The tax treatment of inheritance is regulated in Articles 29 to 43 of the Local Taxes and Fees Law.
Scope of taxation
Inheritance tax is levied on the estate of any decedent Bulgarian citizen located within Bulgaria or abroad when devolved by legal or testamentary succession, as well as on the estate located within Bulgaria where so devolved by any decedent foreign citizen. A decedent's estate incorporates the movable and immovable things owned by the antecessor and the rights to any such things, as well as the antecessor's other property rights, receivables and liabilities at the time of the opening of the succession.
The taxable persons are:
- the legal or testamentary heirs;
- the legatees.
Inheritance tax is not paid by the surviving spouse and by the lineal heirs without restraint.
Any decedent's estate, with the exception of such exempt from tax, is identified and valued in lev terms at the date of the opening of the succession, as follows:
- the corporeal immovables within the territory of the country: at the tax assessed value arrived at according to an annex to the Local Taxes and Fees Law;
- the foreign currency and the precious metals: at the central exchange rate of the Bulgarian National Bank;
- the securities: at fair market value or, where the fair market value cannot be established without considerable cost or difficulty, at nominal value;
- the transport vehicles: at the insured value;
- any other movable things and rights: at fair market value;
- enterprises or participating interests in commercial corporations or cooperatives: at fair market value or, where determination of the fair market value requires considerable expense or causes difficulties, according to accounting data.
- the corporeal immovables within the territory of another Member State of the European Union or of another State which is a Contracting Party to the Agreement on the European Economic Area or of any other third country: at a tax value stated in a document issued for taxation purposes by a competent authority of the respective State, accompanied by an accurate translation into Bulgarian language performed by a sworn translator.
The taxable estate is divided into portions, and each heir is allocated a portion according to the procedure established by the Succession Law.
The tax is assessed and is communicated to each heir or legatee according to the procedure established by the Tax and Social-Insurance Procedure Code.
The rate of the tax is determined by an ordinance of the Municipal Council separately in respect of each heir or legatee:
- applicable to siblings and the children of siblings: from 0.4 to 0.8 per cent per portion in excess of BGN 250,000;
- in respect of any other persons: from 3.3 to 6.6 per cent per portion in excess of BGN 250,000.
Time limits for submission of returns
Within six months after the opening of a succession, the taxable persons or their legal representatives are obligated to submit a declaration to the municipality exercising competence over the last fixed abode of the antecessor.
Any declaration submitted in due course by one heir benefits the other heirs as well.
In the declaration, the heirs must itemize the decedent's estate as inherited by type, location and value.
The tax is payable within two months after receipt of the notice.
The following are exempt from inheritance tax:
- the estate of those who fell for the Republic of Bulgaria or in the line of duty, or those who died in industrial accidents and natural disasters;
- the estate bequeathed to the State and the municipalities;
- the estate bequeathed to the Bulgarian Red Cross, the lawfully registered religious denominations in Bulgaria, the chitalishtes etc.;
- any ordinary household furnishings;
- any small farm implements;
- libraries and musical instruments;
- the antecessor's unclaimed pensions;
- the estates of Bulgarian citizens located abroad, in respect of which inheritance tax has been paid in the respective State.
Ordinary household furnishings, small farm implements, libraries and musical instruments are exempt from tax subject to the condition that the estate devolves to lineal relatives, a spouse and siblings.
The assets of the taxable estate are debited with the following items:
- any liabilities of the antecessor at the time of opening of the succession, established in terms of legal grounds and amount, unless property exempt from inheritance tax is acquired against any such liabilities; any liabilities to creditors whose claims to the antecessor are extinguished by prescription and are not realized within the six-month time limit under Article 32 of the Local Taxes and Fees Law, are not debited;
- any rights and receivables which the heirs have transferred to the Exchequer or the municipalities according to the procedure established by the law;
- funeral expenses up to the amount of BGN 1,000;
- any reliefs provided for in the law.
Administration of the inheritance tax
The inheritance tax is assessed, secured and collected by the municipal administration officers according to the procedure established by the Tax and Social-Insurance Procedure Code.
In accordance with the provisions of Article 4 (2) of the Local Taxes and Fees Law, any delinquent taxes shall be collected with interest under the Interest on Taxes, Fees and Other Such State Receivables Law.
According to the provision of Article 124 (1) of the Local Taxes and Fees Law, any heir, legatee or their legal representative, who fails to submit a declaration under Article 32 , who fails to submit any such declaration in due time, who fails to declare or misdeclares any property acquired by succession, is liable to a fine of BGN 10 or exceeding this amount but not exceeding BGN 500.
According to the provision of Article 127 (2) of the Local Taxes and Fees Law, default on payment of the inheritance tax is not treated as an administrative violation.
According to the provision of Article 128 of the Local Taxes and Fees Law, the written statements ascertaining the violations are drawn up by the municipal administration officers, and the penalty decrees are issued by the municipality mayor or by officials authorized by the mayor. The ascertainment of violations, the issuing, appeal against and enforcement of the penalty decrees follows the procedure established by the Administrative Violations and Sanctions Law.