Reversal of property tax assessment. It will be lower in 170 settlements.
According to preliminary estimates, after the implementation of the new categorization in 2024, many settlements will move to lower categories, i.e. their location coefficient will become lower, and from there – the tax assessments of the properties will become even lower, reported the financial portal pariteni.bg.
This change will affect about 170 settlements that are municipal centers (64% of the 265 municipalities) and an as yet unknown number of town halls, which would lead to a reduction in real estate tax revenues of over BGN 41 million. This is said in the opinion of the National Association of Municipalities in the Republic of Bulgaria on the amendments to the Law on Local Taxes and Fees.
They provide for the creation of a permanent rule to update two of the total seven components of the formula for calculating the tax assessment of real estate:
- in the event of a total change of more than 10 percent in the housing price indices according to NSI data, starting from the following year, the basic tax value per 1 sq. m. should be updated;
– in the event of a total change of more than 10 percent in this index at the regional level or a change in the categorization of settlements, the location coefficient shall be updated starting from the following year.
The Association of Municipalities reminds that a similar provision existed in the Law on Local Taxes and Fees and was applied until 2007. At that time, the law allowed the tax assessment, determined according to the norms in the appendices to the law, to be changed, but no later than November 30 of the previous year, if the real estate market value index has increased or decreased by more than 20 percent cumulatively for the period since their last change.
In our country, the amounts of the basic tax value have not been changed since 2002 and are determined, according to the law, according to the types of properties and constructions, varying from BGN 3.70/sq.m. m. up to BGN 18.70/sq.m. m.
The location coefficients increase the basic tax value per 1 square meter and are determined differently, according to the functional type of the settlement and the zone in which the relevant property is located.
Separate changes in the location coefficients were made in 2006, 2007 and 2009, while essentially in these years the grouping of municipalities according to the second functional type was changed and the grouping into the third was dropped.
The highest coefficient for location is for zone I in the capital – 93.6, and the lowest is for settlements of VI, VII, VIII category. These coefficients are further increased by 50% for properties in resorts and by 20% in villa areas up to 10 km. from the sea coast.
If no measures are taken, the large lag behind tax assessment values and real estate market trends will continue to deepen in the coming years. The values at which the real estate transactions are declared drastically differ from their tax assessments, which are the basis for calculating the real estate tax, the tax for remunerative acquisition, as well as a number of other state and notary claims, the opinion says.
According to the NSORB, upon acceptance of the proposed change, after its entry into force on January 1, 2024, the preparation of specific amendments to the tables under Appendix No. 2 of the Tax Tax Act should be started, with which to determine the new amounts of the basic tax value and of the location coefficients so that they apply from 1 January 2025.
The municipalities also support the proposal to create a permanent rule for the annual update of the basic tax value in BGN per square meter, which is involved in the calculation of the tax assessment of agricultural lands.
The tax assessment of agricultural land is determined depending on the method of permanent use and the category, the location factor and the area. It is the legal basis for determining and paying the local tax in case of acquisition of property for consideration. The proposal aims to ensure the possibility of subsequent legal amendments to the table determining the basic tax value of 1 sq. m. The values of this indicator currently vary from BGN 0.338 to BGN 0.003, depending on the category and type of plantings.
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