Tuesday, 22 January 2013

Value added tax (VAT)

The Bulgarian VAT legislation is based on the EU VAT rules and Directive 2006/112/EC.

VAT rates

 20% for domestic supplies, intra-community acquisitions and importation from non-EU countries
 9% for hotel accommodation services


 With the right to deduct input VAT – intra-community supplies, exportation to non-EU countries, international transport of goods and passengers, certain supplies related to international transport, sale of duty free goods under certain conditions, certain transactions related to international trade, specific supplies under international treaties, etc.

 No right to deduct input VAT – transfer or rental of land or rights in rem over land (except for building land and land adjacent to new buildings), the transfer of old buildings or parts thereof, rental for residential purposes to individuals (an option to tax these transactions is available); financial and insurance services; gambling; certain services related to health, education, religion, culture, etc.; other specific supplies (e.g., importation of certain goods and up to a limit).

VAT registration

Entities are obliged to register for Bulgarian VAT purposes if they have performed:
 Transactions with a place of supply in Bulgaria for which the VAT should be charged by the supplier exceeding BGN 50 thousand (approximately EUR 25.6 thousand) for the last 12 months
 Intra-community acquisitions exceeding BGN 20 thousand (approximately EUR 10.2 thousand) during the calendar year
 Distance sales in Bulgaria exceeding BGN 70 thousand (approximately EUR 35.8 thousand) during the calendar year

Entities established in an EU Member State performing supply of goods with installation in Bulgaria to customers non-registered for VAT purposes are 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. However, if voluntarily registered, such entity will not be able to registered for two years following the year of registration.

Fiscal representative
In order to register for VAT purposes foreign entities have to appoint a local fiscal representative, except when they have a registered branch in Bulgaria. The requirement does not apply to EU based entities.

Reverse charge mechanism
Foreign entities not established and not VAT-registered in Bulgaria performing certain supplies to local businesses will not have to register for VAT purposes. The VAT will be self-charged by the local customer.
Supplies to which reverse charge of VAT applies include:
 Services provided to businesses (with some exceptions)
 Supply of goods with installation
 Supply of natural gas and electricity
 Supply of goods under a triangular transaction (i.e., a supply of goods between three entities VAT-registered in three different EU Member States. Under certain conditions the ultimate customer self-charges VAT, while the supplies for the first two entities are exempt with right to deduction of the input VAT)
Please note that certain specific conditions may also apply.

VAT returns and payment
Monthly VAT returns are filed and the tax is due by the 14th of the following month. The tax period is a calendar month.
European sales list (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.

VAT refund

VAT can be refunded through the VAT returns within:

 2 months (period for carry forward and offsetting of the claimable VAT against VAT payable) and 30 days of filing the last VAT return (period for effective refund)

 30 days of filing the VAT return for entities which have performed exempt supplies with the right to deduction exceeding 30% of the total turnover from taxable supplies for the last 12 months
An investor in a large investment project which has received authorization by the Ministry of Finance can receive a refund within 30 days. The investor can also apply reverse charge for VAT on importation of goods (without effective cash outflow).

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 before 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 of VAT to Bulgarian entities). A specific procedure before the Bulgarian revenue authorities has to be followed.

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