Bulgaria is preparing the largest change to property taxation in more than two decades. A working group at the Ministry of Finance is developing a new methodology for setting tax valuations — the figure on which annual property tax, the waste-collection fee and much of the tax on transfers of property are calculated. It is expected to take effect from 2027.
Public debate over recent weeks has centred on a different proposal: a higher tax on second and third homes. That proposal is real, but it is separate and, for now, deferred. The methodology is the bigger change, because it touches every owner rather than a minority of them.
A tax valuation is not a market price and was never designed to be one. It is calculated under the rules in Appendix 2 to the Local Taxes and Fees Act, using a formula that multiplies a base value by a series of coefficients — location, infrastructure, property characteristics, floor level and depreciation — and finally by usable floor area.
The municipal council then applies a rate in per-mille terms to that valuation. The law permits a range of 0.1 to 4.5 per mille; in practice no municipality applies the ceiling, most sit around 2–3 per mille, and in Sofia the rate is 1.875 per mille (indicative, as of July 2026).
The problem is that the underlying norms have not been updated in over 20 years, while housing prices in the major cities have risen several times over.
Market participants report that in a large share of Sofia transactions the tax valuation sits five to nine times below the price at which the deal actually closes.
One concrete example, discussed publicly by a tax adviser in July 2026: a home with a market value of €150,000–200,000 carries a tax valuation of roughly €50,000; at a rate of 2 per mille the annual tax comes to about €100.
The gap is not accidental — it is accumulated drift. But it means local budgets are funded off a base that describes the market of two decades ago.
Based on how the work is progressing, the new methodology will take account of substantially more, and more current, indicators:
At the same time, obsolete indicators are expected to be dropped — for instance whether the property has electricity, which today inflates the valuation for no defensible reason. There is discussion of replacing the window-frame type with an energy rating for the building.
The hardest part is redrawing the housing zones, since this must reflect both the accumulated price differences between districts and the emergence of new expensive and resort locations. There is consideration of drawing that data not only from official statistics but also from the cadastre, the Property Register and estate agencies.
Separately, there is discussion of updating tax valuations periodically — every two or three years, or automatically once prices rise above a set threshold (15% has been mentioned). That would be the more consequential change, more so than any one-off increase: the system would stop falling behind by default.
Two things need to be kept apart here.
A higher valuation does not automatically mean a higher tax. The per-mille rate remains a decision of the municipal council. Municipalities can lower the rate to offset the higher valuation in part or in full — or choose not to. The real effect will therefore differ from one municipality to the next.
The figures discussed publicly point to valuation increases in the 20–30% range. On the example above, that means an annual tax of roughly €120–130 instead of €100. In absolute terms the difference is small; as a percentage it sounds substantial. Both are true at once — which explains why the subject is politically difficult: more than 90% of the Bulgarian population owns a home.
This is the part most often misunderstood.
On a sale, the effect is limited. Acquisition tax and the notary fee are charged on the higher of the agreed price and the tax valuation. In a normal market transaction the price is many times higher, so raising the valuation does not change the arithmetic. A difference arises only where a deal is agreed below the tax valuation.
On gifts and inheritance, the effect is direct. There the base is the tax valuation itself. Gift tax between siblings and their children is 0.4–0.8%, and between people outside that circle 3.3–6.6%, with the exact rate set by the municipality. Gifts between spouses and direct-line relatives remain exempt, as does inheritance by a surviving spouse and direct-line heirs. In every other case a higher valuation means a proportionally higher bill.
On annual liabilities the effect is permanent. Property tax is charged on the tax valuation every year. So is the waste-collection fee: for 2026 municipalities retained the statutory option to set it on the basis of tax valuation, after the move to a "polluter pays" basis was postponed by amendments to the Local Taxes and Fees Act in December 2025.
In June 2026 Deputy Prime Minister Atanas Pekanov announced that progressive taxation of second and subsequent homes is being deferred to the 2027 budget. The idea is that each additional property would be taxed at a higher rate.
There are two substantive practical objections. First, applying it requires a national register linking one person's properties across different municipalities — no such link exists today. Second, tax advisers estimate that no more than 8–9% of the population owns a second or subsequent home, which limits the fiscal effect relative to the administrative burden.
There is also an objection of substance, voiced by market participants: the number of properties on its own says nothing about capacity to pay. One owner may hold an old village house, the flat they live in and an inherited apartment; another may hold a single luxury property worth millions. The more logical link is to the value and characteristics of the property, not the count. That is precisely what makes the valuation reform the more important of the two.
A narrower variant is also under discussion — a higher charge only on unoccupied homes, or on homes let under a lease registered with the municipality. If that is adopted, properly declaring a lease will carry tax consequences as well; we cover the deadlines and obligations of letting in our landlord's guide.
The relief for a main residence stays: on the property that serves as the owner's main residence, tax is due with a 50% reduction. That is set out in the law and is not part of the proposed changes.
For a new methodology to apply from 2027, the legislative changes must pass through Parliament as part of the tax package accompanying the budget — in practice in October or November 2026. Until then the specific coefficients and the new housing zones remain with the working group.
Which means there is no adopted text at this point. Everything above describes the direction of work made public in July 2026, not the law in force.
The reform arrives at a point when the market is normalising anyway — transaction volumes are contracting and prices are rising more slowly, as we set out in our H1 2026 market report.
The tax valuation is part of the file on every transaction we handle — we file for the certificate together with the seller, and it serves both the notary and the check for unpaid municipal liabilities. When the methodology changes, the figure for a specific property changes with it, and we will recalculate before the transaction rather than after. The full scope of the document preparation is set out in our guide to legal checks before buying. For a quick preliminary estimate under today's rules you can use the notary calculator.
The reform that will affect the most owners is not the progressive tax but the recalculation of tax valuations. It is twenty years overdue, will likely bring increases in the 20–30% range where the market has moved most, and will be felt most acutely not on sales but on gifts, inheritance and the annual bill from the municipality. The actual legislative text is expected in the autumn.
If a gift, an intra-family transfer or a purchase is coming up and you want the numbers run under today's rules — call us or come into the office. We will look at the specific property and tell you what changes for it and what does not.
This article describes changes under discussion and in preparation as of July 2026 that have not yet been adopted. The law in force is the Local Taxes and Fees Act. Amounts are indicative. This material is for information only and does not replace individual legal or tax advice.
