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Renting out housing in Bulgaria: VAT, individuals and companies without surprises
Renting out an apartment or house to private individuals seems like the simplest and most straightforward way to earn passive income. However, when it comes to taxes and VAT (ЗДДС), owners often get confused: whether 20% must be added to the price, whether it makes a difference if the property is held by a company, and when the obligation to register with the National Revenue Agency (NAP) arises.
Let us go through the key rules and tax nuances of long-term residential rentals in Bulgaria.
The main rule: VAT when renting housing to individuals
Under Art. 45, para. 4 of the VAT Act (Закон за ДДС), letting residential property to individuals for their own occupancy is classified as a VAT-exempt transaction.
- What this means: No 20% VAT is added to the rent, and the owner does not issue invoices with VAT.
- The key condition: The property must be specifically residential, and the tenant must be an ordinary citizen who uses the housing for its intended purpose, not as an office or for commercial activity.
Letting as an individual or as a company (EOOD): is there a difference?
From the point of view of VAT itself there is no difference: both citizens and legal entities providing long-term residential lettings to individual users supply a VAT-exempt service.
The differences lie in other tax and administrative aspects:
| Parameter | Individual | Company (EOOD / OOD) |
|---|---|---|
| VAT on residential rent | Exempt (0%) | Exempt (0%) |
| VAT registration threshold (51 130 €) | Only income from rent and business activity is counted. | The entire turnover of the company across all of its activities is counted. |
| Income tax | 10% on the income amount less 10% statutory expenses (effectively 9%). | 10% corporate tax (income minus documented expenses) + 5% on dividend payouts. |
| Administration | Annual tax return. | Full accounting and monthly reporting. |
What happens if the €51,130 (BGN 100,000) threshold is exceeded?
In Bulgaria, VAT registration becomes mandatory once turnover reaches BGN 100,000 (€51,130) over the last 12 months.
Income from renting housing to individuals counts towards this limit. If your total rental income over 12 months exceeds this amount:
- You are required to file an application for VAT registration with the National Revenue Agency (NAP).
- The rent will remain VAT-free. Even after obtaining a VAT number, renting housing to individuals remains an exempt supply. You will not add 20% to the cost of accommodation.
- Administrative obligations will arise: you will have to file monthly VAT returns, and there are restrictions on recovering input VAT (for example, on the cost of renovations or buying furniture for these apartments).
Pitfalls worth keeping in mind
- Short-term rental (Airbnb, Booking) is not housing rental but tourist accommodation services (настаняване). It is subject to a rate of 9% VAT, and the income directly counts towards the turnover for mandatory VAT registration.
- Advertising and platform commissions (Art. 97a of the VAT Act). If you list your property on international platforms or buy advertising on Meta/Google, you are required to complete a partial VAT registration (under Art. 97a) and pay 20% VAT on the commission amounts charged by foreign platforms.
The bottom line for the owner
Long-term renting of housing to individuals is a profitable and transparent arrangement: 20% VAT is not charged either by individuals or by companies. However, as your property portfolio grows, it is important to monitor total turnover and to draw up contracts correctly in order to avoid penalties from the tax authorities.
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