Per the 1st of January 2011 the amendments on Law on Income Tax of Individuals are in effect. The amendments have been published in the State Gazette (Държавен вестник) number 94, 30/11/2010.
The law affects companies paying rent to physical persons. As of the 1st of January 2011, companies who pay rent to physical persons are now obliged to withhold the tax on the taxable amount of the rent. The taxable amount is 90% (10 % are reserved for expenses of the landlord) of the rent as in the rental agreement. The tax payable is 10% over the taxable amount.
1. Rent: 1000 leva
2. Taxable amount (90% by p.1): 900 leva
3. Tax to be paid (10% by p.2): 90 leva
4. Amount to pay to landlord (p.1 – p.3): 910 leva
The tax has to be paid to the National Revenue Agency (NRA) by the company who pays the rent. The tax has to be paid until the 10th of the month following the month when the rent is paid for. The company shall provide to the landlord the relevant documents for paid rent and tax to NRA.
In case the tenant is a not a Bulgarian company, the tenant should not deduct the tax from the payable amount, as it is not a tax obliged entity in Bulgaria. It then is the responsibility of the lessor to pay his income tax.
Please feel free to contact us when you have any further question on the subject.