Then: the transaction
A higher minimum base at a time of record purchases and transfers — exactly where the deal itself is made.
Blog · Market analysis
Raising the tax valuation: economically, yes. But why now?
Updating tax valuations makes economic sense. The more important question is why it is being proposed after two exceptionally active years — when it was transactions, not passive ownership, that could have absorbed most of the effect.
Published: 29 September 2026+30%
The first step, 2027
Followed by +35% in each of 2028 and 2029
+100%
Doubled by 2029
30% + 35% + 35%, each step measured against today’s valuation
up to 3%
Property acquisition tax
The rate is set by each municipality
BGN 10bn+
Cash “under the mattress” before the euro
An expert estimate, not official statistics
The short version
The same higher valuation has a different effect depending on timing.
Applied during a period of record transactions, it acts on the transactions themselves. Introduced afterwards, a growing share of the effect moves onto the annual taxation of property people already own.
That is the real question: not whether tax valuations should be updated, but when, and on which tax base, it would have been most sensible to do so.
2024–2025
An unusual market cycle — and an unusual amount of cash.
The housing market went through a period of sharp acceleration: rapidly rising prices, a very high number of transactions, cheap mortgage finance and behaviour shaped by expectations around the euro changeover. Part of future demand was clearly pulled forward — purchases that under normal conditions would have happened later were made sooner.
At the same time, Bulgaria remains an economy with a sizeable informal sector and a large volume of cash held outside the banking system. Estimates vary, but as early as 2024 public expert commentary put the money held “under the mattress” at more than BGN 10 billion, and predicted that part of it would find its way into retail and real estate around the adoption of the euro.
None of this proves where the money came from in any particular transaction. But the combination of strong demand, purchases at ever higher prices, record activity and substantial cash resources makes real estate a logical channel for absorbing part of that liquidity. This is an economic inference from market behaviour, not a claim that every purchase was made this way.
FinHome’s analytical frame. When strong demand, deals at rising prices and substantial cash resources all coincide, the question is not only “is there proof for each individual sum?” but also what the movement of money through the market reveals.
The mechanism
Where the tax valuation matters in a transaction.
Under Bulgaria’s Local Taxes and Fees Act, the tax on the acquisition of real estate for consideration is charged on the agreed price — or, where that price is lower than the tax valuation, on the tax valuation. Municipalities set the rate within a range of 0.1% to 3%.
This makes the tax valuation a minimum threshold for taxation on transfer. When it sits far below real market levels, that threshold is low.
The legal line. There is nothing unlawful about a property genuinely selling at a price equal or close to its tax valuation. But if the price actually agreed and paid is higher, while the notarial deed states a lower sum, this is no longer “completing the deal at the tax valuation” — it is a discrepancy between the declared and the actual price of the transaction.
That is exactly why the wide gap between tax valuations and market values matters: it creates a broad band in which the legal minimum for taxation is far below the economic value of the asset.
The fiscal moment
The window that was missed was the record flow of transactions.
If the aim was to bring the tax base closer to the real value of property, the strongest moment to do so was before, or at the start of, the acceleration in 2024–2025.
The reason is simple: revenue from acquisition tax depends both on the tax base and on the number of transactions. When transaction volumes are at a record, any real increase in the minimum tax base acts on a far larger stream of transfers.
An illustrative scenario — not an estimate of tax actually evaded
BGN 300m
3% on a BGN 10bn gap
A hypothetical gap between the price actually paid and the declared tax base
BGN 510m
3% on a BGN 17bn gap
The same arithmetic with a larger hypothetical gap
These figures are not a calculation of lost revenue. They show the scale of the fiscal effect that even a partial gap between the value actually paid and the tax base could have at high transaction volumes.
At this point the question is no longer only about tax, but about governance. If the state has known for years that valuations lag systematically behind, while at the same time watching an unusually high number of transactions, postponing the update has a cost.
Who carries the burden
Now the effect shifts: from the transaction to ownership.
The proposal arrives after the strongest part of the cycle. Its economic effect is therefore different.
Now: ownership
A higher annual tax burden on a wide range of owners, whether or not they took part in the property boom.
A higher tax valuation will affect not only future transactions, but also the annual tax on real estate. The Ministry of Finance says that the 2026 base will be kept for the household waste fee during the transition period; the real estate tax itself, however, will follow the updated valuations.
This is the essential distinction. Someone who bought a second or third property as an investment in 2025, and a pensioner who has lived in their only home for 30 years, may own properties of similar value. Their ability to pay can be entirely different.
A property tax does not tax income. It taxes the asset. That is why raising the tax valuation can be economically logical and, at the same time, have a disproportionate effect on households that are rich in assets but limited in current income.
This is where the question changes: from “how do we tax the active market more realistically?” to “how do we share a higher burden among all owners?”
What would be more sustainable
The right debate is not “for” or “against” higher valuations.
Tax valuations clearly need to be updated periodically. Their current detachment from real values is hard to defend. But a one-off or mechanical percentage increase does not solve the underlying problem — different towns, neighbourhoods and types of property have risen in value at very different speeds.
A more sustainable model would be a system that updates regularly using clear regional and market coefficients, instead of lagging behind for years and then catching up in jumps.
FinHome’s conclusion. An earlier and smarter update could have worked hardest where economic value was being created — in the transactions themselves. A late update shifts more of the burden onto ownership, and so affects not only the active participants in the property boom but practically every owner.
This is not an argument for keeping tax valuations unrealistically low. It is an argument for tax policy that takes into account not only the size of the valuation, but also the timing, the tax base and the ability to pay of the person on whom the burden falls.
Legal framework and public data:
- Ministry of Finance — draft amendment to the Local Taxes and Fees Act, public consultation from 23 September 2026.
- Ministry of Finance — explanation of the phased increase: 30% in 2027 and 35% in each of 2028 and 2029, 100% in total against current levels; the household waste fee base to be kept.
- Local Taxes and Fees Act, Art. 44–51 — tax on acquisition for consideration, and the rule applying the higher of the agreed price and the tax valuation.
- Ministry of Finance — real estate tax and how the tax valuation is determined.
- Georgi Angelov, 26 June 2024 — public expert estimate of more than BGN 10 billion held “under the mattress” and its expected flow into retail and real estate around the euro changeover.
The BGN 10bn and BGN 17bn scenarios are illustrative arithmetic examples, not an estimate of proven tax evasion or of any specific amount of undeclared payments in transactions. This article is analytical and does not constitute legal or tax advice.