Tax on rental income: what you owe and how to declare it

More and more owners in Sofia rent out their home - as extra income, as an investment, or simply because they have moved. Many of them, however, are not sure exactly what they owe the state, when, and how. The good news is that the rules are fairly simple and have not changed for years. The bad news is that the National Revenue Agency (NRA) is finding undeclared rentals more and more easily. Here is what you need to know if you rent out property as a private individual.

How much is the tax

Rental income is taxed at a flat 10%, but not on the full amount. The law lets you deduct 10% as statutory expenses - automatically, without collecting invoices or receipts. In other words, the tax is calculated on 90% of the rent you receive, and the real burden is about 9% of the gross rent.

Example: if you rent out an apartment for 700 euros a month, you receive 8,400 euros a year. After deducting the 10% expenses, the taxable income is 7,560 euros, and the tax is 756 euros a year.

It is worth knowing that private individuals cannot deduct their actual expenses (renovation, furniture, a mortgage) instead of the statutory 10%. There is also no tax-free allowance - tax is owed from the very first euro of rent.

Advance tax every quarter

The tax is not paid only once a year. If your tenant is a private individual, you declare and pay advance tax yourself for each of the first three quarters of the year:

- for January - March: by 30 April;

- for April - June: by 31 July;

- for July - September: by 31 October.

No advance tax is paid for the last quarter (October - December) - it is settled directly through the annual tax return. With rent of 700 euros a month, the advance tax for one quarter is 189 euros.

When the tenant is a company

If you rent the property to a company or a self-employed person (for example an office, or an apartment a company rents for an employee), the rules are easier for you: the tenant must calculate and withhold the advance tax with every payment and pay it to the budget itself. You receive the rent minus the withheld tax.

This does not, however, release you from the annual return - the income must still be declared, and the withheld tax is deducted from your annual liability.

The annual tax return

All rental income for the calendar year is declared in Annex No. 4 of the annual tax return under Art. 50 of the Personal Income Tax Act. The deadline is 30 April of the following year - for rent received in 2026, that is 30 April 2027. Since Bulgaria is now in the eurozone, income for 2026 is declared in euros.

If you file the return electronically (with an NRA PIN or an electronic signature) and pay the tax by 31 March, you get a 5% discount on the tax due, up to a maximum of 255.65 euros. Both conditions - filing and paying - must be met by 31 March.

What you risk if you don't declare

Unpaid tax is always owed, together with late-payment interest, and a fine is imposed for a return that was not filed. Counting on "nobody will find out" is an increasingly risky strategy. The NRA receives data from companies that rent property, and under the European information-exchange rules (DAC7) online platforms such as Airbnb and Booking report hosts' income to the NRA. Rent received in cash is also taxable income.

Short-term rentals (Airbnb, Booking)

Renting out for a few nights at a time is a more complicated case than a classic long-term let. Depending on how it is organised, it may require the property to be categorised under the Tourism Act and in some cases be treated as a business activity with different tax treatment. If you plan short-term letting, we recommend speaking with an accountant before you publish your first listing.

Practical tips

- Always sign a written rental contract - it protects both you and the tenant and is the basis for declaring correctly.

- Mark the three advance-tax deadlines in your calendar (30 April, 31 July, 31 October).

- If your tenant is a company, ask for a document confirming the withheld tax - you will need it for the annual return.

- Factor the tax into your yield calculation from the start - about 9% of the gross rent goes to tax. You can do this with our rental yield calculator.

This article is general information, not tax advice. For your specific situation, especially with several properties, short-term rentals or tenants from abroad, consult an accountant.

At New Key Properties we help owners rent out their property to reliable tenants, with a clear contract and a realistic rent - not with promises that never come true. If you are thinking of renting out a property in Sofia, call 0879 826 292 for a free consultation.