Taxation of the rental income of natural persons
Income of natural persons originating from renting property in Bulgaria is regulated by the Income Taxes on Natural Persons Act.
The ITNPA does not distinguish between Bulgarians and foreigners, but between local and foreign natural persons, such that each group has its own pecularities in terms of the statutory provisions and its obligations to the state.
Taxation of local natural persons
Local natural persons within the meaning of Bulgarian tax law that receive income originating from rent are subject to taxation pursuant to Art. 31 ITNPA. The taxable income from rented property is determined by way of decreasing the income received by the expenses amounting to 10 per cent. These expenses are legally recognised and need no documentary proof.
The annual basis of taxation is determined by way of decreasing the taxable income earned during year of taxation by those contributions which the person was obligated to make during that year at their own expense in accordance with the procedure set forth in Art. 40 (5) of the Health Insurance Act.
The income received from rent during the year are declared in the annual tax declaration which must be submitted no later than 30 April of the year following the year of receiving the income.
If the natural person fails to submit a declaration within this time limit, a fine of BGN 500 is imposed, and for a repeated violation - up to BGN 1,000.
Withholding and payment of tax on income of natural persons originating from rent to other natural persons
Natural persons renting property to other natural persons must make advance contributions for the rental income. The contributions are made quarterly and are paid into the account of the National Revenue Agency by the residential address of the landlord. The contributions are determined by multiplying the size of the rental income received in the respective quarter decreased by 10% expenses by a tax rate of 10 per cent.
No contributions are due for the last quarter and the tax is additionally paid or deducted by filing the annual tax declaration by 30 April of the year following the year of receipt of the rental income.
Withholding and payment of tax on income of natural persons originating from rent to businesses and self-insured persons
Landlords need to file an annual tax declaration for the income tax by 30 April of the year following the year of receipt of rental income. They are not required to submit declarations for advance taxation, as it is withheld and paid by the payer of the income.
The due contributions for the respective quarters are made by their tenants. The remaining taxable amount under the annual tax return is paid by the landlords into the account of the National Revenue Agency by 30 April of the year following the year of receipt of the rental income.
For the paid income and withheld tax the tenant issues a slip for the amounts paid as well as a certificate that they provide to the recipient of the income.
Taxation of income originating from rent of a person with reduced working capability
A person with reduced working capability of 50 and more than 50 per cent is liable for an advance tax for income from rent or any other non-gratituous grant for use of rights or property after the taxable income of the person from all income sources acquired from the beginning of the year of taxation and subject to taxation by tax on the total annual basis of taxation reduced by the wihheld or paid on account of the person compulsory insurance instalments exceeds BGN 7,920. Thus this category of persons in determining their taxable income also reduce the health insurance contributions paid at their expense.
Taxation of foreign natural persons
Foreign natural persons are obligated to pay taxes on income originating from sources in the Republic of Bulgaria. A final tax is levied on the income received from rent or any other non-gratituous of the use of movable or immovable property from a source in Bulgaria, accrued by or paid to foreign individuals. The tax due is 10 per cent. The final tax on such income is determined on the gross amount of accrued or paid income. A foreign person who is a local natural person for tax purposes in a Member State of the European Union or a state party to the Agreement on the European Economic Area may choose to recalculate the final tax on income. If the foreign person chooses to recalculate the final tax, this recalculation is made for all income received by the said person during the year subject to final tax. Upon request of the foreign person a certificate is issued by the NRA for the tax paid under the ITNPA.
The mode of withholding and payment is similar to the one described above.