Value Added Tax (VAT) Guidelines: Bulgaria

In general, the following transactions are subject to Bulgarian VAT:

 

According to the Bulgarian VAT legislation some transactions carried out without consideration are deemed to be supplies for consideration: for example, free transfer of ownership or other property right on goods to third parties under certain conditions, the private use of business assets, etc.

 

Certain transactions are not subject to Bulgarian VAT (VAT exempt supplies): for example, listed financial services, some health (medical) and education services.

 

The standard VAT rate is 20 percent. It applies to all taxable supplies except those liable to the tax rate of 0 percent (zero rate). The reduced VAT rate is 9 percent. Only as a corona-pandemic caused economic support temporary reduced VAT rate of 9 percent has been legally implemented and shall apply under certain condi­tions until 31 December 2022.

 

There is a difference in the treatment between the non-taxable supplies and supplies liable to VAT at the zero rate. Entrepreneurs selling VAT exempt goods or providing VAT exempt services neither can charge VAT nor can deduct the VAT paid on their purchases. In such cases input VAT is considered the cost of an entrepreneur. Input VAT deductions are allowed with respect to supplies taxable at the zero rate. Therefore, it must always be checked whether a supply is a tax exempt or taxable at the zero rate.

 

According to the general rule in case of supply of goods the place of supply is considered to be:

 

The place of supply of an intra-Community acquisition is, in principle, in the EU Member State in which the transport of goods ends. The import is deemed to be effected in the country in which the goods were released for free circulation.

 

The intra-Community supply of goods, where the recipient is registered for VAT purpose in another EU Member State and the goods are dispatched or transported to this another EU Member State, is chargeable with VAT at a zero rate.

 

In order to determine the place of supply of a service and to properly classify that service later, it should be always checked what kind of a service is performed.

 

The place of supply of services to non-taxable recipient (B2C services) is where the supplier providing the services is established. As an exception, if such services are provided from a fixed establishment of the service supplier, the place of such fixed establishment is the place of supply or, if neither applies, where he usually resides.

 

The place of supply of services to a taxable recipient for the purpose of its business activity (B2B services) is where the recipient of the service is established. As an exception, if such services are provided to a fixed esta­blishment of the recipient, the place of such fixed establishment is the place of supply. 

 

Notwithstanding the above, the place of supply of services is the place where the service recipient is resident or domiciled, provided the following conditions are met simultaneously:

Basically, the obligation to register for VAT arises upon the provision of taxable supply of goods or services in Bulgaria. Taxable supplies also include supplies taxed at a zero rate. Currently Bulgarian law provides for a turnover limit of BGN 50,000 (approx. EUR 25,000). 

 

Registration for VAT purposes is mandatory, if the above limit is exceeded by a taxable person established in Bulgaria during a period of 12 consecutive months. 

 

Any non-resident taxable person has to apply for a mandatory VAT registration at least 7 days prior the performance of a taxable supply with place of supply in Bulgaria.

 

There are some simplification rules to avoid a registration for VAT purposes in Bulgaria:

According to the Bulgarian VAT legislation the tax period is the calendar month. The difference between total amount of output and input VAT calculated in tax period represents the amount of VAT liability for payment or the amount of VAT refund. 

 

VAT returns are to be filed with the competent tax authorities and the due VAT, if any, is to be paid by the 14th day of the month following the tax period which it refers to. The VAT return is to be submitted to the tax authorities electronically.  

 

If a taxable person conducts intra-Community or other cross-border supplies or acts as the intermediate supplier in a triangular transaction, he has to submit the so-called VIES declaration. This declaration is to be submitted monthly, together with the monthly VAT return.

 

The Intrastat report is to be submitted regarding cross-border transactions with goods by VAT registered taxable persons, if certain value of dispatches and/or deliveries to or from EU Member States is exceeded. Intrastat reports must be filed electronically. Any taxable person, who is obligated but fails to submit an application for registration within the time limits established by law, shall be liable to a penalty of BGN 500 up to BGN 5,000 (approx. EUR 250 up to EUR 2,500).

There are also other cases of violation of the Bulgarian VAT legislation, in which a penalty is applicable, for example, failure to charge VAT in the invoice issued and failure to charge the due VAT within the time limits provided for by law, not issuing any invoices or if the invoice for performed supply at all. In some cases an admi­nistrative penalty is applied only if the violation leads to a reduction of the VAT revenues for the respective tax period. In many cases the amount of the administrative penalty is calculated as a percentage of the not charged VAT and may vary depending on the time period during which any actions for correction of the violation is undertaken. In case of repeated violation the amount of the respective penalties are usually doubled.

 

A taxable person who is registered for VAT purposes within Bulgaria may claim deduction of credit for input VAT within the VAT return on the regular tax procedure under certain preconditions.

 

Taxable persons resident in a country outside the EU may apply for a refund of credit for input VAT in Bulgaria, only if reciprocity has been established between that country of residence and Bulgaria. 

 

Persons established in EU Member State fall within the scope of the procedure for input VAT refund. 

 

The taxable person can deduct credit for input VAT, only if the purchased goods or services are used for the purpose of taxable supplies within the business activity of the taxable person. 

 

Deduction of credit for input VAT is also allowed with regard to supplies which have been effected abroad, but which would have constituted taxable supplies if they had been effected in Bulgaria. Any VAT that is charged incorrectly is non-refundable. 

 

Input VAT on certain employee expenses:

Each taxable person is obliged to issue an invoice for a supply effected. This also applies to advance payments. The invoice must be issued in duplicate: original for the recipient and copy for the supplier. The general rule is that the invoice must be issued no later than five days as of the occurrence of the chargeable event or the receipt of the advance payment. 

 

The electronic invoicing and electronic storage of tax documents is generally possible according to the Bulgarian tax legislation. 

 

So far as the issued electronic invoices fulfill the requirements for the mandatory items of information that must be stated in every invoice and the authenticity of origin and integrity of data are guaranteed through the use of an electronic signature or Electronic Data Interchange, the electronic invoices sent/received by electronic means are accepted as invoices for tax purposes. 

 

The supplier issues a debit, respectively credit note to the invoice upon any change of the taxable amount of a supply or upon rescission of a supply on which an invoice has been issued. 

 

Issued invoices, debit notes and credit notes must not contain any corrections. Any incorrect invoice/credit note/debit note must be cancelled and a new one must be issued. 

 

Self-billing procedure is generally possible according to the law. In order to apply self-billing procedure the following conditions need to be fulfilled: