With the rise of digital technologies it is becoming easier for many people to rent out spare rooms in their apartments, and sometimes even whole guesthouses. You are probably a supplier of such services in this newfound market and are not quite sure about the legal requirements with which you have to comply. In this article we’ll take a look at the main issues regarding the legal regime of guest apartments and houses: how the law treats them, what requirements it imposes, when will you be regarded as a trader and what peculiarities exist around registration and taxes.Registration and categorization.
Guest apartments and guesthouses are considered class “B” tourist sites under the Tourist Act (TA) and as such are subject to categorization (Art. 119 TA). To do that you must submit an application for categorization, which contains the information envisaged in Art. 129 TA to the mayor of the municipality or the person who he has authorized for these procedures.
There are situations in which in the eyes of the law you will not be considered a trader and you’ll still be able to provide hospitality services in a guesthouse or guest apartment. This means that you will be spared the obligation to register with the Commercial register and register of NPLE and to do bookkeeping as a trader. Nevertheless, in terms of the process of registering your house or apartment as a tourist site, the law does not provide for a simplified regime, regardless of whether you provide hospitality services as a trader.
In order to be able to provide hospitality services in a guest apartment or house as a non-trader, these must be a part of the housing unit where you live (Art. 113, par. 2 TA). To consider a housing unit as one where you live, there are 3 cumulative requirements, which must be met:
1) you have to provide the hospitality service there;
2) you have to physically live there; and
3) your current address has to be registered there.
You must also keep the register envisaged in Art. 116 TA.
Categorization procedure.
Of main consideration here is the Categorization Ordinance (CO). The person who will provide the hospitality services or a person authorized by them must lodge an application to the mayor of the municipality in accordance with Annex 4 or 5 of CO to which must be appended the documents referred to in Art. 129, par. 1 TA. You must specify a physical address for correspondence, an email or fax.
The municipality’s Expert commission on the categorization of tourist sites will decide on the category of your guest apartment or house. Within 14 days the commission must open the procedure, upon which it will issue a temporary certificate for an open procedure. The commission conducts an on-site inspection through an expert working group which is composed of no less than three people and which issues a protocol detailing its findings in at least two copies.
The application for categorization is lodged for a specific category. If it is not in conformity with the findings, the commission may propose that the site be assigned with a different class, type or category.
At the end of the procedure a certificate is issued with a 5-year period of validity.
The categorization fee is determined by a ministerial decree. Currently for guest apartments and guesthouses it amounts to 10 lv. per bed.
Taxes.
As a non-trader there are 2 main taxes that you have to be concerned with.
The first one is local tourist tax. It is determined by an ordinance of the local counsel and it varies between 0.20 lv. and 3 lv. per overnight accommodation for each person.
The second one taxes the income of physical persons. In Bulgaria this is a 10% flat tax. However, 10% of the sum is not taxed, as it is considered an expense for providing the hospitality service. Only the other 90% are effectively taxed. The amount is due by the 30th of April following the year in which the income was made.
In case you want to take advantage of the seemingly simple way to increase your income by renting out your property, but have uncertainties about the legal regime – don’t hesitate to contact us – your online business consultant!
Vladimir Slavov
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