Short-term property rental
Short-term property rental
Question:
Hello!
We want to rent a property (studio) short-term through Booking, possibly another similar site. We got to the issue of the Certificate of registration of the place class B (we already have it), as well as the registration in ESTI, but many questions arose regarding: the VAT registration, the collection of personal data from the guests for their registration in ESTI, where and what pays as taxes and to whom what information to send. I am interested in completing all the documentation step by step until everything is ok legally, as well as when and how to pay the necessary duties?
Thanks in advance!
Answer:
Hello,
First of all, you must decide in what form you will carry out the activity you described - whether as an individual (free profession on a general basis or free profession on a patent) or through a company registered in your name. Each option has its own specifics.
From a tax point of view, things look like this:
- with the patent, the amount of your tax is determined by the municipality where the property is located, based on the number of beds, categorization, location, etc. This tax is annual
- in the case of self-employment, you declare the amount of income for the year. From the amount received in this way, you deduct 25% of legally recognized expenses and the insurances paid during the year, and you owe 10% tax on the amount received in this way.
- with an EOOD, you declare the amount of income and expenses related to your activity. If the income is more than the expenses, then you make a profit and this profit is taxed at 10%.
From an insurance point of view, the situation is as follows:
- in the case of self-employment and patent activity, you are insured monthly, and accordingly you must declare and pay insurance every month, and the minimum insurance income is currently BGN 933.00, which means minimum insurance in the amount of BGN 290.00 per month. At the end of the year when the annual tax return is submitted, an adjustment is made. In this equalization, the realized income during the year is considered. If its amount exceeds the amount on which you were insured, you must add insurance on the difference. The amount on which insurance is paid on an annual basis cannot be higher than BGN 45,000.00 for the year 2024.
- with an EOOD, the insurance contributions are paid again on the minimum insurance income for the year - BGN 933.00, the difference being that there is no annual equalization of the insurance contributions.
I.e. purely from a tax and insurance point of view, you will need to assess and make some kind of plan as to what income you expect to receive and what expenses you would have. Only in this way will you be able to determine which form of activity is economically more profitable (ie you would pay less tax and insurance).
Apart from the differences from a tax and insurance point of view, there are also several purely functional differences:
- the money you earn as a freelancer and as a patent activity is really your money and you can "spend" it whenever and on whatever you want. With an EOOD, the money the company earns stays with the company. If you, as the owner, want to have this money available, there are several options - to give yourself a salary, to give yourself a loan or after the financial year is over and the company, if it has made a profit, to distribute this profit to yourself as a dividend (but you will have to pay an additional 5% dividend tax on this amount).
- if you exercise your activity as a freelancer, you will not have the obligation to issue a receipt when receiving cash. For an EOOD, this exemption does not apply and you will need to have a cash register previously purchased from which to issue cash receipts.
- registration as a self-employed person is carried out by the Bulstat Register within 24 hours, and there is also a state fee of BGN 10.00. To register an EOOD, the procedure is a little longer and more complicated. A set of documents is prepared, some of them are certified by a notary, a collection account is opened in a bank. All prepared documents are submitted to the Commercial Register, no later than 7 calendar days from the date of the founding act, and the registration takes place within 7 working days. The state fee is BGN 110.00, in addition there is a notary and bank fee.
If you choose the freelance patent profession, the patent registration itself is done in the municipality where the property is located and can only be done personally by you.
Only after you have chosen the form under which you will carry out your activity, then you can proceed to the categorization of the property, which is again done in the municipality where the property is located.
Once you have the categorization, you will be able to register in the ESTI system you indicated. In this system, you will have to fill in real-time information related to the overnight stays you have made. As far as we are aware from what our clients have shared with us - information is filled in regarding the period of overnight stays, personal data of the persons staying for the night - the minimum is names and nationality. On the basis of the information filled in this system, the tourist tax is determined, which is due monthly to the relevant municipality (for the months in which you have no overnight stays, you do not owe tax).
The last step is the possible VAT registration obligation - if you are going to use platforms like Booking and/or AirBnB, then VAT registration is mandatory (even as an individual). The same applies if you are going to use services provided by companies outside of Bulgaria (for example, you decide to make paid ads through Facebook and Google). With this registration mode, you will not owe VAT on your sales, but you will owe 20% VAT on the value of services received from companies outside Bulgaria.
We hope we have been helpful!
Greetings!
