Renting an apartment through Booking or Airbnb is a popular way to generate extra income, especially in tourist cities like Sofia, Plovdiv, Varna, and Burgas. While it may seem like an easy business model—register on the platform, upload photos, and wait for guests—from a tax and accounting perspective, things are more complex.
In this article, we will cover:
- What are the registration options for this activity?
- How are rental incomes from Booking and Airbnb taxed?
- What expenses can be deducted?
- How do you declare rental income?
- Examples of different rental scenarios.
How Can You Rent Out an Apartment Through Airbnb and Booking?
If you decide to rent out an apartment short-term via Airbnb or Booking, you have two main options for registering your activity:
As an Individual
- This option applies if you rent out a property that you own and are not engaged in systematic business activity.
- Taxation of rental income:
- You owe a 10% rental income tax on the annual income after deducting a 10% standard expense allowance.
- If you are not registered for VAT, you do not owe VAT.
- You must declare rental income in your annual tax return.
- You do not pay social security contributions unless you have another taxable activity.
As a Business Entity (Sole Proprietor, LLC, LTD)
- If you rent out multiple properties or actively advertise the service, this may be considered a business activity, requiring company registration.
- Taxation of rental income:
- LLC/LTD – 10% corporate tax on profits + 5% dividend tax if you withdraw the profit.
- Sole Proprietor – Progressive taxation based on income (up to 15%).
- Mandatory social security contributions if you are self-employed.
- If the company exceeds BGN 166,000 in annual turnover, it must register for VAT.
In general, rental income is not considered a freelance profession because it does not require personal labour, skills, or professional qualifications. Instead, rental income is classified as passive income and is usually declared as personal income or through a business entity.
VAT for Short-Term Rentals
IMPORTANT: Renting out a property to a private individual is not subject to VAT when the rental period is long-term (over 30 days). However, if you provide short-term rentals (up to 30 days) through platforms like Airbnb and Booking, the Bulgarian tax authorities consider it a hotel service, which means the following:
- Mandatory VAT registration – If your annual turnover exceeds BGN 166,000 over 12 consecutive months, you must register for VAT.
- VAT rate – If you are VAT registered, you charge 9% on revenues, but only if the property is categorized as a tourist accommodation. Otherwise, the standard 20% rate applies.
- Obligation for VAT registration under Article 97a – If you pay commissions to foreign platforms (e.g., Airbnb, Booking), even if you do not reach the BGN 166,000 threshold, you must register under Article 97a of the VAT Act and declare 20% VAT on these expenses.
Example: Ivan rents an apartment in Sofia through Airbnb for BGN 100 per night. Over a year, he has 200 nights booked, generating BGN 20,000 gross income.
- If he is not VAT registered, he owes 10% rental income tax after deducting the 10% standard expense allowance.
- If he owns multiple properties and his turnover exceeds BGN 166,000, he must register for VAT and charge 9% or 20% VAT on each booking, depending on the property’s categorization.
ℹ Important: If you rent out properties short-term, it is advisable to consult an accountant to comply with tax regulations and avoid penalties from the National Revenue Agency (NRA).
What Expenses Can You Deduct?
If you rent out an apartment through a company, you can deduct certain expenses to reduce taxable profit:
- Property maintenance (cleaning, repairs, supplies).
- Interior improvements and furnishings.
- Advertising and marketing expenses.
Example: Maria rents out an apartment in Varna with an annual income of BGN 50,000. Over the year, she incurs the following expenses:
- Cleaning and maintenance: BGN 8,000
- Platform fees: BGN 7,500
- Furnishing and repairs: BGN 5,000. Thus, her taxable profit is reduced to BGN 29,500, on which she will pay a 10% corporate tax (if registered as a company).
To ensure proper accounting for income from Booking, Maria works with a professional accountant who helps her calculate the exact expenses and taxes.
Common Mistakes and Pitfalls
- Unregistered activity: Tax authorities monitor Airbnb and Booking listings. You may face a fine if you rent regularly without declaring income from Booking.
- Incorrect expense reporting: If you operate as an individual, a patent tax is paid, which depends on the location of the establishment.
- Overlooking VAT obligations: Penalties can be severe if your turnover exceeds BGN 166,000 (updated as of January 1, 2025) but you fail to register for VAT.
How to Choose the Right Option?
If you manage multiple properties and do it systematically, registering a company is a better option as it allows you to deduct expenses and ensure professional accounting for income from Booking.
Important Tip: If you’re unsure which option is best for you, consult a professional accountant to avoid issues with the tax authorities and ensure proper income declaration from Booking.
Frequently Asked Questions About Booking, Airbnb, and Short-Term Rentals in Bulgaria
1. Do I have to declare my income from Booking and Airbnb in Bulgaria?
Yes. Declaring income from Booking and other short-term rental platforms is mandatory.
2. How is rental income from Booking and Airbnb taxed?
Taxation depends on whether you operate as an individual or a company:
- Individual: 10% tax on annual income after deducting 10% standard expenses.
- Company (LLC, LTD, Sole Proprietor): 10% corporate tax on profit + 5% dividend tax (if withdrawing profits).
3. When do I need to register for VAT if renting out a property through Airbnb and Booking?
If your revenue from short-term rentals exceeds BGN 166,000 in the last 12 months, you must register for VAT. In this case, you will charge 9% VAT on rentals, as tax authorities classify this activity as a hotel service.
4. How is income from Booking and Airbnb accounted for?
Accounting for income from Booking depends on how you are registered:
- Individual: You declare the income in your annual tax return without needing bookkeeping.
- Company: Full accounting is required, including revenue and expenses (repairs, platform fees, cleaning, etc.) to optimize tax obligations.
5. Do I need to issue receipts to guests?
If you are an individual, you are not required to issue receipts. However, if you operate as a company and are VAT registered, you must use a cash register or issue electronic fiscal receipts for cash payments.
6. What expenses can I deduct when renting a property through Booking and Airbnb?
If you are registered as a company, you can deduct:
- Commissions and platform fees.
- Cleaning, maintenance, and repair costs.
- Marketing expenses (advertising, professional photos, online promotions).
- Furnishings and interior improvements.
7. How are taxes paid if Airbnb and Booking deposit money directly into my account?
Payments from these platforms are considered taxable income, even if received via PayPal or a bank account. When declaring income from Booking, you must include all amounts received throughout the year.
8. What happens if I don’t declare my income from Booking and Airbnb?
If you fail to declare income from Booking or rental income, the tax authorities may impose severe penalties, including:
- For individuals: BGN 500 to BGN 1,000 for a first offence and BGN 1,000 to BGN 2,000 for repeat violations (Article 80 of the Personal Income Tax Act).
- Failure to submit an annual tax return on time can result in a fine of BGN 500 to BGN 3,000.
- If taxes are deliberately evaded, the tax authorities can conduct an audit and impose the rental income tax due, along with late payment interest.
9. What documents should I keep for my income from Booking and Airbnb?
- Statements from Booking and Airbnb showing received payments.
- Invoices for expenses (cleaning, utilities, repairs).
- Contracts with clients (if applicable).
10. How can I optimize my taxes if renting multiple properties through Booking and Airbnb?
If you rent multiple properties and have high revenue, registering a company might be more beneficial. It allows you to deduct expenses and optimize taxation.
Conclusion
Renting an apartment through Booking and Airbnb can be profitable but comes with important tax and accounting obligations. Choosing between an individual and a company depends on the scale of the operation, while proper income declaration is crucial to avoiding penalties. Besides taxes, it’s also important to consider social security contributions, VAT registration for high turnover, and deductible expenses. To prevent mistakes and unexpected costs, it’s best to consult a professional accountant who can help you find the most beneficial option for your situation.
Find more useful information in the Smetalnik blog.
