As from 1st of January 2011 there is an amendment in the Bulgarian Personal Income Tax Act/PITA/ which has an impact on the monthly rents paid by companies to landlords – physical persons. In compliance with art. 44, para 4 from PITA, starting from 1st of January 2011, in case that a company pays monthly rent to landlord which is a physical person, the income payer /the company/ is obliged to levy 10% advance personal income tax on behalf of the landlord, physical person. The tax shall be paid every month by the company to the National Revenue Agency until 10th day of the following month. Every month for the withheld and paid advance tax, the company shall issue a Certificate to the landlord for the paid 10% Advance Personal Income Tax to the Budget.
Until 31st of December 2010 the individuals were obliged to pay the 10% tax themselves but as the government wants to exceed the collection of Income tax from individuals, it decided to transfer this responsibility to the Legal persons, payers of the income. At the same nothing changes for the landlord – individual in relation to the amount of the tax he needs to pay – it remains the same. Simply from now on the Company will withheld the amount of the tax on behalf of the individual, recipient of the income.
Anyway, on the base of the certificates issued by the Company, the Landlord will be able to declare and decrease his Tax liabilities in his Annual Tax Return. Also in case of renting activity the Lessor is entitled to deduct from his profit 10% normative recognized expenses for tax purposes – something like depreciation of the property.
Sample calculation:
– Gross monthly rent of BGN 120 – The landlord keeps on issuing receipts to this amount
– Advance personal income tax withheld by the Company – (120-120×0.10)x0.10 = BGN 10.80
– Net monthly amount paid to the landlord – BGN 109.20
