In brief
An Israeli resident who sells property in Bulgaria is liable there to a final tax of 10% on the gain after a statutory deduction of 10%, i.e. about 9% of the gain. The Bulgarian exemptions for selling an apartment held for more than three years, or up to two properties held for more than five years, apply, according to the wording of the law, only to residents of Bulgaria and of the European Union and the EEA, and not to Israeli residents. In Israel the sale is subject to capital gains tax under the Income Tax Ordinance, with a credit for the Bulgarian tax, and it must be reported within 30 days.
Key takeaways
- 1An Israeli resident pays in Bulgaria 10% on the gain after a 10% deduction for expenses - about 9% of the gain.
- 2The Bulgarian exemption after three or five years of holding does not apply to a seller who is a tax resident of Israel, even if he has a European passport.
- 3The seller himself pays the tax and files a declaration with the Bulgarian tax authority by the 15th of the month following the quarter in which the consideration was received.
- 4In Israel: capital gains tax of 25% on the real gain, net of a credit for the Bulgarian tax, and reporting and payment of an advance within 30 days.
- 5Documenting the purchase cost and obtaining a certificate of the tax paid in Bulgaria are a condition for a correct calculation and for preventing double taxation.
How much tax does an Israeli pay who sells an apartment in Bulgaria?
In Bulgaria: a final tax of 10% on the gain, after a deduction of 10% of the gain as "recognized expenses". In practice this is about 9% of the gain. Under Article 37 of the Bulgarian Personal Income Taxes Act, income of an individual who is not a Bulgarian resident from the sale of real estate in Bulgaria is subject to a final tax. Article 37(3) provides that the base is the difference between the sale price and the documented purchase cost, less 10% expenses, and Article 46 sets a rate of 10% (as of October 2026).
This is the point at which many investors are surprised. In many articles, and in professional discourse in Israel as well, Bulgaria's generous exemptions are mentioned: the sale of one residential apartment a year that was held for more than three years, and the sale of up to two additional properties held for more than five years. These exemptions exist, but the question is to whom they apply.
The Bulgarian exemption after three or five years of holding does not apply to a seller who is a tax resident of Israel, even if he has a European passport.
Does the exemption after three or five years apply to an Israeli resident?
According to the wording of the law, no. The exemptions appear in Article 13(1)(1) of the Act. Article 37(1), which imposes the final tax on non-residents, provides that the tax applies "notwithstanding" Article 13. The only exception appears in Article 37(7): final tax will not be collected on income exempt under Article 13 when it is paid to an individual who is not a Bulgarian resident and who is a tax resident of a European Union or EEA member state. An Israeli tax resident is not included in this exception.
| The seller | An apartment held for more than 3 years | Tax rate on a taxable gain |
|---|---|---|
| Resident of Bulgaria | Exempt (one apartment a year) | 10%, after a 10% deduction for expenses |
| Tax resident of an EU or EEA country | Exempt, on presentation of a residence certificate and a declaration | 10% final tax, with the option of a recalculation as a resident |
| Israeli tax resident | No exemption under the wording of the law | 10% final tax, after a 10% deduction for expenses |
The test is tax residence, not citizenship. An Israeli who holds a Romanian or Portuguese passport but whose center of life is in Israel is a tax resident of Israel, and therefore does not enjoy the exemption. To enjoy it, the law requires a residence certificate from the tax authority of the country of residence, together with the seller's declaration.
How is the taxable gain calculated in Bulgaria?
The base is the sale price less the documented purchase cost, and then 10% is deducted. A cost that is not documented is not recognized, so the original purchase documents, including the notarial deed and the proofs of payment, are essential. When the price is paid in instalments, Article 37(5) provides that the tax is calculated proportionally on the part received. Take a numerical example: an apartment bought for 100,000 euros and sold for 150,000 euros. The gain is 50,000 euros, after a 10% deduction the base is 45,000 euros, and the Bulgarian tax is 4,500 euros.
Who pays the tax in Bulgaria and by when?
The seller himself. When the buyer is an individual and not a business, he does not withhold tax at source. Under Articles 65(6) and 67(1), the non-resident seller pays the tax by the 15th of the month following the quarter in which he received the income. Under Articles 55(2) and 56(2), by the same date he also files a declaration with the National Revenue Agency (NRA). When the seller acts through an attorney whose permanent address is in Bulgaria, the declaration is filed with the regional office in the attorney's area of residence. Otherwise it is filed with the Sofia office.
After payment, you ask the Bulgarian tax authority for a certificate of the tax paid, under Article 58 of the Act. This is the document that will allow you to obtain a credit in Israel.
And what if the property is held in a Bulgarian company?
Then the seller is the company, and the taxation is different. There are two ways to exit the investment:
- The company sells the property. The gain is included in the company's profit and is subject to corporate tax of 10%. The sale of a new building, where less than five years have passed since it was put into use, may also be subject to 20% VAT. Distribution of the profit to the Israeli shareholder as a dividend is subject to withholding tax in Bulgaria and to tax on a dividend in Israel, net of a credit.
- The shareholder sells the company's shares. For the buyer this saves the municipal acquisition tax and the property registration fee. For a non-resident individual the gain from the sale of the shares is subject in Bulgaria to a final tax of 10%, without the 10% deduction that applies to real estate. The treaty between Israel and Bulgaria allows Bulgaria to tax a gain on shares of a company at least half of whose assets are real estate in Bulgaria.
How is the sale taxed in Israel?
As a capital gain under Part E of the Income Tax Ordinance, and not under the Land Taxation Law. An apartment abroad is not a "right in land" within the meaning of the Land Taxation Law, so the Israeli residential-apartment exemptions do not apply to it. It is an "asset" under Section 88 of the Ordinance, and the real gain is taxed at a rate of up to 25%. For an asset acquired before 2012 the calculation is linear, and a lower rate applies to the part accrued until then.
- A credit for the Bulgarian tax. The treaty between Israel and Bulgaria (signed in Jerusalem on 18 January 2000) permits Bulgaria to tax the gain, and provides that Israel grants a credit for the Bulgarian tax. If the Bulgarian tax is lower than the Israeli tax, the difference is paid in Israel.
- Surtax. Alongside the 3% surtax on income above the annual ceiling, from 2025 an additional 2% surtax applies to income from capital sources, including capital gains and rent, above a ceiling of 721,560 ILS, which has been frozen for the years 2025 to 2027. A large sale may cross the threshold.
- Reporting and an advance payment within 30 days of the date of sale, under Section 91 of the Ordinance, and in addition reporting in the annual return for the year of sale.
Continuing the example, in a simple calculation for illustration only: if the real gain in Israel is about 50,000 euros, the Israeli tax at 25% is 12,500 euros. Net of a credit of 4,500 euros for the Bulgarian tax, about 8,000 euros is paid in Israel. The actual calculation is carried out in shekels, according to the linkage rules and rates in the Ordinance and according to recognized expenses, and the result may differ.
New immigrants and veteran returning residents have tax benefits in Israel on assets abroad, which may exempt the gain in Israel for a certain period. In such a case the Bulgarian tax becomes a final cost. It is worth checking this before the sale and not after it.
How do you transfer the sale proceeds to Israel?
By a documented bank transfer, in euros. Since 2026 there is no currency conversion within Bulgaria, and conversion to shekels, if at all, is carried out at the bank in Israel. The Israeli bank will examine the source of the funds, so it is recommended to prepare in advance:
- The notarial deed of sale of the sale and its translation.
- The original purchase documents and the proofs of the transfer of funds from Israel at the time of purchase.
- The declaration to the Bulgarian tax authority and the certificate of payment of the tax.
- The receiving account details: an account in Bulgaria or a direct transfer from the buyer to an account in Israel, as set in the contract.
- If the property was held in a company: the dividend distribution resolution and the certificate of withholding tax.
A continuous chain of documents, from the money that left Israel on the day of purchase to the money that returns to it, is the simplest way to avoid delays at the bank and questions from the assessing officer.
A list of actions before a sale
- Locate all purchase documents and cost proofs, including documented renovations.
- Check your tax residence and examine whether there is entitlement to an exemption or a benefit in Israel.
- Compare a sale of the property with a sale of shares, if the property is held in a company.
- Prepare the documents for the buyer: a tax valuation certificate, a certificate of encumbrances and a certificate of no debts to the municipality and the condominium.
- A specific power of attorney for the sale, if you will not attend the signing.
- Pay the Bulgarian tax and file the declaration by the 15th of the month following the quarter, and obtain a certificate of payment.
- Report and pay an advance in Israel within 30 days, and claim the credit in the annual return.
What to do before signing, and how we accompany you
Proper planning of a sale begins before the property is advertised. We accompany the sale in Bulgaria, from preparing the documents to the notarial deed, structure the transaction as a sale of the property or a sale of shares according to the circumstances, coordinate payment of the Bulgarian tax and receipt of the certificate, and work with your tax adviser in Israel on the reporting, the credit and the transfer of the funds.
The contents of this article are general information and do not constitute legal advice, tax advice or an investment recommendation, and should not be relied upon for a specific case. The law, tax rates and tariffs in Bulgaria and in Israel change from time to time, and personal circumstances may change the outcome. Before any decision or signature, obtain advice tailored to your case.
Frequently asked questions
Is an Israeli who sells an apartment in Bulgaria after three years exempt from tax?
According to the wording of Bulgarian law, no. The exemptions in Article 13 apply to residents of Bulgaria, and Article 37(7) extends them only to tax residents of European Union and EEA countries. An Israeli resident pays a final tax of 10% on the gain after a 10% deduction.
How much tax is paid in Bulgaria on the sale of an apartment?
An individual who is not a Bulgarian resident and is not entitled to an exemption pays 10% on the difference between the sale price and the documented purchase cost, after a 10% deduction for expenses. That is, about 9% of the gain.
Who pays the Bulgarian tax, the buyer or the seller?
When the buyer is an individual, the non-resident seller pays the tax himself and files a declaration with the Bulgarian tax authority, by the 15th of the month following the quarter in which the consideration was received.
Is tax also paid in Israel on the sale of an apartment in Bulgaria?
Yes. The sale is subject to capital gains tax under the Income Tax Ordinance, at a rate of up to 25% on the real gain. The treaty between Israel and Bulgaria grants a credit for the Bulgarian tax, so usually only the difference is paid in Israel. You must report and pay an advance within 30 days of the sale.
Is it better to sell the company's shares instead of the property?
Sometimes. A sale of shares saves the buyer the municipal acquisition tax and the registration fee, and may therefore improve the price. On the other hand, it requires the buyer to conduct due diligence on the company, and its taxation differs in Bulgaria and in Israel. The decision requires a comparative calculation.
Read next · 10 min readReal Estate Development in Sofia: Planning and Construction, Permits and Legal Considerations for a ProjectAn Israeli developer in Sofia: holding land when a non-EU foreigner cannot buy it, the permit route to a use permit, contracts, off-plan sales and exit tax.Read the guideSources
- Bulgarian Personal Income Taxes Act - English translation (Arts. 13, 33, 37, 46, 55-58, 65-68)
- CMS - Real estate transaction costs and taxes in Bulgaria (capital gains, EU/EEA exemption)
- PwC Worldwide Tax Summaries - Bulgaria, Individual taxes on personal income
- Bulgaria - Israel Double Tax Treaty (Arts. 6, 13, 22)
- Ben Shoshan & Co. CPAs - Selling a residential apartment abroad: tax aspects
- Shibolet & Co. - Imposition of an additional 2% surtax on income from capital sources
The information in this guide is general in nature and does not constitute legal or tax advice on any specific transaction. Every transaction is assessed on its own facts.