Value Added Tax (VAT) is the main type of indirect taxation in the Bulgaria
VAT taxation under Bulgarian tax law is regulated by the Bulgarian VATA (Value Added Tax Act)
This type of indirect tax is payable monthly for all supplies of goods or services for any intra-European Union acquisition whose place of performance is within the country, carried out by a registered person, as well as for import of goods. The tax is levied on the consumption thereof and the group of turnover taxes. The VAT model under Bulgarian law follows the common VAT regime within the EU model, where personal expenses are taxable by applying the credit (invoice) method.
According to this method, each stage of production of goods or services and the implementation thereof to end users is chargeable with VAT on the entire value of the supply, such that through the mechanism of tax credit the final price of the goods or services includes a single VAT charge in the amount of the respective tax rate.
A taxable person is any person who independently carries out an economic activity, whatever the purpose and results of that activity, as well as any person who performs accidental onerous intra-European Union supplies of new transport vehicles. ‘Independent economic activity’ are the activities of producers, traders and persons supplying services, including mining and agriculture, as well as the practice of a liberal profession, including as private enforcement agents and notaries.
In the cases of trading goods, which are transported between two different member states, the following regimes are applicable, known as:
The companies (persons not registered under the VATA) and the tax non-liable legal entities must pay themselves the VAT when acquiring excisable goods from VAT registered person in other member states (suppliers).
During import the tax is charged by the customs authorities, and the export of goods is defined as supplies, subject to taxation with zero rate, that are entitled to tax credit.
The rules for tax base formation stipulate that this base does not include the penalties and interests for delay, except for those of sanctioning character. There is also no regulation of the tax base in the case of selling at a loss (except for the cases explicitly stipulated by law).
Subject to mandatory registration under VATA is any person having a taxable turnover of 50 000 BGN or more for a period not longer than the last 12 consecutive months prior to the current month. The person is obliged within 7 days as of the expiry of the tax period in which it reached such turnover to file an application for VAT registration.
The registration requirement shall apply to each non-taxable legal person and taxable person which is not registered under VATA, and which effects intra-European Union acquisition of goods.
An obligation to submit an application for registration under VATA shall arise for the acquisition by which the total value of taxable intra-European Union acquisitions exceeds BGN 20 000/EUR 10 225.84 The intra-European Union acquisition by which the said threshold is exceeded shall be liable to tax under VATA.
A penalty may be imposed by the tax authority if a business fails to register at the correct time.
Nevertheless, at the same time option is provided for voluntary registration regardless of the turnover made. This means that each person who performs independent economic activity can register under the VATA.
The threshold does not apply to foreign entities. They are required to register at least 7 days before their first taxable supply.
B2C supplies of electronically supplied services to customers in BG are subject to BG VAT. To ensure compliance with this, suppliers have the choice to either register for VAT in each Member State where their customers reside, or elect to register under the EU VAT MOSS simplification scheme in a single Member State (where they are established).
Businesses with multiple establishments in the EU can choose which Member State to operate MOSS (the Member State of Identification). However, the MOSS cannot be used to report local sales to customers in a Member State in which suppliers of electronically supplied services have a fixed establishment. Non-EU suppliers without an establishment in a Member State are free to select a Member State of their choosing to operate MOSS and become their Member State of Identification.
Any non-resident person, who has a fixed establishment within the territory of the country from which the said person carries out economic activity and who satisfies the conditions of VATA for compulsory registration or for optional registration, shall be registered through the agency of an accredited representative, with the exception of branches of non-residents which shall be registered according to the standard procedure.
Where a person is established in another Member State or in a third country with which Bulgaria has signed legal assistance instruments, the fiscal representative is not mandatory but it is still an option.
VAT registered entities are required to file a monthly return within 14th day of the month following the respective tax period (month).
The VAT must be paid by the same date.
Please note that if the due date falls on a weekend or public holiday then the due date will be the next working day.
Any person, who while obligated to do so, fails to submit a VAT return shall be liable to a fine, applicable to legal persons and sole traders, of BGN 500 or exceeding this amount but not exceeding BGN 10,000.
Any registered person who, while obligated to do so, fails to charge tax within the time limits provided, shall be liable to a fine applicable to legal persons and sole traders, equivalent to the amount of the uncharged tax but not less than BGN 500. In case of repeated violation, the amount of the fine or pecuniary penalty shall be in the double amount of the uncharged tax but not less than BGN 1,000.
If the value of the intra-EU trade in goods dispatched or arriving from other EU is above an annual threshold, a supplementary declaration (referred to as an Intrastat declaration) has to be submitted for either or both. These declarations have to be submitted on a monthly basis.
Any registered person should submit a VIES declaration if for the tax period has – performed supplies of goods or services to a merchant registered for VAT purposes in another Member State, including in case of transfer of its own goods, or has participated as an intermediary in a trilateral transaction between VAT registered merchants in other Member States.
Yes. A range of penalties can be imposed where businesses do not comply with the VAT rules.
Civil penalties and interest can be applied for errors and omissions made on tax returns, or where the tax is paid late. Penalties can also be applied where the business has failed to maintain adequate records, provide information (including additional declarations), or makes repeated mistakes.
Criminal proceedings may be brought in the case of more serious matters.
Yes, it may be possible to reclaim the VAT incurred in certain circumstances.
Two schemes exist, one for businesses established in the EU and another for businesses established elsewhere.
The EU cross border refund scheme is available in all EU member States, and enables a business established in an EU country to recover VAT incurred in another member State. To be eligible to make a claim, the claimant must be a taxable person established in an EU member State other than the one from which the claim is to be sought. In addition, the claimant:
The amount that is refundable is determined by the deduction rules that apply in the country making the refund. The claim is submitted electronically to the tax authority from whom the repayment is being sought.
The refund period must not cover more than one calendar year or less than three calendar months – unless it is covering the remainder of a calendar year. The claim has to be made by 30 September of the year following that in which the VAT was incurred.
Businesses established outside of the EU can, subject to certain conditions, also reclaim the VAT incurred on imports into BG or purchases of goods and services used in BG. The scheme is available to any person carrying on a business established in a third country ie outside the EU, provided that in the period of the claim:
The claim period in Bulgaria is until 30 June each year. Claim forms have to be submitted to the Bulgrian tax authority no later than six months from the end of the relevant designated year is by 31 December each year.
An invoice shall mandatorily state:
Where a person effects distance selling of goods, is registered for VAT purposes in another Member State, and the place of supply under the terms of distance selling is within the territory of that other Member State, the invoice shall mandatorily state:
When the registered person who is an intermediary in a triangular operation documents a supply of goods effected to the acquirer in the triangular operation, the invoice shall state Article 141 2006/112/EC as grounds for not charging tax.
Where the tax is chargeable from the recipient, the invoice shall not state the amount of tax and the rate of tax. In such case, recorded in the invoice shall be ‘reverse charge’, as well as the grounds for this.
The amount in the invoice may be stated in any currency, provided that the taxable amount and the amount of the tax are stated in Bulgarian leva.
Every taxable person must assure, applying a method of his/ its own choice, from the moment of issuance until the end of the period of storage the authenticity of origin, the integrity of content and the readability of the invoices and the notifications to them issued thereby or on his/its behalf as well as the invoices and notifications received thereby, no matter whether they are on hard copy or in electronic form.
Documenting of supplies with electronic invoices and electronic notifications to invoices shall be carried out, provided that such documenting is accepted by the recipient with a written or tacit consent.
The taxable person shall ensure the authenticity of origin, the integrity of content and the readability of the invoice or the notification thereto by exercising any type of control over the economic activity, creating a reliable audit trail between the invoice or the notification to the invoice and the supply of the goods or services.
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For further information on indirect tax in Bulgaria please contact:
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Victor Bakalov |
