Advance Tax on Rental Income in Bulgaria: Rules, Calculations, and Art. 55 Declarations (Complete Guide)
1. Introduction: What is the Advance Tax on Rental Income?
Renting out real estate in Bulgaria is a popular way to generate passive income. However, this income is strictly regulated under the Personal Income Tax Act (PITA / ЗДДФЛ). One of the most important obligations related to this type of income is declaring and paying advance tax throughout the tax year.
The rules for withholding and paying the advance tax vary significantly depending on whether the tenant is a company (legal entity or self-employed person) or an individual. Unfamiliarity with these rules often leads to payment delays, incorrectly completed declarations, and fines from the National Revenue Agency (NRA/НАП). In this practical guide, we will analyze all the details of the advance tax on rental income for 2026, complete with calculation examples and current deadlines.
2. Who is Obliged to Withhold and Pay the Advance Tax?
The legislation distinguishes between two main scenarios depending on the parties to the tenancy agreement:
Scenario A: The Tenant is a Company, and the Landlord is an Individual
When the payer of the income (the tenant) is a company or a self-employed person, the tenant is fully responsible for calculating, withholding, declaring, and paying the advance tax to the state budget. The landlord (individual) receives the net rental amount after the tax has already been withheld.
Scenario B: The Tenant is an Individual, and the Landlord is an Individual
When both parties to the contract are individuals, no company is involved. In this scenario, the landlord is obliged to calculate, declare (via an Article 55 PITA declaration), and pay the advance tax themselves.
Scenario C: Business-to-Business Contracts (B2B)
When both the tenant and the landlord are companies, the PITA advance tax provisions do not apply. The transaction is recorded in accordance with standard rules of the Corporate Income Tax Act (CITA) and the VAT Act (via standard invoicing).
3. Calculation Formula: Statutory Deductions
The taxable base for rental income received by individuals is not the gross amount stated in the rental contract. The law provides relief in the form of statutory activity expenses, which are set at 10% of the gross income (under Article 31 of PITA). The flat personal income tax rate is 10%.
The formula for calculating the advance tax due is as follows:
- Statutory Expenses (10%): Gross Rent × 10%
- Taxable Income (Tax Base): Gross Rent − Statutory Expenses
- Advance Tax Due (10%): Taxable Income × 10%
- Net Amount to be Paid (Net Rent): Gross Rent − Advance Tax Due
Practical Example:
Let’s take a gross monthly rent of 1,000 EUR as an example:
- Statutory Expenses: 1,000 EUR × 10% = 100 EUR
- Taxable Income (Tax Base): 1,000 EUR − 100 EUR = 900 EUR
- Advance Tax Due: 900 EUR × 10% = 90 EUR
- Net Rent to be paid to the landlord: 1,000 EUR − 90 EUR = 910 EUR
4. Declaring and Payment: The Article 55 Declaration
The advance tax must be declared on a quarterly basis using the Declaration under Article 55, Paragraph 1 of PITA (Template 4001). The deadlines for submitting the return and paying the tax are:
- First Quarter (January – March): by April 30th.
- Second Quarter (April – June): by July 31st.
- Third Quarter (July – September): by October 31st.
- Fourth Quarter (October – December):
- Under general rules, advance tax for the fourth quarter is not withheld by the tenant company. Instead, the landlord declares and pays it with their Annual Tax Return (Article 50 declaration) by April 30th of the following year.
- Exception (applicable for 2026): The landlord can declare in writing to the tenant company that they wish to have the advance tax withheld for the fourth quarter as well. In this case, the company tenant withholds the tax and declares it under Article 55 by January 31st of the following year.
5. Bills for Payment and Official Certificates
When the tenant is a company, it is legally obliged to issue the following documents to the landlord upon each payment (under Article 45, Paragraph 4 of PITA):
- Bill for Payment (Сметка за изплатени суми): A document showing the gross rent, statutory expenses, tax withheld, and net rent paid.
- Official Certificate (Служебна бележка): Certifies the advance tax withheld and paid to the state. These documents are used by the individual landlord to file their annual tax return.
Additionally, the company must file an annual information return under Article 73, Paragraph 1 of PITA by February 28th of the following year, reporting all payments made to physical persons during the year.
6. Quick Reference Table: Deadlines and Obligations
| Period | Declaration Deadline (Art. 55) | Payment Deadline | Note |
|---|---|---|---|
| Q1 | By April 30th | By April 30th | Mandatory withholding by the tenant company |
| Q2 | By July 31st | By July 31st | Mandatory withholding by the tenant company |
| Q3 | By October 31st | By October 31st | Mandatory withholding by the tenant company |
| Q4 | By January 31st (following year) | By January 31st (following year) | Withheld by the company only upon landlord’s written consent |
7. Frequently Asked Questions (FAQ)
Q1: Do I need to withhold tax if I rent an office from another company?
No. When the landlord is a legal entity (company), they issue an invoice, and you pay the full amount. Advance tax is withheld only when the landlord is an individual.
Q2: What happens if the landlord is a foreign individual?
If the landlord is a foreign individual, their rental income from properties in Bulgaria is subject to a 10% final withholding tax. The tenant company withholds and pays this tax, but Double Tax Treaties (DTT) may apply depending on the landlord’s residency.
Q3: Is withholding tax mandatory during the fourth quarter?
No, it is optional. The company can withhold tax for Q4 only if the landlord provides written consent before the payment. Otherwise, the landlord pays this tax directly with their annual return.
Q4: What if the rent is paid in cash?
If the rent is paid in cash, the company tenant is not required to issue a cash register receipt, as they are not selling goods/services. However, the landlord must sign a receipt for the cash, and the Bill for Payment serves as the official expense document.
Q5: Can the landlord pay the tax themselves even if the tenant is a company?
No. The law requires the company tenant to withhold and pay the tax for the first three quarters. Shifting this obligation to the individual is a violation of tax regulations.
Q6: Where is the withheld advance tax paid?
The tax is paid to the bank account of the territorial directorate of the NRA where the tenant company is registered.
Q7: What is the deadline for filing the Article 73 declaration?
The Article 73, Paragraph 1 declaration must be filed electronically by February 28th of the year following the payment year.
Q8: What are the penalties for late filing of the Article 55 declaration?
The penalty for late filing is up to 255.65 EUR for a first offense and up to 511.29 EUR for repeated violations, plus interest on the unpaid tax amount.
8. Conclusion
Correct administration of rental income requires detailed accounting, timely filing of Article 55 declarations, and proper documentation. For tenant companies, this is a standard but mandatory task, and missing deadlines leads to audits and fines.
Our accounting team provides comprehensive support, including document preparation, Article 55 filings, and Article 73 annual reports for your tenancy agreements. Contact us for professional assistance.