Whether you are a landlord or tenant, this guide provides a practical overview and will help you to understand the rental taxes and shows three scenarios based on calculation examples on the basis of the current legislation in Bulgaria. Bulgarian tax law rental income differentiates between business and private rental options.
See following three scenarios for reference based on an example monthly rent of € 450.
Scenario 1: Landlord is a Company, Tenant is a Company or Private Person
Tax Implications:
– Rental income is subject to a 10% corporate income tax.
– The company can deduct property-related expenses.
Example Calculation:
Annual Rent: €450 * 12 = €5,400
Assume annual deductible expenses (maintenance, etc.): €1,200
Taxable Income: €5,400 – €1,200 = €4,200
Corporate Tax: 10% * €4,200 = €420
Tenant Deduction: If the tenant is a company, they may be able to deduct the rental payment as a business expense.
Scenario 2: Landlord is an Individual, Tenant is a Company
Tax Implications:
– The tenant company is responsible to withholds 10% tax from the rent payment to the individual / private landlord, after applying a 10% statutory deduction, and deposits it to the budget every quarter.
Example Calculation:
Monthly Rent: €450
10% Deduction: €450 * 0.10 = €45
Taxable Base: €450 – €45 = €405
Tax to Withhold: 10% * €405 = €40.50
Net Rent Payment to Landlord: €450 – €40.50 = €409.50
Quarterly Tax Payment by Tenant Company: €40.50 * 3 = €121.50
Scenario 3: Landlord and Tenant are Both Individuals (Private to Private)
Tax Implications:
– There is no need to register or any need for formal declaration of renting out property.
– The landlord needs to declare 10% tax on the rental income, after a 10% statutory deduction.
– The landlord declares and pays this tax quarterly and is ought to submit annual tax declarations.
Example Calculation:
Monthly Rent: €450
10% Statutory Cost Deduction: €450 * 0.10 = €45
Taxable Income: €450 – €45 = €405
Monthly Tax: 10% * €405 = €40.50
Quarterly Tax Payment: €40.50 * 3 = €121.50
Note on Terminology:
In the examples above we use the term “company” and we used to refer to any type of business entity. The tax treatment applies to businesses in general, regardless of their specific legal structure.
In case you have any questions please feel free to drop us an email or book a call.
Yours truly,
Uwe
