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The Value Added Tax Act ("VAT Act") is effective as of 1 January 1999.
Although Bulgaria is not a member of the European Community, the VAT legislation
in many aspects follows the provisions of the Sixth VAT Directive.
The Ministry of Finance and the Customs Authorities who also work within the
Ministry of Finance administer VAT. Although VAT is administered separately from
the other taxes at present, any VAT refunds that arise can be used to cover
other tax liabilities. This, however, has to be agreed in advance with the relevant tax
Any person (legal or physical, resident or non-resident) who has a taxable
turnover exceeding BGN 75,000 during the preceding twelve months is obliged to register
The most important changes compared to the old VAT regime are in the area of the
registration of foreign persons performing taxable supplies in Bulgaria.
According to VAT Act, such persons are subject to mandatory VAT registration, through an
agent, upon achieving the respective turnover, regardless of whether:
- they have a permanent establishment in Bulgaria, and
- the activities are continuing and/or performed from an "object" in Bulgaria.
Voluntary registration is possible for persons whose taxable turnover is below
75,000, who at the same time carry on non-exempt export supplies, accumulating a
turnover above BGN 50,000.
Group or divisional registration is not allowed. Therefore, a group of companies
subsidiary of a company and its parent cannot be registered as one fiscal unit
VAT Act provides for a few new instances of optional VAT registration:
- A local legal entity that does not meet the requirements for mandatory
VAT registration can register if its contributed share capital is at least
equivalence of USD 1 million. Such a person can keep its VAT registration
a period of three years following the date of registration. After the expiry
this term the person is de-registered ex officio, unless it has met the
requirements for mandatory registration or optional registration, based on
- As of 1 January 2000 any person who is not subject to mandatory VAT
registration can register for VAT purposes when the value of its basic funds
acquired in the preceding 12 months exceed BGN 150,000. Such a person can
keep its registration for 12 months, after whose expiry it is de-registered,
unless it has reached the required turnover for mandatory VAT registration.
There are considerable changes in the rules on the VAT registration in some
commercial companies' transformation and acquisition.
There are a number of new grounds for optional VAT registration applicable
transformation of commercial companies and acquisitions of companies and
A VAT-registered person files annual and monthly tax returns. The tax return
be submitted within 14 days as of the end of each tax period. VAT-registered
persons who provide both taxable (including export) and exempt supplies are
to submit annual VAT returns.
VAT payments to the state and VAT refunds from the state can only be made in
The payment must be made within 14 days as of the end of the tax period.
VAT credit refund
The VAT credit to be refunded can be set off against the VAT due, as well as
other liabilities to the state. The offsetting takes place during a 6-month term
following the period in which the VAT credit occurred. If after this term there
VAT to be refunded, the refund is to be made within 45 days.
Exporters are entitled to a VAT credit refund within 45 days, if they do not
pending liabilities to the state. The scope of taxpayers, treated as exporters
expanded under the new VAT Act. Persons whose turnover from export supplies,
exceeds 30 per cent of the value of their supplies in aggregate, are also
The tax base for local supplies is the price (exclusive of VAT) invoiced to
customer, and all other taxes and fees, including excise duties, subsidies and
financing relating to a transaction, as well as any interest and penalties under
transaction. The tax base also includes transportation, package and other
relating to the supply, provided that these are borne by the customer.
The tax base for transactions between related persons is at least the market
the goods and/or services involved.
VAT is also charged on goods and services provided by the employer (if
to the employees (benefits in kind).
The VAT mechanism applicable to sales of goods at a loss has been changed as
- The VAT refund available to the supplier for such sales will not be subject to
adjustments. Instead, the supplier will be obliged to charge VAT to the
customer on an amount not lower than the acquisition value of the goods, or
their cost, respectively, if the goods are manufactured by the supplier.
- The above rule will not apply to sales of tangible fixed assets.
- General rules for charging VAT will not apply where the sale at a loss is due
objective market conditions.
The tax base for imports includes the customs value, the customs duties and
duties (if any) on the import goods.
Place of supply
Bulgaria has adopted the EC definitions of place of supply of goods and
There are three types of exempt supplies:
- Supplies that, according to the statutory “place of supply” rule, are provided
outside the territory of Bulgaria.
- Supplies of goods in customs warehouses within the frame of the respective
- Supplies exempt due to their subject, such as:
- transfer of ownership and limited property rights on land;
- financial services;
- insurance services;
- lease of buildings and parts thereof, provided these are leased out for
- transfer of the commercial enterprises of a company as per article 15 of the
Commerce Act as well as businesses or parts thereof as per the Privatization
- provision of legal advice by registered attorneys in accordance with
Bulgarian Bar Association Act and of services in accordance with the Public
- land processing services rendered by co-operatives by means of their own
equipment, provided that the land is owned by the co-operative members;
- supply of grain as an in-kind rent for use of land;
- betting and gambling;
· donations in favour of charity institutions
Export of goods and services
According to the Act, the export of goods and services is subject to VAT at
Within the meaning of the VAT Act export of goods is exportation abroad or to
free zones, free warehouses and duty-free outlets. However, export supply to
customs warehouses does not qualify as export.
The most important changes refer to international transport and the relating
services. International transport is defined to be the transportation between
points abroad, irrespective of whether part of the transport route passes
Bulgaria or not. The transport between the free zones and the free warehouses
within Bulgaria is also considered international transport. A number of services
relating to international transport (including forwarding or agent services) are
considered export services.
Processing of import good that are further re-exported is also zero-rated.
Where a registered person makes both taxable (including zero-rated) and
supplies the following rules apply:
- The input VAT charged for goods or services entirely used in relation to
(including zero-rated) supplies is fully recoverable.
- The input VAT charged for goods or services entirely used in relation to
supplies is not recoverable.
- The input VAT charged for goods or services used both in relation to
(including zero-rated) supplies and exempt supplies is partially
amount of recoverable input VAT is calculated by reference to the proportion
taxable supplies to exempt supplies.
Under the Act two rates are applicable to taxable supplies.
- 20% applicable to taxable supplies, including import of goods and services.
- A zero-rate applicable to imports and supplies of precious metals to the
Bulgarian National Bank.
Disallowable input VAT
As a rule, input VAT cannot be reclaimed for goods and services that are:
- used for promotional purposes,
- relating to cars,
- used for exempt transactions.
Refund of VAT to non-registered persons
VAT is not refundable to non-registered persons. However, a number of new
possibilities as to recovery of VAT charged upon acquisition of assets in the
when the taxpayer has not been VAT-registered, or upon cancellation of previous
VAT registration, are introduced. Such VAT refund can be claimed, if the
requirements are met cumulatively:
- the taxpayer registers for VAT purposes
- the assets are available with the taxpayer on the date of the VAT
- the required documentation is available.
If VAT is not refunded within the statutory term, interest is charged at the
Only where services are imported VAT at 20% must be charged and paid by the
- the latter is registered for VAT, and
- the supplier is not a VAT-registered person, and
- the services relate to exempt supplies.
In all other cases no reverse charge applies in Bulgaria to import services.