Taxation of immovable property

Lawyer Mihail Tomov | Varna

Immovable property tax is a direct tax on assets held as an economic resource and potential source of income. The tax is levied on the value of the assets, determined by the quantitative and qualitative characteristics of the property, as reflected in the system used to assess its value for tax purposes. The exemption for agricultural land under Article 10(3) of the Local Taxes and Fees Act reflects its special status as a fundamental national asset and the related objective of reserving it for agricultural use. To that end, changes in land use are subject to a special procedure; agricultural land is exempt from this tax to encourage agricultural production. When agricultural plots are brought within the development boundaries of a settlement, their characteristics change: their location within a particular planning zone, the applicable building density standards and the infrastructure coefficient all depend on the settlement’s planning rules. Those changes increase the value of the assets. Bringing them into the urban area also takes them out of the areas intended for agricultural production. In the author’s view this should affect their tax treatment regardless of whether their designated use has been formally changed.

Under Article 8, point 1 of the Spatial Development Act, the specific use of each plot is determined by the detailed development plan. Within urban areas or on individual plots outside them, permitted uses may include housing, public services, production, storage, resorts, holiday homes, sports and recreation; green spaces and green corridors linking them to nature conservation areas; ornamental water features (cascades, navigable canals and others); traffic and transport, including cycle lanes and access routes for people with disabilities; utility infrastructure, special facilities and other uses. Under Article 7(1), urban areas comprise settlements and settlement formations.

The general development plan adopted for Varna in 2012 defines the location and boundaries of the settlement area, agricultural areas and areas designated for special, other or mixed uses, in accordance with Article 107 and paragraph 5, point 6 of the supplementary provisions of the Spatial Development Act.

When a property is brought within Varna’s development boundaries, the first limb of Article 10(1) of the Local Taxes and Fees Act applies.

Article 10(1) sets the criteria for taxing immovable property. It covers buildings situated in Bulgaria and plots within the development boundaries of settlements and settlement formations, as well as plots outside those boundaries designated in a detailed development plan for a use under Article 8, point 1 of the Spatial Development Act, following a change of land use where required by special legislation.

The sentence structure, which separates the relevant facts by a comma, identifies two situations in which the public authority may levy the tax: 1. The plot lies within the development boundaries of a settlement or settlement formation. 2. The plot lies outside those boundaries, is designated in a detailed development plan for a use under Article 8, point 1 of the Spatial Development Act and has undergone a change of land use.

This article is not a legal opinion or advice on any particular situation or person. For legal assistance in a similar case, consult a lawyer.