More and more couples in Bulgaria are choosing to live together without entering into marriage. According to data from the 2021 census, over 17% of families in the country are cohabiting without marriage, which represents more than 324,000 households. Cohabiting couples with children account for 27.3% of all family couples with children in the country. When there is no marriage, this leads to complications in inheritance matters and, in particular, complications in tax planning regarding inheritance tax.
It is important to know that the partner you live with does not inherit you by law if you are not married. In order for them to be able to receive part of the property, a will must be made, and it must comply with the legal requirements for reserved shares of the inheritance for statutory heirs (if any). This is rarely discussed, but in Bulgaria there is an additional tax obligation – inheritance tax.
Who owes payment of inheritance tax?
To determine whether a person owes inheritance tax, two criteria must be taken into account. The first is what the familial relationship is to the deceased person, and the second is the value of the inherited property. The Local Taxes and Fees Act explicitly defines which persons are exempt from paying the tax regardless of the value of the inherited property.
Inheritance tax is owed by all who acquire property by law, will, or legacy, with the exception of the closest relatives – the children, parents, and spouse of the deceased. This means that if you are a brother, sister, nephew or niece, or a unmarried partner, you will have to pay tax when receiving an inheritance. The same applies if you are not a legal heir but are designated in a will – for example, if the deceased has left you property or money.
How is the tax base determined?
The tax is due on the so-called taxable inheritance mass. The tax base is formed on the basis of the value of the inherited property. The value of the property is determined as follows:
- real estate located in Bulgaria – according to the tax valuation under Annex No. 2
- foreign currency and precious metals – at the central rate of the Bulgarian National Bank
- securities – at market value, and when the market value cannot be determined without significant expense or difficulty, they are valued at nominal value
- vehicles – at insurance value
- other movable property and rights – at market value
- enterprises or shareholdings in commercial companies or cooperatives – at market value, and when its determination requires significant expense or difficulty – according to accounting data
- real estate located in another EU country, or another country party to the Agreement on the European Economic Area, or a third country – at the tax value
Some expenses are deducted, thus reducing the tax base. The amount of recognized funeral expenses (1,000 BGN) has not been updated since 1998 and does not reflect today’s costs, which are often 3–5 times higher. A legislative change in this direction would be fully justified.
How is the amount of inheritance tax determined?
Interestingly, the amount of inheritance tax varies, because the law provides for a range within which each Municipal Council can determine the specific rates applicable in the municipality. This is done by an ordinance for setting local taxes.
For example, in Sofia the inheritance tax rate is 0.7% for inheritance shares over 250,000 BGN for siblings and their children, and for all others outside of them 5% for inheritance shares over 250,000 BGN. The difference in tax burden is significant. This again affects mainly partners who are not married but have inherited through a will, whether real estate with high tax valuations or company shares at market/accounting value.
In Plovdiv, the tax rates are the same as in Sofia. In Varna, they are slightly higher, with the maximum of 0.8% for siblings and their children, and 6.6% for other persons.
In Burgas the values are respectively 0.8% and 6%. In Stara Zagora the rates are slightly lower, respectively 0.4% and 4%.
These rates are subject to change. If the Municipal Council decides that the current levels do not correspond to social conditions, it may amend the ordinances determining the tax. This creates a degree of uncertainty about the final amount that would be owed. In the case of significant property, a high tax base will be formed and our partner may find themselves owing a substantial sum. For example, with a valuation of company shares worth 500,000 BGN, the inheritance tax that the person who lived with the deceased on a domestic partnership basis but was not married and was left the shares in a will would have to pay would be 25,000 BGN in Sofia, 33,000 BGN in Varna, and 20,000 BGN in Stara Zagora.
If at the same time the heir has no liquid funds, this will place them in a difficult financial situation.
Where and when is the inheritance tax declaration submitted?
The declaration for inheritance tax is submitted within six months from the finding of the inheritance in the municipality where the deceased had their last permanent address. If they lived abroad, the declaration is submitted in the municipality where the majority of their property in Bulgaria is located.
What is the deadline for paying the tax?
After the declaration is submitted, the municipality sends a notice of the amount of tax due, which must be paid within two months from the date of delivery. If this deadline is not met, statutory interest for late payment is charged, which as of April 1, 2025, amounts to 12.39% annually (2.39% base interest rate of the BNB plus a 10 percentage point surcharge). If a sole proprietorship, participation in a general partnership, or shares and stocks representing over 50% of the capital of a commercial company are inherited, the law provides the option for the tax to be paid within an extended deadline – up to one year from the opening of the inheritance. In this case, interest begins to accrue after the initial two-month deadline.
Special cases
When inheriting sums in bank accounts, life insurance, or securities, heirs must comply with a special procedure provided by law to ensure collectability of the inheritance tax. When the deceased had funds in a bank, these sums are paid to the heirs only after they present a certificate from the municipality confirming that they are included in the submitted inheritance tax declaration and that the tax due has been fully paid. If the tax has not yet been paid at the time of submitting the documents, the bank has the right to withhold it directly from the account and transfer it to the respective municipality within one month from the submission of the document specifying the exact tax amount. The heirs will receive only the remaining balance.
The same procedure applies when receiving sums under a life insurance policy where the deceased named a specific person as beneficiary – if that person is not legally exempt from tax, they will owe inheritance tax on the amount received, and payment will be made only after declaration and payment have been verified.
Likewise, if registered shares or other securities are inherited, their transfer to the heirs cannot be carried out without presenting a certificate from the municipality stating that these assets are included in the declaration and that the due tax has been paid. This requirement is mandatory for performing transactions with such assets, even when the heirs are specifically named in a will.
How and what to plan?
As with all other taxes, inheritance tax also requires proactive tax planning. In Bulgaria, this aspect is not often considered because historically inheritance was mostly between surviving spouses or linear descendants. However, with the changes in social relationships, a new approach is necessary.
Plan in advance. Make a list of your assets, assess who you would like to inherit what and in what shares, taking into account the legally reserved portions. Consider whether to prepare a will and align it with the mandatory shares of legal heirs, if any.
To facilitate your heirs and avoid situations where property remains undisclosed or unmanaged, it is important to keep a complete and structured archive of documents related to your property in one place. This includes title deeds for real estate, tax valuations, sketches and cadastral maps, contracts for bank accounts and deposits, a list of companies in which you hold shares or stocks, temporary certificates, stocks, pension and insurance policies, loan contracts, repayment schedules, lease agreements (if you are a landlord), as well as documents for high-value movable property – such as vehicles, artworks, or valuables. In case of property abroad, documents issued by the respective foreign authorities, accompanied by official translations, should also be stored. It is also advisable to include a list of all institutions with which you have financial or legal relationships – banks, insurers, lawyers, accountants. This will enable your heirs not only to submit an accurate declaration but also to exercise their rights over the inheritance without the risk of the estate being left unused or forgotten.
Equally important is to keep in the same place information about all liabilities you may have. Heirs should also be fully aware of any obligations of the deceased – bank loans, outstanding debts, obligations to private individuals, public debts to the National Revenue Agency, municipalities, or enforcement officers. These liabilities pass on to the heirs together with the property and may exceed the value of the assets. Therefore, having documentation on debts and obtaining reports from relevant institutions is a key condition for an heir to decide whether to accept the inheritance (expressly or under inventory), or in the extreme case – to renounce it in court.
A well-thought-out and documented distribution of assets can save your loved ones stress, costs, and unnecessary disputes during an already difficult time. Entering into marriage, even after many years of cohabitation, can also be a form of tax planning and protection for the surviving partner. In practice, it is not uncommon for couples in older age who have lived together for decades to choose to marry specifically because of the tax consequences in case of inheritance. In this way, the partner automatically becomes exempt from inheritance tax and also acquires the full rights of a statutory heir without the need for a will. Although this act may seem like a mere formality, it carries real financial and legal benefits for the person with whom you have shared your life.
Тhe article above is for information purposes only. It is not a (binding) legal advice. For a thorough understanding of the subjects covered and prior acting on any issue discussed we kindly recommend Readers consult Ilieva, Voutcheva & Co. Law Firm attorneys at law.
