Short-term rentals in Bulgaria: VAT, ESTI and management companies

Short-term rentals: why are they more complicated than long-term ones?

Renting out property by the night (нощувки) in Bulgaria’s resort regions and major cities can generate a higher yield than long-term letting. From a legal, tax and administrative point of view, however, these are completely different types of activity.

While long-term letting comes down to signing a contract and filing a simple annual/quarterly income declaration, short-term letting is treated by law as a hotel and tourism business. This places four key obligations on the owner:

• Official registration of the property: Obtaining an individual registration number for the apartment at the local municipality (Община).
• Recording guests in ESTI: Mandatory entry of the details of all staying tourists into the Ministry of Tourism’s state system within 24 hours.
• Tourist tax: Calculation and monthly payment of the local tourist tax for each actual overnight stay.
• Day-to-day operations: Round-the-clock check-in, cleaning, laundry, ongoing repairs and constant communication support for guests.

Legal status: registering the apartment and the abolition of categorisation

Owners often ask: has categorisation for private apartments been abolished?

Yes, from a legal point of view the classic “categorisation” (assigning stars for a period of 5 years) for private residential properties of class “B” (guest apartments and guest rooms — апартаменти за гости, стаи за гости) was indeed abolished by the Tourism Act. It was replaced by a simpler, open-ended registration of the property with the Municipality.

However, this is a change of terminology and a simplification of the procedure, not a complete abolition of record-keeping. You cannot simply list an apartment on Booking.com or Airbnb without a registration number. Under EU Regulation 2024/1028 and Bulgarian law, international platforms are obliged to check for a registration number and to block listings that do not have one.

Procedure for registering an apartment:

• 1. Filing the application — declaration: The owner files an application in the prescribed form with the mayor of the municipality where the apartment is located (in person or online using a KEP electronic signature).
• 2. Set of documents: The application is accompanied by the notarial deed (title document) or a use agreement, a declaration stating the exact address, the cadastral identifier and the number of beds, and a document confirming payment of the municipal fee.
• 3. Neighbours’ consent no longer required: Registering a private apartment no longer requires obtaining the consent of the neighbours in the building (the condominium).
• 4. Issue of the certificate: After checking the documents, the municipality enters the apartment in the municipal register and issues an open-ended certificate with a unique registration number.

How to connect to and work with the ESTI system

ESTI (Unified System for Tourist Information, Единна система за туристическа информация) is the centralised database of Bulgaria’s Ministry of Tourism. The law requires the details of every guest who checks in to be transmitted to ESTI within 24 hours.

Step-by-step process for an individual to register in ESTI:

• 1. Prerequisites: Having the apartment’s registration certificate from the Municipality to hand, and holding a qualified electronic signature (KEP) or a profile in the e-Delivery system (Е-връчване).
• 2. Registering a profile: Go to the portal esti.tourism.government.bg and complete the application to create a profile as a “hotelier — individual” (хотелиер — физическо лице).
• 3. Linking the property: Entering the apartment’s registration number. The system automatically cross-checks it against the registers of the Ministry of Tourism and the Municipality.
• 4. Daily record-keeping: Once the profile is activated, the owner enters each guest’s details (name, date of birth, document, dates of stay) manually via the web interface or by uploading data files.

The main pitfall: mandatory VAT registration (Art. 97a ЗДДС)

The most unexpected and costly aspect of individuals working directly with international platforms (Airbnb, Booking.com) is the requirements of the Value Added Tax Act (ЗДДС).

• Receiving services from foreign legal entities: Booking.com (the Netherlands) and Airbnb (Ireland) are foreign companies from the EU. For promoting the property and processing bookings they withhold a commission from the owner (a marketing service).
• Requirement of Art. 97a ЗДДС: Under the law, any person (including individuals) receiving services from a foreign legal entity from the EU IS OBLIGED to complete a special VAT registration with the National Revenue Agency (NAP) at least 7 days before receiving the first such service.
• Monthly returns and 20% tax: After registration, the individual is obliged to file a VAT return with NAP EVERY MONTH, and to self-assess and pay 20% VAT on the amount of the commission withheld by the platform.

Attention! Risk of automatic audits and fines:
The tax authority (NAP) regularly receives data from booking platforms on commission volumes and income paid out to owners. Fines for missing the mandatory VAT registration and for failing to file monthly VAT returns range from 250 euros to 1000 euros and more for each missed reporting period.

Solving the problem: a management agreement with a management company

To remove the financial and legal risks entirely, avoid VAT problems and free yourself from the operational routine, the optimal solution is to conclude a Property Management and Operation Agreement (Договор за управление и стопанисване) with a professional management company.

Advantages of working through a management company:

• 1. Complete removal of VAT obligations: The company lists the apartment on Booking and Airbnb from its corporate account. It is the company that acts as the recipient of the services, handles the accounting under Art. 97a ЗДДС, files the monthly returns and pays the VAT. The individual owner has nothing to do with VAT.
• 2. Handing over tasks with the Municipality and ESTI: The management company registers the accommodation with the municipality in its own name, enters guest data into ESTI daily and pays the local tourist tax.
• 3. Transparent financial settlements: The management company sends the owner a monthly report and transfers the net income to a bank account in euros. The owner only states the amount received once a year in an ordinary income tax return (ЗДДФЛ).
• 4. A full range of services: The management company takes on round-the-clock guest meeting and check-in, professional cleaning, laundry, minor repairs and handling reviews.

Comparing the approaches: on your own vs through a management company

To sum up, let us look at the difference between the two approaches by key parameters:

• VAT registration (Art. 97a ЗДДС): Mandatory when renting out on your own. It requires filing monthly returns and paying 20% VAT on the platforms’ commission. When working through a management company, the owner does not need VAT registration — the accounting is handled entirely by the company.
• Registration with the Municipality and ESTI: When renting out on your own, the owner prepares all the documents personally, buys a KEP (qualified electronic signature) and keeps daily records in ESTI. When working through a management company, the company takes on all administrative interactions.
• Check-in and service: Renting out on your own requires round-the-clock presence and organising cleaning and laundry. A management company covers the entire service with its own team.
• Risk of tax fines: When renting out on your own, the risk of fines is high due to the complexity of VAT accounting and strict deadlines. When working through a management company, the legal and financial risks are reduced to a minimum.
• The owner’s tax regime: When renting out on your own, the owner pays VAT, tourist tax and income tax. When working through a management company, the owner pays only ordinary income tax on the income actually received into the account in euros.

Summary for the owner

Short-term rental of property is a profitable commercial business that requires ongoing legal and operational support. Attempts to rent out an apartment on your own without VAT registration and without entering data into ESTI can lead to significant fines.

Concluding a management agreement with an official management company allows you to shift all the VAT bureaucracy, accounting and organisational hassle onto specialists, while receiving a stable and fully lawful passive income.