the money from the sales is pooled and invested in a single new family home (for example, in building a house), rather than being put back into circulation for resale.

Expert advice: how to protect yourself before the tax authorities

Since data on large transactions reaches NAP automatically, be prepared for a tax inspector to ask for written explanations. To sleep soundly, secure your «legal rear» in advance:

• Keep everyday evidence: Documents on the change of address registration (from city to city), medical documents of elderly parents (if the move is connected with caring for them).
• Record force majeure: If you sold an apartment you had just bought because of construction work that suddenly started under your windows, take photographs and keep the district’s construction plan or the acts on the start of building work nearby. This will prove that the sale was forced.
• Show the movement of money: Keep the contracts for the home under construction or the house into which the money from the previous sales went. NAP must see that you are solving a housing problem, not engaging in speculation.

Summary: The new law requires daily monitoring of the amounts of your transactions. But if your sales are not a systematic off-plan business but the solution to family matters, you will not have to panic or pay 20% VAT. The main thing is to report the income correctly in your annual declaration and to have your family’s history on hand, documented in writing.