Our clients often ask us questions about how to register under the Value Added Tax Act (VATA), what are the applicable conditions for this, and what is the rate of the VAT in Bulgaria; when and where to file a tax declaration, how to apply for VAT returns; how to invoices shall be written and others. In this article law firm Ruskov & Coll. will address some specifics of the value added tax in Bulgaria.
I. Scope and tax rates
Which supplies are subject to taxation with value added tax (VAT)?
Subject to taxation with VAT is any supply of goods or services realised on the territory of the Republic of Bulgaria or on the territory of another Member State performed by a tax liable person in its economic activity. The supply may be performed in various forms and is not limited to direct sale of goods and services Pursuant to Art. 6, Para. 2 of the Value Added Tax Act (VATA), equivalent to supply of goods are also the cases of:
- The transfer of title or another real right over goods against compensation ensuing from a request or an act of a state or local body or on the grounds of a law;
- Factual supply of goods under a contract stipulating transfer of title over the goods under delay conditions or terms;
- Factual supply of goods under a leasing agreement explicitly providing for transfer of title over the goods;
- Factual supply of goods to a person acting in their own name and at the expense of others.
According to Art. 9, Para. 2, provision of a service is also considered to be:
- The sale or transfer of rights over intangible property;
- The remuneration for non-performance of a particular action or non-exercising of rights;
- Any physical and intellectual labour, including processing, such as production, construction or assembling of tangible assets with raw materials and materials provided by the principal at the disposal of the contractor;
- The performance of a service by a holder/user for repair and/or improvement of an asset rented or granted for use.
What is the standard tax rate of VAT?
Since 1999 now the standard tax rate applicable to taxable supplies performed in Bulgaria, the import of goods on the territory of the country and the taxable intra-Community acquisitions is 20%.
Are there tax relieved supplies or supplies taxable at reduced or zero rates?
As of 1 January 2012, a reduced tax rate is applied for the accommodation at hotels and similar places, including the provision of holiday accommodation and renting of places for camping or caravan purposes (Art. 66).
The following types of supplies are taxable at a zero rate:
- Export of goods outside the territory of the EU;
- Intra-Community supplies (ICA);
- International transport of passengers;
- International transport of goods outside the EU to Bulgaria and vice versa;
- Supplies related to international transport;
- Supplies related to processing of goods;
- Supplies related to duty free trade – sales at duty free shops, etc.
The list of relieved supplies includes:
- Supplies related to healthcare;
- Supplies related to social care and social security;
- Supplies related to education, sports and physical education;
- Culture-related supplies;
- Religion-related supplies;
- Non-profit supplies;
- Supplies related to land and buildings;
- Supplies of financial services;
- Supplies of insurance services;
- Supply of stamps and postal services;
- Supply of goods and services for which a tax credit has not been used.
Which are the other local indirect taxes besides VAT?
These are customs duty and excise duty.
Who is subject to mandatory VAT registration in Bulgaria?
Subject to mandatory registration under VATA (Value Added Tax Act) is any person having a taxable turnover of 50,000 BGN or more for a period not longer than the last 12 consecutive months prior to the current month. The person is obliged within 14 days as of the expiry of the tax period in which it reached such turnover to file an application for VAT registration (Art. 96, Para. 1 of VATA).
Regardless of the taxable turnover under Art. 96, subject to VAT registration is any person established in another Member State that performs taxable supplies in Bulgaria. In such case, foreign persons may be registered through an accredited representative. The revenue body may also register a foreign person in case the latter has filed a registration application in due time, but has not appointed an accredited representative.
A tax liable person – an EU member – that is not registered under VATA in Bulgaria and supplies goods to a person not registered under VATA in Bulgaria (remote sale) should obtain a VAT registration in Bulgaria if the total amount of supplies for a period of one year exceeds the statutory threshold of 70,000 BGN.
Are there any sanctions for non-registration or late registration under VATA?
Yes. In case of non-registration under VATA, a sanction is imposed, amounting to 500 to 5,000 BGN, plus the principal of the non-levied VAT and a sanction equal to the non-levied VAT.
Is it possible for foreign companies to be voluntarily registered under VATA?
Yes, it is possible. Pursuant to Art. 133, Para. 1 and 2, all foreign persons having a permanent establishment on the territory of the Republic of Bulgaria where an economic activity is performed, as well as foreign persons that are not established on the territory of the country, but perform taxable supplies on the territory of the country and meet the statutory conditions for mandatory registration or voluntary registration, may be registered through an accredited representative. The registration is performed pursuant to Art. 101 of VATA at the territory directorate of the National Revenue Agency (NRA) according to the registration of the accredited representative.
Which persons may be representative of foreign companies?
An accredited representative of a foreign person may be:
- A legally capable natural person with a permanent address;
- A permanent resident in the country; or
- A local legal entity.
A legal entity – an accredited representative should meet the statutory conditions, in particular – not to be in an insolvency procedure or not to be declared insolvent, as well as not to have any exigible and outstanding tax liabilities for security contributions collected by NRA.
The accredited representative represents the foreign person in all its tax relations arising on the grounds of VATA by virtue of a notarised written agreement. The representative is jointly and unlimitedly liable for the liabilities under the Bulgaria VATA for the foreign person registered in Bulgaria.
III. Tax declaration
Who, in what cases, and in what term shall submit a VAT tax declaration?
For each tax period the VAT registered person should submit a tax declaration pursuant to Art. 125, Para. 1 of VATA based on accounting registers in the due form. The tax declaration should be also submitted where the tax is not due or reimbursable, as well as in case the registered person has not performed or received supplies or acquisitions or has not performed import for this tax period.
The tax liable persons should submit the tax declarations together with the accounting registers – a purchases record and a sales record – at the competent directorate if NRA by the 14 day inclusively of the month following the tax period which they refer to. The tax declaration should be submitted in person by the representative of the registered person or by a duly authorised person. It could be submitted in the due form on paper or by electronic means.
What are the sanctions for non-submission or non-submission in due time of the VAT tax returns?
Any person that has the obligation, but fails to submit a tax declaration, together with the accounting registers, or fails to submit them in the statutory terms is sanctioned with a fine – for natural persons who are not merchants, or a monetary sanction – for legal entities and sole traders, amounting to 500 to 10,000 BGN (Art. 179, Para. 1of VATA).
VIES – declarations
The EU accession of Bulgaria in 2007 entailed certain substantial changes in VATA. One of these changes concerns the movement of goods and services within the EU single market. With respect to the trade of goods and services between VAT registered companies within two Member States, the regime of export under the revoked VATA is replaced by intra-Community supply (ICS), and the regime of import – by intra-Community acquisition (ICA).
VIES is an information system for exchange of VAT information between Member States which processes and stores data from the VIES returns of the VAT registered persons performing transactions within the EU.
Who should submit VIES returns?
A VIES return should be submitted by any registered person that for the tax period has:
- Performed supplies of goods or services to a merchant registered for VAT purposes in another Member State, including in case of transfer of its own goods, or
- Has participated as an intermediary in a trilateral transaction between VAT registered merchants in other Member States.
How and in what terms are VIES tax returns submitted?
VIES declarations are completed on the basis of the general data from the accounting registers under Art. 124, Para. 1 of VATA, and they should mandatorily contain the intra-Community supplies of goods of which the person is a supplier, the supplies of services on the territory of another Member State, as well as the supplies in which the person is an intermediary in a trilateral transaction.
A VIES declaration should not be submitted where for the respective tax period the person has no such supplies.
Registered persons should submit the VIES return by electronic means under the conditions and pursuant to the Tax Insurance Procedure Code (TIPC). VIES returns are submitted by the 14th day inclusively of the month following the tax period which they refer to (Art. 125, Para. 5 of VATA). They should be submitted in the respective competent directorate of NRA in person or by a duly authorsed person.