Value Added Tax

The value added tax (VAT) regime is regulated in the Value Added Tax Law (VATL).

Scope of taxation

Subject to value added tax shall be each taxable supply of goods or services effected for consideration; each intra-European Union acquisition effected for consideration, whereof the place of transaction is within the territory of the country, by a person registered under this Law or by a person in respect of which an obligation to register has arisen; receipt of goods within the territory of the country by a taxable person, which will be used for the purposes of the economic activity of the said person, where the said goods are dispatched or transported from the territory of another Member State in which the person is registered for VAT purposes; each intra-European Union acquisition of new means of transport effected for consideration, whereof the place of transaction is within the territory of the country, including by natural persons, whose acquisitions normally are not subject to VAT taxation; each intra-European Union acquisition effected for consideration, whereof the place of transaction is within the territory of the country, of excisable goods, where the recipient is a taxable person or a non-taxable legal person which is not registered under this Law; importation of goods; distance selling of goods with a place of execution the territory of the country (where the conditions of Article 20(1) are not met or those under paragraph 2 of the same provision are met).

"Taxable supply" shall be each supply of goods or services, where effected by a taxable person under this Law and whereof the place of transaction is within the territory of the country, as well as the zero-rated supplies effected by a taxable person, save in the cases in which this Law provides otherwise.

A supply in which the recipient is a taxpayer shall not be subject to taxation by the supplier.

Activities and supplies not falling under the scope of VATL

Activities and supplies not falling under the scope of VATL shall be supplies between natural persons outside independently carried out economic activity, the activity carried out by natural persons under an employment relationship, free of charge supplies and all activities and supplies of central or local government authorities in which they engage in their capacity as such.

Outside the scope of the VATL shall be the supply to the transferee from the transforming corporation, from the transferor or from the contributor, which under Article 10 of the Law is not treated as supply for VAT purposes, in case of transformation of a commercial corporation; transfer of an enterprise; contributing a non-cash asset in consideration of a capital allotment in a commercial corporation; transformation of budget-supported organisations, state-owned or municipal-owned enterprises and the provision for use of properties by the state/municipalities/applicants under the National Education Law, for the purposes of private kindergartens, schools, as well as kindergartens and schools with foreign participation.

Supplies free of charge do not fall within the scope of the Law except in the explicitly provided for cases.

Taxable Persons

Taxable person shall be any person who independently carries out an economic activity, whatever the purpose and results of that activity.

Taxable person on importation of goods shall be any natural or legal person.

Any person, who from time to time effects an intra-European Union supply for consideration, acquisition of a new means of transport, shall also be regarded as a taxable person.

Taxable person shall be any person who is not established within the territory of the country and who effects taxable supplies of goods which are assembled or installed within the territory of the country by or for the account of the said person.

Independently carried out economic activities

Independently carried out economic activities shall comprise 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.

Any remunerative activity, carried out on a continuing basis or as a regular occupation or business on a professional basis for the purpose of obtaining income therefrom, including the exploitation of tangible and intangible property, shall also be considered an independently carried out economic activity.

Zero-rated supplies

Zero-rated supplies shall be:

  • supplies of goods dispatched or transported to destination outside territory of European Union:
  • international transport of passengers;
  • international transport of goods;
  • supplies linked to international transport;
  • supplies linked to international goods traffic;
  • supplies for handling of goods;
  • supplies of gold for central banks;
  • supplies linked to duty-free trade;
  • supplies of services provided by agents, brokers and other intermediaries linked to supply of the above mentioned zero-rated supplies;
  • supplies by virtue of international treaties, agreements, accords, conventions or other such whereto the Republic of Bulgaria is a party, ratified and promulgated accordingly;
  • supplies of goods and services where recipients are armed forces of other countries which are parties to the North Atlantic Treaty;
  • supplies of services linked to importation, such as commissions, packing, transport and insurance shall be a supply liable to tax at the zero rate where their value is included in the taxable amount]
  • intra-European Union supplies, except the exempted ones, where the recipient is a taxable person or a non-taxable legal person which is not registered for VAT purposes in another Member State;
  • intra-European Union supplies of new means of transport, including by natural persons.

Exempt supplies and right of option

  • without right of option

Supplies under Chapter Four of the Law linked to health care, rendered by health-care facilities and creches under the Health Law and by medical-treatment facilities under the Medical-Treatment Facilities Law; welfare and social security work; education, sports or physical education; culture; religious denominations; supply of non-profit-making nature; supply of financial services with the exception of the granting of credit for a consideration (interest) by the person granting it upon supply of goods pursuant to a lease contract; insurance services; gambling; supply of postage stamps and postal services; and supply of goods or services for which credit for input tax has not been used.

  • with right of option

Supplies linked to land and buildings and the granting of credit for a consideration (interest) by the person granting it upon supply of goods pursuant to a lease contract, for which the supplier may opt to be taxable.

Exempt intra-European Union acquisitions

Any intra-European Union acquisition of goods, whose supply within the territory of the country is an exempt supply under the law.

Exemption from tax shall be granted in respect of any intra-European Union acquisitions of goods whereof the place of transaction is within the territory of the country:

  • where any persons covered under Article 172 (2) and Article 174 (1) herein are recipients;
  • the importation of which into the territory of the country would be exempted from tax according to the procedure established by Article 58 herein, with the exception of the importation of goods under Article 58 Paragraph 1, Item 6;
  • where the recipients are institutions of the European Union, European Atomic Energy Community, European Central Bank, European Investment Bank or by the authorities of the European Union to which the Protocol of Privileges and Immunities of the European Union is applicable, subject to the restrictions and terms and conditions of this same protocol and the agreements for its application or the agreements on the headquarters and provided that this does not result in violation of the fair competition practices;
  • from an intermediary in a triangular operation, who is a person registered for VAT purposes in another Member State.

Exemption from tax upon importation of goods

Exemption from tax shall be granted in respect of the importation of the goods listed in Article 58 of VATL.

Applicable rates of tax

  • the standard rate of 20 % shall be applicable to the taxable supplies, the importation of goods into the territory of the country and the taxable intra-European Union acquisitions;
  • the rate of tax applicable to accommodation provided at hotels and similar establishments, including the provision of vacation accommodation and letting out of places for camping sites or caravan sites, shall be 9 %;
  • a zero tax rate shall be applicable to the explicitly provided for in the Law supplies.

The rate of tax on the supplies of electronically supplied services shall be the rate applicable in the Member State in which the recipient referred to in Item 1 of Article 152 (1) herein is established.

Credit for input tax and right to deduct credit for input tax

Credit for input tax shall be the amount of tax which a registered person has the right to deduct from the tax liabilities thereof under this Law in respect of goods or services received thereby in a taxable supply, linked with the said person economic activity and used for making subsequent taxable supplies.

Block on the right to deduct credit for input tax

The right to deduct credit for input tax shall not be exercisable, where the goods or services are intended for effecting of any exempt supplies, the goods or services are intended for supplies effected free of charge or for activities other than the economic activity of the person (including for personal use of the owner, the owner's workers and/or employees or third parties), the goods or services are intended for business entertainment purposes, a motorcycle or a passenger car has been acquired, imported or rented, including the goods or services linked with the maintenance, repair, improvement or operation of those means of transport, as well as for transport services or taxi transport by those means of transport.

Charging and remittance of tax

Taxpayer upon effecting of taxable supplies

The tax shall be chargeable from a person registered under this Law who is a supplier of a taxable supply, with the exception of the cases explicitly provided for in the Law, where it shall chargeable from the recipient.

Taxpayer recipient of the supply

Where the supplier is a taxable person who is not established within the territory of the country and the place of supply is the territory of the country and the supply is taxable, the tax shall be chargeable from the recipient of the supply upon:

  • supply of natural gas through a natural gas system situated on the territory of the European Union, supply of electricity or of heating or cooling energy through district heating or cooling networks, where the recipient is a person registered under this Law;
  • supply of any goods which are assembled or installed by or for the account of the supplier: where the recipient is a person registered under this Law and the supplier is established within the territory of another Member State;
  • supply of services, where the recipient is a taxable person under Article 3, paragraphs 1, 5 and 6.

The tax shall be chargeable from the acquirer in a triangular operation under Article 15.

The tax shall be chargeable from the recipient who is a person registered under this Law:

  • supplies of gold material or semi-manufactured products of a purity of 325 thousandths or greater or linked to investment gold;
  • supplies of goods and services related to ferrous and non-ferrous metals waste; ferrous and non-ferrous metals waste of domestic nature; waste, industrial waste, construction and hazardous waste; services linked to the mining, processing or treatment of waste - regardless of whether the supplier is a tax liable person or not.
  • upon supplies of:
     - Seeds of coriander: Neither crushed nor ground; crushed or ground;

      - Wheat and meslin: Durum wheat -seed and other; other - seed and other; other - seed (spelt, common wheat and meslin, other) and other;

      - Rye: seed and other;

      - Barley: seed and other;

      - Oats: seed and other;

      - Maize: seed (hybrid - hybrid "trois voies", simple hybrids, other hybrid and other) and other;

      - Rice in the husk (paddy or rough): for sowing and other except parboiled (round grain, medium grain, long grain: of a length/width ratio greater than 2 but less than 3, of a length/width ratio equal to or greater than 3);

      - Grain sorghum: seed (hybrid for sowing and other) and other;

      - Buckwheat, millet and canary seed; triticale; other cereals;

      - Soya beans, whether or not broken: seed and other;

      - Rape or colza seeds, whether or not broken: low erucic acid rape or colza seeds (foe sowing and other) and other;

      - Sunflower seeds, whether or not broken: for sowing and other (shelled; in grey-and-white-striped shell and other).

Declaration and reporting

Persons registered under this Law shall mandatorily keep the following ledgers:

  • a purchase day book
  • a sales day book

For every tax period, the registered person shall submit a VAT return, prepared on the basis of the ledgers of account. Together with the VAT return, except in the cases under Article 157 of the Law, the registered person shall submit the ledgers of account for the relevant tax period. The tax period shall be fixed as one month in respect of all registered persons and shall be concurrent with the calendar month, except in the case of supplies of services supplied electronically by persons who are not established within the European union, for which the tax period shall be three months and shall coincide with a calendar quarter.

A VAT return shall furthermore be submitted where there is no payable or refundable tax, as well as in the cases where the registered person has not effected or received any supplies or acquisitions or has effected any importation for the relevant tax period.

A registered person, who has effected supplies as an intermediary in a triangular operation, intra-European Union supplies or supplies of services under Article 21, paragraph 2 with the place of supply within the territory of another Member State for the tax period, shall submit a VIES return on the said supplies for the relevant tax period together with the VAT return.

The returns and the ledgers of account shall be submitted on or before the 14th day of the month following the tax period to which the said returns and ledgers refer.

Tax Refund

Refund of net tax for period: input tax claimable within 30 days:

  • after submission of the VAT return, where:

- the person has effected supplies liable to tax at the zero rate during the 12 months last preceding the current month at a total value exceeding 30 per cent of the total value of all taxable supplies. including zero-rate supplies.

- the person - agricultural producer has effected supplies liable to tax during the 12 months last preceding the current month at a tax rate of 20 per cent of the goods produced thereby under appendix No. 2, part two, to a total value exceeding 50 per cent of the total value of all taxable supplies effected thereby.

  • after submission of the most recent VAT return, when there is input tax claimable after the application of the 2-month procedure under Article 92(1) of setting-off of input tax claimable for the period when the procedure has arisen and after setting off all other chargeable and unpaid tax liabilities and liabilities for social-insurance contributions collected by the National Revenue Agency, where the person owes such.

Other recovery periods

Where an audit of the person has commenced, the time period for refund of the tax shall be the time period for issuance of the audit act except for the cases where the person provides security in cash, in government securities or in unconditional and irrevocable bank guarantee which shall be valid for not less than 6 months. The tax shall be refunded and/or set off to the amount of the security within five days after provision thereof.

Refund of Tax to Persons Not Established within Territory of Country

The tax paid shall be refunded to:

  • any taxable persons who are not established within the territory of the country but who are established and registered for VAT purposes within another Member State in respect of any goods purchased and services received thereby within the territory of the country;
  • any persons who are not established within the territory of the European Union but who are registered for VAT purposes in another State: on a basis of reciprocity;
  • any non-taxable natural persons, who are not established within the territory of the European Union, but have effected purchases of goods for private use inclusive of tax charged, after leaving the territory of the country, subject to the condition that the said goods are exported in an unaltered state.

The procedure and the documents required for refund of the tax shall be determined by an ordinance of the Minister of Finance. Ordinance Н-9 of 16.12.2009, Ordinance No Н-10 of 24.08.2006 and Ordinance No Н-12 of 24.08.2006.

Registration

Registration under the VAT Law shall be compulsory and optional.

Subject to compulsory registration under the VATL is any taxable person having a taxable turnover of BGN 50,000 or more for a period not exceeding twelve consecutive months last preceding the current month. That person shall be obligated to submit an application for registration under this Law within 14 days after the lapse of the tax period during which such turnover has accrued to the said person. The obligation to register shall arise notwithstanding the time period over which the taxable turnover has accrued, but not for a period longer than 12 consecutive months.

Persons shall be obligated to register in case of:

  • supplies of assembled and installed goods (Article 97);
  • supplies of services the tax for which is chargeable on the recipient (Article 97а);
  • distance selling of good, whereof the place of transaction is within the territory of the country (Article 98);
  • intra-European Union acquisition (Article 99)]
  • transformation (Article 132).

Optional registration in accordance with the general procedure of the Law

Any taxable person, whereto the conditions for compulsory registration covered under Article 96 (1) do not apply, shall have the right to register under the VAT Law.

Registration initiated by revenue authority

Where a revenue authority ascertains that in the event of grounds for compulsory registration a taxable person has failed to fulfil in due time the obligation thereof to submit an application for registration, the said authority shall register the said person by issuing a registration act, if the conditions for registration are fulfilled.

Right to registration for application of special regime

Under Chapter Seventeen "a" of the Law the persons registered under Articles 96, 97 and 100(1) may apply a value added special cash accounting regime, if they meet certain conditions. For application of the special regime a permit shall be granted by the National Revenue Agency authorities.

Under Chapter Eighteen of the Law right to register have persons providing services supplied electronically, who are not established within the European Union. Registration shall be by electronic means, with the application for registration submitted to the Sofia Territorial Directorate of the National Revenue Agency.

Registration of Non-Resident who Is Not Established within Country

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 this Law 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.

Any non-resident person, who is not established within the territory of the country but effects taxable supplies whereof the place of transaction is within the territory of the country and who satisfies the conditions of this Law for compulsory registration or for optional registration, shall be registered through the agency of an accredited representative.

Registration through the agency of an accredited representative is not compulsory, where the non-resident person is established in another Member State or in a third country with which this country has signed legal assistance instruments. Registration is made according to the standard procedure established by the Law.

No registration through the agency of an accredited representative is allowed under the Law of persons providing services under Chapter Eighteen.

Deregistration

There shall be compulsory deregistration upon the death of the natural person; upon the death of the natural person who is a sole trade, with or without expungement in the Commercial Register; upon dissolution of the legal person which is a merchant, with or without liquidation; upon dissolution of the cooperative; dissolution of the legal person which is not a merchant; dissolution of the unincorporated association or the social insurance fund.

Upon expungement of the sole trade in the Commercial Register there are grounds for compulsory registration, unless:

  • the person is subject to compulsory registration for the taxable turnover of the supplies provided by him, representing independent economic activities;
  • the person who has opted to register shall not have the right to terminate the registration thereof before the lapse of 24 months reckoned from the beginning of the calendar year following the year of registration;
  • within 14 days from registration of the expungement from the commercial register, the person files an application for registration to the competent territorial directorate of the National Revenue Agency, stating continuation of the registration under the terms of optional registration.

Optional deregistration shall arise in respect of:

  • any person registered pursuant to Articles 96, 97 (3) or Article 100 (1) herein, upon the lapse of the relevant grounds for compulsory registration]
  • any person registered pursuant to Article 98(2) or Article 100(3), where:

a) the sum total of the taxable amounts of the supplies effected under the terms of distance selling within the territory of the country (excluding the supplies of excisable goods) does not exceed BGN 70,000 for each of the two calendar years preceding the current year, and

b) at the date of submission of the application for deregistration application, grounds for compulsory registration do not exist;

  • any person registered pursuant to Article 99 or Article 100(2), where:

a) the sum total of the taxable amounts of the taxable intra-European Union acquisitions, with the exception of new means of transport and excisable goods, does not exceed BGN 20,000 for the preceding calendar year, and

b) at the date of submission of the application for deregistration application, grounds for compulsory registration do not exist;

  • any persons registered according to Article 100(1) and (3) not before the lapse of 24 months reckoned from the beginning of the calendar year following the year of registration.

Deregistration may be initiated by the Revenue Authority.

The registration of a non-resident person registered in pursuance of Article 133 shall be terminated if the general conditions for deregistration under this Law are fulfilled.

Supply linked to deregistration and assessment of liabilities for last tax period

At the date of deregistration, it shall be deemed that the person effects supplies of all available goods and/or services for which the said person has used, wholly or partly, credit for input tax. This requirement does not apply:

  • to the available assets which constitute public state or public municipal property;
  • upon deregistration by reason of death of a natural person who is not a sole trader, and if a sole trader, if the enterprise of the person has been taken over by legal or testamentary succession by a person who registers within six months after the date of such death: applicable only to the goods and services available at the date of registration;
  • upon transformation of a legal person, if the acquiring person submit an application for registration within 14 days after the recording of the transformation in the Commercial Register: applicable only to the goods and services available at the date of registration;
  • upon deregistration and any subsequent registration of the person within the same tax period -for the goods and services on stock both as of the date of deregistration and as of the date of the subsequent registration.

Special Taxing Arrangements

Chapter Eight provides for special taxing arrangements:

  • of single service to tourists;
  • of price margin (second-hand goods, works of art, collectors' items and antiques):
  • supplies of services supplied electronically by persons who are not established within the European union;
  • supplies of investment gold;
  • supply of goods and services according to appendix no 2 with a place of execution the territory of the country, where tax is executable by the recipient;
  • implementation of investment projects;
  • intra-European Union supplies and intra-European Union acquisitions of new means of transport;
  • upon registration to apply special cash accounting of VAT regime.

Part Nine of VATL provides for specific provisions for:

  • importation exempted by virtue of international treaties and importation of goods by armed forces of other states;
  • supplies exempted by virtue of international treaties and supplies in which recipients are armed forces of other states or institutions of European Union;
  • refund of tax to diplomatic missions, consular posts, missions of international organizations and members of staff thereof by an ordinance of the Minister of Foreign Affairs and the Minister of Finance.

Sanctions

In accordance with the provisions of Article 178 of the VAT Law, any taxable person under this Law who is obligated but fails to submit an application for registration or an application for termination of registration within the time limits established under this Law, shall be liable to a fine, applicable to natural persons who are not merchants, or by a pecuniary penalty, applicable to legal persons and sole traders, of BGN 500 or exceeding this amount but not exceeding BGN 5,000.

In accordance with the provisions of Article 179 of the VAT Law, any person registered under this Law, who while obligated to do so, fails to submit a VAT return referred to in Article 125 (1) herein, a return referred to in Article 125 (2) herein, the ledgers of account referred to in Article 124 herein, a return referred to in Article 157 (2) herein, or fails to submit the said returns and ledgers in due time, shall be liable to a fine, applicable to natural persons who are not merchants, or to a pecuniary penalty, applicable to legal persons and sole traders, of BGN 500 or exceeding this amount but not exceeding BGN 10,000.

In accordance with the provisions of Article 181 of the VAT Law, any registered person, who fails to submit information from the ledgers of account or who submits information on a magnetic or optical data storage medium departing from the information stated in the ledgers of account, shall be liable to a fine, applicable to natural persons who are not merchants, or to a pecuniary penalty, applicable to legal persons and sole traders, of BGN 500 or exceeding this amount but not exceeding BGN 10,000. Upon a repeated violation the fine or the pecuniary penalty shall be BGN 1,000 or exceeding this amount but not exceeding BGN 20,000.

Under the provisions of Article 182 of VATL Any registered person, who fails to issue a tax document, or to show a tax document issued or received in the ledgers of account for the relevant tax period, which leads to an assessment of the tax in a smaller amount, shall be liable to a fine, applicable to natural persons who are not merchants, or to a pecuniary penalty, applicable to legal persons and sole traders, in the amount of the smaller tax amount but not less than BGN 1,000. Upon a violation the previous sentence, where the registered person has issued or shown a tax document for the tax period following the tax period in which the said document should have been issued or shown, the fine or the pecuniary penalty, as the case may be, shall be in the amount of 25 per cent of the smaller tax amount but not less than BGN 250.

In accordance with the provisions of Article 183 of the VAT Law, any person, which is not registered under this Law and who issues a tax document stating therein tax, shall be liable to a fine, applicable to natural persons who are not merchants, or to a pecuniary penalty, applicable to legal persons and sole traders, equivalent to the amount of tax stated in the document but not less than BGN 1,000. Upon a repeated violation the amount of the fine or the pecuniary penalty shall be the double amount of the uncharged tax but not less than BGN 5,000.

In accordance with the provisions of Article 184 of the VATL, any person, who fails to submit the return for intra-European Union acquisition of new means of transport or who fails to submit the said return in due time, shall be liable to a fine, applicable to natural persons who are not merchants, or to a pecuniary penalty, applicable to legal persons and sole traders, of BGN 1000 or exceeding this amount but not exceeding BGN 10,000. Upon a repeated violation the fine or the pecuniary penalty shall be BGN 5,000 or exceeding this amount but not exceeding BGN 20,000.

In accordance with the provisions of Article 193 of the VAT Law, the ascertainment of violations of this Law and of the statutory instruments on the application thereof, the issuing, appeal and execution of penalty decrees shall follow the procedure established by the Administrative Violations and Sanctions Law. The written statements on violations shall be drawn up by the revenue authorities, and the penalty decrees shall be issued by the Executive Director of the National Revenue Agency or by an official empowered thereby.

For further information: http://www.nap.bg/