Rental via Booking and Airbnb

Rental via Booking and Airbnb

 

Question:
Hello!

We are about to buy a holiday property, which we intend to rent through Booking.com or Airbnb.

We do not have a company, ie - an individual rents an apartment. The property will be in my husband's name (if relevant).

We are not aware of the order and steps for this purpose. What should we do and what taxes do we owe?

Thanks in advance!

 

Answer:

Hello,

You have different options, we will try to cover them briefly. The general in all cases that the first step you need to do is to subtract the categorization of the apartment. This happens in the municipality where the apartment in question is located. However, in order to be able to submit documents for this, you must choose the form in which you will work - as an individual or as a company:

1. Individual - If you choose to operate the apartment as an individual you will fall into one of two cases:

- If your categorization is 1 or 2 stars, you have the opportunity to be subject to "patent tax". This means that you pay a patent tax once a year, which will be determined by the specific municipality where the holiday property is located. Different municipalities have different patent tax rates.

- If your categorization is over 2 stars, you will owe at the end of the year a tax of 10% on the total amount of income received, deducting 10% of statutory expenses.

In addition to the relevant tax, you will also owe insurance for the time during which you carry out your activity. The minimum insurance contributions you will owe are based on the minimum monthly insurance income for the year. At the end of the year, an annual equalization of social security contributions is made. The annual income you have generated is compared to the total amount on which you paid social security contributions during the year. If the income is higher, additional social security contributions are due on the difference.

2. Company - when operating the apartment through a registered company, at the end of the year you will owe a tax of 10% calculated on the realized profit (if any). Subsequently, if this profit is distributed as a dividend (income) to the manager of the company, an additional 5% dividend tax is due.

For the time during which the company operates, social security contributions are due on behalf of the manager, and here the minimum social security contribution is based on the minimum monthly social security income for the year. In this case, however, there is no annual equalization, as is done for individuals.

In principle, the administrative burden is less if you choose the option with the individual. Also, every lev you earn as an individual can be used immediately for personal use. When working with a company, every lev earned by the company remains with the company until a dividend is distributed (which can only happen with a profit and a 5% dividend tax is paid). Also, when choosing a form of work, it is good to consider what income and expenses you expect, because from a tax and insurance point of view it may be more profitable to work with a company.

Regardless of which option you choose, keep in mind something very important - you will have to register for VAT. This is due to the fact that you will be working with Booking and Airbnb. In short - according to the VAT law, any person who in his business receives services from companies registered in the European Union, but outside Bulgaria are subject to VAT registration under a slightly special regime (Article 97a of the VAT Act). With this registration, you will not owe VAT on your sales, but you will owe VAT on the value of the services you receive (For example, if you work with Booking, they will send you an invoice each month for the commission you owe them. invoice you will have to "self-assess" 20% VAT and pay it into the State Budget). If you reach a turnover of realized sales in the amount of BGN 50 thousand within the previous 12 months, you will have to register for VAT on a general basis, which means that you will start to charge and owe VAT on all your realized sales. You will also be able to get your VAT back on expenses incurred for which you have received invoices with VAT included.

We hope we have been helpful to you.

Greetings!