Renting out apartments on a daily basis: legal requirements

Apartments in Bulgaria may be rented out both by individuals and by legal entities; both options are popular. In either case it should be remembered that:

• Apartments, like other properties offering visitors a place to spend the night (hotels, hostels, guest houses, apartments, rooms for rent, etc.), are classed as category B tourist sites and are subject to mandatory categorisation.
• The landlord must pay taxes in accordance with Bulgarian law.

Categorisation of an apartment

Categorisation is a mandatory procedure. The owner must submit an application with a package of documents and wait for a visit from the commission, which will assign the apartment a category (its “star rating”). Those who avoid this procedure are fined from 1000 to 10000 leva, and for a repeat violation — from 10 to 15 thousand leva. The law lists the establishments that are not subject to categorisation: residential apartments are not on that list.

Since 2019, categorisation of an apartment requires the consent of at least 51% of the owners in the building (complex) where the apartment is located. No more than 5 flats in a single building may obtain separate categorisation.

When buying an apartment for subsequent renting out, one detail must be taken into account. Many developers categorise their entire properties immediately after receiving Act 16, and only then sell off the individual apartments. In this case buyers of flats fall into a trap: by law you cannot rent out on a daily basis, on your own, an apartment that has already been categorised in someone else’s name (another company). In such a situation the only options left are to hand property management over to the developer (or alternatively to a management company) or to conclude a special cooperation agreement (finding guests for your own apartment yourself through the management company), at least in order to keep track of the number of lettings and payments, which companies as a rule do not agree to. The terms offered by management companies in such a situation are usually unfavourable for apartment owners: after paying the maintenance fee and the management company’s service percentage, almost nothing is left. For this reason, buying apartments in such complexes for daily rental is entirely unprofitable. Unfortunately, most buyers only learn about this after the deal has been completed. Many take the risk and rent out on a daily basis anyway, until they are caught by inspectors; others conclude long-term contracts, renting out apartments by the month for extended periods. However, the income will no longer be comparable with daily rental.

Tax

As for the tourist tax, it must be paid to the Obshtina (Municipality) where the property is located. The amount of the tax varies depending on the location of the property and its category. The tourist tax must be paid by the 15th of the month following the month in which the property was rented out. In addition, a declaration must be submitted by 30 January. If the amount of tax paid is less than 30% of the established figure, the difference is paid by 30 March of the following year — even if the apartment was not used.

Renting out tourist properties is also subject to VAT (value added tax), which, where categorisation is in place, is reduced to 9% for landlords registered for VAT.

“Easy money”

Only from the outside can it seem that earning money from daily rental of Bulgarian apartments is easy and simple. In practice, a landlord has to deal with numerous difficulties. It is better to prepare for them in advance and study all the details carefully, so as not to accidentally break Bulgarian laws later on.

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