Bulgaria's 10% flat income tax applies to rental income too — making it one of the most landlord-friendly tax regimes in the EU. Whether you own a single apartment in Sofia or a portfolio of holiday lets on the Black Sea coast, the tax rules are straightforward. But the optimal structure — personal ownership vs. company (EOOD) — depends on your expenses, residency status, and rental strategy.
This guide covers every angle: how individuals, EOODs, and non-residents are taxed on Bulgarian rental income, the special rules for Airbnb and short-term lets, VAT implications, deductible expenses, filing deadlines, and the common mistakes that trigger NRA attention.
Rental Income Tax for Individuals
If you own rental property in your personal name as a Bulgarian tax resident, rental income is taxed under the Personal Income Tax Act (ЗДДФЛ) at a 10% flat rate on net income.
The 10% Automatic Expense Deduction
Individuals who earn rental income receive an automatic 10% deduction from gross rental income to cover expenses. You do not need receipts or documentation — the deduction is applied by law. The remaining 90% is your taxable base.
Effective tax rate on gross rental income: 9%.
How it works: EUR 12,000 gross annual rent × 90% = EUR 10,800 taxable base × 10% tax = EUR 1,080 tax. That's 9% of your gross rental income. No bookkeeping required — just report the gross amount in your annual tax return.
Key Rules for Individual Landlords
- No actual expense deductions. You cannot deduct real costs (repairs, insurance, etc.) against rental income as an individual — you get only the flat 10% deduction
- No social security contributions on rental income — it is considered passive income, not earned income
- Rental income from multiple properties is aggregated and reported on a single annual tax return
- The tenant does not withhold tax when the landlord is a Bulgarian tax resident — the landlord self-reports and pays
When individual ownership makes sense: If your real property expenses are less than 10% of gross rental income (e.g., a fully paid-off apartment with minimal maintenance costs), the individual structure is simpler and cheaper. No accounting fees, no company administration.
Rental Income via EOOD (Company)
Holding rental property through a Bulgarian EOOD (single-member limited liability company) opens up the ability to deduct actual expenses — but adds a second layer of tax on distribution.
Two-Layer Tax Structure
- Corporate income tax (CIT): 10% on net profit (gross rental income minus all documented business expenses)
- Dividend withholding tax: 5% when you distribute profits to yourself as the owner
Combined effective rate: approximately 14.5% of net profit (10% CIT + 5% on the remaining 90% after CIT). However, because you can deduct real expenses, the taxable profit is often much lower than gross income.
Example: EUR 24,000 Annual Rent via EOOD
| Item | Amount |
|---|---|
| Gross rental income | EUR 24,000 |
| Property tax + garbage tax | -EUR 400 |
| Insurance | -EUR 300 |
| Repairs & maintenance | -EUR 1,200 |
| Building depreciation (4%) | -EUR 4,000 |
| Accounting fees | -EUR 600 |
| Mortgage interest | -EUR 2,500 |
| Taxable profit | EUR 15,000 |
| CIT (10%) | -EUR 1,500 |
| Profit after CIT | EUR 13,500 |
| Dividend tax (5%) | -EUR 675 |
| Net to owner | EUR 12,825 |
| Total tax paid | EUR 2,175 (9.1% of gross) |
Compare this to the individual route: EUR 24,000 × 9% = EUR 2,160 tax. In this example, the rates are nearly identical — but the EOOD owner received significant depreciation and mortgage interest deductions that reduced the taxable base. With higher expenses, the EOOD advantage grows.
Deductible Expenses for EOOD
An EOOD can deduct all documented, business-related expenses from rental income:
- Property tax (данък недвижими имоти) and garbage collection tax
- Property insurance
- Repairs and maintenance — both routine and capital improvements
- Building depreciation: 4% per year under the straight-line method (tax depreciation rate for buildings per the Corporate Income Tax Act)
- Mortgage interest on loans used to acquire the property
- Property management fees
- Accounting and legal fees
- Utilities paid by the landlord (if included in the lease)
- Advertising costs for tenant acquisition
Documentation is mandatory. Unlike individuals, an EOOD must keep invoices, contracts, and receipts for every deducted expense. The NRA can disallow undocumented deductions during an audit and impose penalties. Use a licensed Bulgarian accountant.
Non-Resident Landlords
If you own Bulgarian property but are not a Bulgarian tax resident, the rules change significantly.
Default: 10% Final Withholding Tax
Non-resident individuals pay a 10% withholding tax on gross rental income — with no deductions available. The tenant (if a company or self-employed person) or the property manager must withhold and remit the tax to the NRA.
If the tenant is an individual (not acting as a business), the non-resident landlord must self-declare and pay the tax.
| Scenario | Tax Rate | Deductions | Who Pays |
|---|---|---|---|
| Non-resident, default | 10% of gross | None | Withheld by tenant/manager |
| EU/EEA resident, opt-in | 10% of net (after deductions) | Yes — same as residents | Self-assessed via annual return |
EU/EEA Residents: Option to File Annual Return
Under EU non-discrimination rules, residents of EU/EEA countries can elect to file an annual Bulgarian tax return and be taxed as if they were residents. This means they can claim the 10% automatic expense deduction (for individuals) or deduct actual expenses (if operating through a permanent establishment).
This option is beneficial when the effective tax after deductions is lower than the 10% gross withholding. To use it, file an annual tax return (Form 50) by 30 April of the following year and claim a refund of any excess withholding.
Double tax treaties matter. Bulgaria has treaties with most EU countries and many others. If your home country taxes worldwide income, the Bulgarian tax paid can typically be credited against your home-country tax liability, avoiding double taxation. Check your specific double tax treaty.
Tax Comparison: Individual vs EOOD vs Non-Resident
The table below compares the total tax burden at different income levels. The EOOD column assumes 30% real expenses (property tax, depreciation, maintenance, insurance, mortgage interest).
| Gross Annual Rent | Individual (9% eff.) | EOOD (~14.5% on profit, 30% expenses) | Non-Resident (10% gross) |
|---|---|---|---|
| EUR 6,000 | EUR 540 | EUR 609 | EUR 600 |
| EUR 12,000 | EUR 1,080 | EUR 1,218 | EUR 1,200 |
| EUR 24,000 | EUR 2,160 | EUR 2,436 | EUR 2,400 |
| EUR 48,000 | EUR 4,320 | EUR 4,872 | EUR 4,800 |
| EUR 100,000 | EUR 9,000 | EUR 10,150 | EUR 10,000 |
When does the EOOD win? When real expenses exceed 10% of gross income. If your mortgage interest, depreciation, and maintenance total 40-50% of gross rent, the EOOD's taxable profit drops substantially — and the total tax can be lower than the individual's 9%. The EOOD also provides liability protection and can retain profits for reinvestment without triggering dividend tax.
Airbnb & Short-Term Rental Taxation
Short-term rentals (typically under 30 days) are not treated as passive rental income in Bulgaria. They are classified as a commercial accommodation activity under the Tourism Act, which triggers different rules.
Key Differences from Long-Term Rental
- Trade registration may be required. Operating short-term rentals can be considered a commercial activity, requiring registration as a trader or through an EOOD
- Tourism Act compliance: properties must be categorized (rated with stars) by the municipality, and guest registration with the local police is mandatory
- Municipal tourism tax: a per-guest, per-night levy set by each municipality — typically EUR 0.25 to EUR 1.50
- Tax treatment for individuals: if not registered as a trader, income may still be taxed under the personal income tax rules (10% on net), but the NRA may reclassify it as commercial activity
- EOOD is often the safer structure for Airbnb operations, as it clearly establishes the activity as commercial and allows full expense deductions
The NRA is increasing scrutiny of Airbnb income. Bulgaria's tax authorities have access to platform data and are cross-referencing listings with tax declarations. Failing to declare short-term rental income is a common audit trigger. If you operate on Airbnb, Booking.com, or similar platforms, declare all income and ensure proper registration.
VAT Implications for Rental Income
Long-Term Residential Rental: VAT-Exempt
The rental of residential property for residential purposes is VAT-exempt under Bulgarian VAT law (ЗДДС, Art. 45). This applies regardless of your turnover. You do not charge VAT on residential rent, and this income does not count toward the VAT registration threshold.
Short-Term / Airbnb Rental: Potentially VAT-Liable
Short-term accommodation services are not covered by the residential rental exemption. They are treated as hospitality/accommodation services, subject to a reduced 9% VAT rate.
However, VAT registration is only required if your annual taxable turnover exceeds EUR 51,130 (BGN 100,000). Below this threshold, you are not required to register for VAT and do not charge it.
| Rental Type | VAT Status | VAT Rate | Threshold |
|---|---|---|---|
| Long-term residential | Exempt | N/A | N/A |
| Long-term commercial | Taxable | 20% | EUR 51,130 |
| Short-term / Airbnb | Taxable | 9% | EUR 51,130 |
Monitor your turnover carefully. If you operate multiple Airbnb listings and your combined short-term rental income approaches EUR 51,130, you must register for VAT within 7 days of exceeding the threshold. Late registration triggers penalties and retroactive VAT liability.
Need Help With Property Tax?
We advise foreign property investors on optimal ownership structures, tax filings, and VAT compliance. Free initial consultation.
Get a Free ConsultationLocal Property Tax (Данък Недвижими Имоти)
Every property owner in Bulgaria — resident or non-resident, individual or company — pays an annual property tax to the municipality where the property is located.
Rate and Calculation
- Rate: 0.1% to 0.45% of the tax-assessed value, set by each municipality
- Tax-assessed value is determined by the municipality using a formula based on location, size, construction type, and year of construction — it is typically well below market value
- Garbage collection tax (такса битови отпадъци) is charged separately, based on the same assessed value or a per-square-meter rate
Payment and Discount
Property tax is due in two installments: by 30 June and 31 October each year. If you pay the full annual amount by 30 April, you receive a 5% discount.
Typical annual bill: For a EUR 150,000 apartment in Sofia with a tax-assessed value of EUR 50,000, the annual property tax at 0.15% would be approximately EUR 75, plus EUR 50-150 for garbage collection. Total: EUR 125-225 per year — one of the lowest property tax burdens in the EU.
Annual Filing Obligations
Individuals
- Annual tax return: Form 50 (Годишна данъчна декларация по чл. 50 от ЗДДФЛ)
- Deadline: 30 April of the year following the tax year
- Payment deadline: same — 30 April
- E-filing discount: individuals who file electronically by 31 March receive a 5% discount on the tax due
- No advance payments required for rental income (unlike business income)
EOODs
- Annual corporate tax return: filed by 30 June of the following year
- Monthly advance CIT payments required if prior-year net revenue exceeded EUR 150,000; quarterly payments if between EUR 15,000 and EUR 150,000
- Annual financial statements must be prepared and filed with the Commercial Register
- Accounting: mandatory double-entry bookkeeping, prepared by a licensed accountant
Non-Residents
- If tax is withheld at source: no filing obligation — the withholding is final
- If electing to file (EU/EEA residents): submit Form 50 by 30 April and claim any refund due
Appoint a tax representative. Non-residents with Bulgarian rental income should consider appointing a Bulgarian tax representative (данъчен представител) to handle filings, correspondence with the NRA, and property tax payments. This is especially important if you don't have a Bulgarian address for NRA correspondence.
Common Mistakes to Avoid
| Mistake | Consequence | How to Avoid |
|---|---|---|
| Not declaring rental income | Penalties of 10-20% of undeclared income, plus interest | Declare all rental income in your annual tax return — the NRA cross-references property ownership with tax filings |
| Confusing gross vs net income | Overpaying or underpaying tax | Individuals: apply 10% deduction to gross, then 10% tax on net. Non-residents: 10% on gross (no deductions) |
| Missing VAT threshold with Airbnb | Retroactive VAT liability, penalties | Track cumulative short-term rental turnover monthly; register within 7 days of exceeding EUR 51,130 |
| Operating Airbnb without registration | Fines under Tourism Act, tax reclassification | Register the property with the municipality, categorize it, register guests with police |
| Using personal structure with high expenses | Paying more tax than necessary | If real expenses exceed 10% of gross, evaluate EOOD structure with an accountant |
| Not paying local property tax | Accumulating debt, interest, potential liens | Pay by 30 April for 5% discount, or in two installments by 30 June and 31 October |
The NRA knows you own property. Property ownership is recorded in public registries that the NRA accesses directly. If you own Bulgarian property and receive rental income but do not declare it, expect an inquiry. Voluntary late filing carries lower penalties than being caught in an audit.