Pursuant to Bulgarian legislation (based on the EU VAT rules and Directive 2006/112/EC) the following transactions are subject to VAT:
Under Bulgarian legislation “taxable person” shall mean any person who independently carries out an economic activity, whatever the purpose and results of that activity. As of 19 December 2007 persons who practice a freelance profession, including private bailiffs, lawyers and notaries, etc. are also
subject to obligations under the Value Added Tax Act.
Pursuant to the VAT Act entities which fall within the requirements of the law are obligated to register with the National Revenue Agency, which maintains a special VAT Register. Upon registration each entity/person is issued a unique ID number for VAT purpose having BG prefix.
The requirement for VAT registration applies to each taxable person who is established within the territory of the country and who performs taxable supply of goods or services in exchange for consideration.
Also a taxable person who is not established within the territory of the country and who performs taxable supplies of goods or services covered under Article 12 of the VAT Act (other than those for which the tax is chargeable from the recipient) is required to register under the VAT Act.
According to the VAT Act there are two types of registration – compulsory and optional.
The compulsory registration applies to taxable persons having a taxable turnover of:
Such persons should file an application for registration within 14 days after the lapse of the tax period during which such turnover has accrued.
Entities established in an EU Member State performing supply of goods with installation in Bulgaria to customers who are not registered for VAT purposes are also obliged to register irrespective of their taxable turnover.
Foreign entities which receive services with a place of supply in Bulgaria for which the recipient has to self-charge Bulgarian VAT are obliged to register irrespective of their taxable turnover.
Any entity may apply for voluntary VAT registration and benefit from the regime of the VAT system. However, if voluntarily registered, such entity will not be able to deregister for two years following the year of registration.
In order to register for VAT purposes foreign entities have to appoint a local fiscal representative, unless they have a registered branch in Bulgaria. The requirement does not apply to EU based entities.
The rate of VAT is 20% and is applicable to:
The rate of VAT applicable to accommodations provided by hoteliers is 9%.
The following major transactions are entitled to zero rate of VAT:
Main transactions which are exempt from VAT are:
Intra-community Supply of Goods
The VAT Act provides the intra-Community supply of goods which actually replaces the regulation of export under the previous VAT Act as far as transaction between merchants from different member states is concerned. Intra-Community supply of goods is any supply of goods, transported from the territory of the country to the territory of another Member State, where both supplier and recipient are registered for VAT. Intra- Community acquisition is acquisition of the right of ownership of goods, as well as the actual receipt of goods, which are dispatched or transported to the territory of the country from the territory of another Member State, where the supplier is a taxable person registered for VAT purposes in another Member State.
Intra-Community supplies with the exception of the exempt intra-Community supplies referred to above which are liable to tax at the zero rate.
In intra-Community acquisitions, the recipient charges 20% VAT and is entitled to deduct credit in the same amount for input tax.
Reverse Charge Mechanism
Foreign entities not established and not VAT-registered in Bulgaria performing certain supplies to local businesses do not have to register for VAT purposes. The applicable VAT will be self-charged by the local customer.
Supplies to which the ‘reverse charge’ of VAT applies include:
VAT Reporting and Payment
VAT is generally reported and paid monthly. The tax period is a calendar month. The monthly VAT returns are to be filed and monthly VAT payments made by the 14-th day of the following month.
VAT Information exchange system (VIES) returns have to be filed monthly by the same deadline if intra-Community supplies of goods or certain services have been performed during the respective month.
Where VAT incurred on purchases exceeds VAT charged on sales, the excess VAT deduction is first carried forward for a period of two months to offset VAT debt due in these two months. If at the end of the two-month period the excess VAT or part thereof has not been recovered, the balance is refunded within 30 days after the date of filing of the VAT return for the second month.
EU based foreign entities which are not registered and established for VAT purposes in Bulgaria can receive a refund of the local input VAT incurred for goods and services used for supplies with a place of supply outside Bulgaria. A specific procedure through the authorities of the EU Member State of establishment has to be followed.
Non-EU based entities may be entitled to a refund on a reciprocal basis (i.e., if their country of tax residence provides the right to refund VAT to Bulgarian entities). A specific procedure through the Bulgarian revenue authorities has to be followed.
Introduction of Cash Accounting Scheme
Recent amendments to the VAT Act have implemented the option granted to European Union Member States with Directive 2010/45/EU to apply a cash accounting scheme.
In accordance with these new provisions of the VAT Act, eligible taxable persons will have the opportunity to delay payment of output tax to the state budget until they have received payment from their customers. To apply the cash accounting scheme, the taxable persons must apply for formal permission from the revenue authorities.
Only taxpayers with an annual taxable turnover up to EUR 500,000 can apply for this regime. In addition, the cash accounting scheme is not applicable for certain types of transactions such as import, export, intra-Community acquisitions and supplies and other supplies explicitly listed in the VAT Act.
The right to VAT credit of companies receiving invoices from persons applying the cash accounting scheme will arise when they have paid for the goods/services received. Thus, there may be a mismatch between the month in which the invoice is received and the month when the input VAT on the invoice may be claimed for deduction, which is when the invoice is paid. In addition, in order to deduct input VAT on such invoices, the recipient must have a payment document and a special protocol issued by the supplier in addition to the invoice.
Special Rules for Large Investment Projects
VAT-registered investors who perform certain eligible investment projects are entitled to import assets needed for the project without effective payment of import VAT. In addition, such investors are entitled to refund VAT incurred on local purchases within 30 days after filing of the VAT tax return. In order to benefit from the special investment rules, the investor needs to obtain an advance approval from the Minister of Finance. In order to receive the approval, the investment project must meet certain conditions, such as:
Special VAT Regulations for Tourist Sector
There are two regimes in the new VAT Act regarding the tourist sector depending on the services provided. The rate of tax applicable to accommodation provided by hoteliers (which is called “basic tourist service”) is 9 %. The provision by a tour operator or a travel agent, acting in his own name, of goods or services in connection with the journey of a tourist for the direct benefit of the tourist, is treated as a supply of a single service to tourists.
The goods and services directly benefiting the tourist shall be the goods and services which the tour operator or the travel agent has received from other taxable persons and has provided to the tourist without alteration. If the place of transaction of a single service to tourists is in Bulgaria, the tax rate is 20%. However, if the supplies of goods and services for the direct benefit of the tourist have a place of transaction within the territory of third countries and territories (i.e. outside the territory of the Community) they are taxed at zero-rate.
Intrastat is a system for collecting statistical data about intra-Community movement of goods between Bulgaria and the other EU Member States.
All VAT-registered entities in Bulgaria have to file Intrastat returns if the following thresholds for incoming (“arrival”) and outgoing (“dispatch”) intra-Community movement of goods between Bulgaria and the other EU Member States are exceeded:
The deadline for filling Intrastat returns is the 14th day of the month following the month of arrival or dispatch of the goods.