Construction and sale of a house - taxes

Construction and sale of a house - taxes

 

Question:
Hello!

I would like to ask what would be the resulting tax liabilities for an individual who plans to build and sell a house in a commercial way (without a subcontractor) in his own land? What advantages / disadvantages would the person have if he carries out the activity through company registration?

Thanks in advance!

 

Answer:

Hello,

In principle, it does not matter whether you will perform this activity as an individual or through a Company registered by you. In both cases you will be able to admit the construction costs and you will have to pay 10% tax on the realized profit. You have to keep in mind, however, something very important, which is the main difference between the two options. If the sale value of the house exceeds BGN 50,000, you will have to register for VAT (including as an individual). The difference is that once you register for VAT as a company, you will have to declare circumstances only related to the company's activities. However, if you are registered for VAT as an individual, you will have to declare circumstances related to you, as an individual, even if they are not related to doing business. You will be able to deregister for VAT after 12 months have passed from the month in which you sold the house. I will try to give you an example to illustrate the situation around VAT registration.

You are selling the house for a certain amount over BGN 50,000, which leads to an obligation for VAT registration. After a few months (less than 12) you decide to sell your personal car.

1. If you have a company registered for VAT as a result of the sale of the property, this in no way concerns the activity of the company. The same applies to all other property that you sell as an individual during the period until the deregistration of the company.

2. If you have registered for VAT as a natural person as a result of the sale of the property, then for this sale you will have to charge and pay VAT. This also applies to all your other property that you sell during the period until your deregistration as an individual.

Excluding the relevance of your activity to the VAT law, if you do not intend to develop this activity and after you build and sell the house you stop, it is more convenient to report everything as an individual. If you have a company, you will have to declare and submit the necessary reports every year on whether the company has an activity or not, until you decide to liquidate the company (which is a process related to time and costs).

We hope we have been helpful to you.

Greetings!