- 8 May, 2019
- Listing your property on Airbnb and Booking, Payouts and taxes, Pricing, Short term rental
Whether we are a guest or a host, we pay airbnb fees and commissions when we use theirs or any other paltform…
What are the basic short-term rental taxes in Bulgaria? Well, depending on whether you receive your income as a natural person or a company, there are some differences in what taxes you will pay and when you’ll pay them.
Consult with an accountant before deciding on how you will pay your taxes! I am not an accountant and the text bellow is for general information only!
As a categorized place to accommodate tourists, as are all hotels and guest houses, you owe the so-called tourist tax. Currently, in Bulgaria, it is 0.40 leva per tourist per day. This tax is due regardless of whether you operate as a natural person or a company. You must declare and pay it once a month for a whole month period.
You are hosting two people for 3 days in one of your apartments. Here is the arithmetic: 2 tourists x 3 days x 0.40 = 2.40 leva. This is the tourist tax you owe.
When you receive your income as an individual, you owe a tax of 10% of the amount received. There are also legally recognized costs of 10%.
You have to declare and pay the tax in question every quarter. It is important to declare on time. If payment is overdue, interest is due.
As a natural person, you have no right to deduct expenses. You pay a tax on the total amount received minus the legally recognized costs of 10%, no matter how much your expenses are.
For the first quarter of 2019, you have earned 3,000. The legally recognized costs is 10% of 3,000 = 300. The tax profit that you have to pay is 10% of (3000 – 300) = 270.
An important checkmark here is that if you have more than 50,000 in revenue over the last 12 months, you must to register for VAT as an individual. This is not about a calendar year, but about 12 months back from the current month you are in!
If you operate as a not VAT registered company the tax you owe is again 10%. In this case, however, you can also deduct your costs. This way you can drastically reduce your profits and pay much less tax. Keep in mind that you also have to pay a 5% dividend tax so you can take the money out of the company. Another thing you should not forget is that you will also have cost for an accountant.
Short-term rental taxes in Bulgaria are declared annually. Until March 31 of the current year, the previous one must be declared. The payment of the tax has the same deadline, and interest is charged again upon delay of the payment.
For 2018, you have revenue of 20,000 and costs of 8,000. You owe a 10% tax on the difference: 10% on the difference of 12,000 = 1,200.
Dividend tax is 5% of (12,000 – 1200) = 540.
If your company is VAT registered then you owe VAT on your income. The VAT, in this case, is 9% rather than the standard 20%. In the case of a VAT registered company, the accounting is on a monthly basis. The payment of VAT is on monthly basis. The payment of profit tax and dividend tax is once a year. As a registered VAT trader, you can use a tax credit too, which can be a plus.
You’re probably wondering which option is best for you? Everything is a matter of calculations. If you have one or two apartments and you do not have many expenses, the best option is to receive your income as a natural person. In case the apartments are more and you have the opportunity to deduct costs, the registration of a company is a good and not expensive option. If your income is over 50,000 per year, then it is a question of whether to register your company for VAT or divide your income into two companies so that both can remain VAT unregistered. In case renting is the only business it will be hard to cover the 9% VAT included in all bookings. In this case, it might be better to stay VAT not registered.
Everything is a matter of calculations and it is best to consult an accountant! For other, non-financial matters, regarding rental consulting and co-host partnership, please contact me.