Last reviewed and updated: February 2026

Quick Answer

When a company or self-employed person in Bulgaria rents property from an individual, the tenant must withhold 10% personal income tax on 90% of the rent (after the statutory 10% expense deduction under Art. 31 of the Personal Income Tax Act).

Example (monthly rent €1,000):

Taxable base: €900
Tax withheld: €90
Net paid to landlord: €910

The withheld tax is declared and paid to the National Revenue Agency (NRA) quarterly under Art. 55 PITA. The landlord must still include the income in their annual personal tax return.

When Does Rental Income Tax Apply in Bulgaria?

Rental income tax in Bulgaria applies when:

The landlord is a physical person (not a company), and
The tenant is:
- A Bulgarian company, or
- A self-employed person acting in a business capacity.

In these cases, the tenant becomes the withholding agent.

If you are establishing a business and planning to rent office space from an individual, this obligation applies from the start of the lease. See our guide on Company Registration in Bulgaria for structural considerations before signing agreements.

What if the tenant is a private individual?

When the tenant is a private individual renting for personal (non-business) use, no withholding obligation applies. In such cases, the landlord must assess and pay advance tax directly on a quarterly basis (with no advance payment due for Q4 unless voluntarily elected).

The obligation depends on the status of the payer — not nationality.

How Rental Income Tax Is Calculated

Individuals renting out property benefit from a statutory 10% normative expense deduction (Art. 31 PITA). No actual expense documentation is required.

This means:

10% of the gross rent is automatically treated as expenses.
90% becomes taxable income.
The tax rate is 10%.

The effective tax burden equals 9% of the gross rent.

Example: €1,000 Monthly Rent

Gross rent: €1,000
Taxable base (90%): €900
Advance tax (10% of €900): €90
Net amount transferred to landlord: €910

The tenant transfers:

€910 to the landlord
€90 to the NRA

The €90 is credited toward the landlord’s annual tax liability.

The calculation is straightforward. Correct reporting is where errors usually occur.

When Must the Tax Be Declared and Paid?

The tenant must:

Withhold the tax when the rent is paid.
Declare and pay it by the end of the month following the quarter in which it was withheld.

Q4 Rule (Important)

Advance tax is not due for the fourth quarter (October–December) unless the landlord confirms in writing, before payment, their wish for withholding to apply.

In such cases, the tax is declared and paid by the end of January of the following year under the standard Art. 55 procedure.

Advance tax is declared using the return under Art. 55 of the Personal Income Tax Act (Form 4001).

VAT and Rental Income in Bulgaria

Rental income tax concerns personal income tax. VAT is a separate regime governed by the VAT Act.

For a broader overview of VAT registration rules and thresholds, see our detailed guide:
👉 VAT in Bulgaria

Residential Property

The lease of residential property for housing purposes is generally VAT-exempt.

This is the most common situation for private landlords renting apartments to individuals.

Commercial Property

Commercial rent (office, warehouse, retail space) may trigger VAT obligations if:

The landlord is VAT-registered;
The VAT registration threshold is exceeded;
The landlord voluntarily registers for VAT.

If VAT applies:

20% VAT is charged on the rent.
VAT reporting obligations arise separately from personal income tax.

It is essential to distinguish clearly between:

Personal income tax (10%)
VAT (20% where applicable)

They operate under different laws and reporting systems.

Note: As of 1 January 2026, targeted amendments to the VAT Act adjusted registration thresholds and clarified the treatment of certain exempt real estate supplies. See our VAT guide for the current threshold and how rental activity counts towards registration.

Commercial vs Residential Rent: Why It Matters

The type of property affects VAT exposure, documentation and audit risk.

Residential Rent

Typically VAT-exempt.
Subject to the 10% personal income tax regime described above.
Common for foreign individuals investing in Bulgarian property.

Commercial Rent

May trigger VAT registration.
Requires compliant VAT invoicing and reporting.
Frequently reviewed during tax inspections.

For companies renting office space from individuals, VAT exposure is often underestimated — not the 10% income tax withholding.

This article addresses standard long-term lease arrangements. Short-term accommodation (e.g. platform-based rentals) may trigger different tax, VAT or registration considerations and should be assessed separately — see our guide to Airbnb and short-term rental rules in Bulgaria.

Compliance Checklist for Companies Paying Rent

If your company rents from an individual:

✔ Confirm landlord status (individual vs company).
✔ Apply the 10% normative expense deduction correctly.
✔ Withhold 10% tax on 90% of the gross rent.
✔ Pay the landlord the net amount.
✔ Declare and remit tax quarterly under Art. 55 PITA.
✔ Issue an account for paid income and withheld tax.
✔ Monitor Q4 election rules.
✔ Review VAT exposure for commercial leases.

Most compliance issues arise from missed quarterly declarations or overlooked VAT registration triggers.

Does the Landlord Still File an Annual Tax Return?

Yes.

Rental income must be included in the landlord’s annual personal income tax return (Art. 50 PITA), even if advance tax was withheld during the year.

The annual return reconciles:

Total rental income
Normative expenses
Advance tax already paid

For step-by-step guidance, see:
👉 How to File Your Personal Tax Return in Bulgaria

How Aidos Can Help?

Aidos supports:

Companies renting property from individuals
Foreign landlords with Bulgarian rental income
Founders setting up offices or commercial leases
Individuals preparing annual personal tax returns

We assist with withholding compliance, VAT assessment and ongoing accounting and reporting obligations.

If you would like to review your rental arrangement or clarify your obligations, feel free to contact our team.

FAQ: Rental Income Tax in Bulgaria

What is the rental income tax rate in Bulgaria?

Rental income of individuals is taxed at 10% on 90% of the gross rent (after the statutory 10% expense deduction). The effective rate is 9% of the gross rent.

Who withholds rental tax in Bulgaria?

If the tenant is a company or self-employed person, the tenant withholds and pays the advance tax. If the tenant is a private individual renting for personal use, the landlord pays advance tax directly.

Is rental income subject to VAT?

Residential long-term rent is generally VAT-exempt. Commercial rent may be subject to 20% VAT if the landlord is VAT-registered or required to register.

Is tax paid monthly?

Tax is withheld when rent is paid but declared and paid quarterly to the NRA.

Do foreign landlords pay different tax?

No. Bulgarian-source rental income is generally taxed at 10%, including for non-resident individuals. In practice, when the tenant is a company or self-employed person, the same withholding mechanism applies. Additional reporting obligations may arise in the landlord’s home country.

Conclusion

Rental income tax in Bulgaria is structurally simple:

10% statutory expense deduction
10% tax on 90% of rent
Quarterly reporting by business tenants
Annual reconciliation by landlords

In practice, risks arise around withholding obligations, VAT exposure for commercial property, and cross-border situations involving foreign landlords.

Early clarification prevents penalties, missed filings and unnecessary administrative friction.

Disclaimer

This article provides general information on Bulgarian rental income tax and VAT rules as of February 2026. It does not constitute legal or tax advice. Tax treatment may vary depending on the specific facts, including landlord status, property type, VAT registration and cross-border elements.

Professional review is recommended before signing lease agreements or structuring rental arrangements.

Rental Income Tax in Bulgaria: Withholding, VAT and Compliance