Value Added Tax
The new Value Added Tax Act (VATA) came into force on 1 January 2007, the date of accession of Bulgaria to the European Union. The rate of tax is 20%, except for supplies expressly specified in the Act as subject to the zero rate; the rate of tax applicable to hotel accommodation as part of a package tour is 7%.The following supplies are exempt:
- the supply of buildings or of parts of buildings, which are not new, including the adjacent plots of land, as well as the creation and transfer of other real rights to such buildings, parts or land (unless the supplier exercises a right of option for taxation);
- the supply of agricultural land and forestry land (provided its intended use has not been altered to "land for construction work");
- the supplies of a non-profit-making nature etc.
It should be borne in mind that the transfer of a right of ownership or other real rights, as well as the renting out of plant, machinery, equipment and structures immovably fixed to or built under the ground, is not an exempt supply.
Registration for VAT
Registration under VATA is compulsory or optional.
Any taxable person having a taxable turnover of BGN 50,000 or more for a period not exceeding 12 consecutive months preceding the current month is obligated to submit an application for registration to the competent territorial division of the National Revenue Agency (NRA) within 14 days after the end of the tax period during which such turnover has accrued to the person. Notwithstanding the taxable turnover, the registration requirement furthermore applies to any person who is established in another EU Member State, who is not established within the territory of the country and who effects taxable supplies of goods which are assembled within the territory of Bulgaria by or to the account of this person and their recipient is not registered under VATA.
The registration requirement also applies to each non-taxable legal entity and taxable person which/who is not registered on other grounds but effects intra-Community acquisition of goods to a total value exceeding BGN 20,000. Within the meaning given by VATA, "intra-Community acquisition" is any supply of goods, dispatched or transported to Bulgaria from the territory of another EU Member State, where the recipient is a taxable person registered for VAT purposes in another EU Member State or, in other words, the import of goods to the territory of Bulgaria from the territory of another EU Member State.
A person, who is obligated to register but has not registered his/her obligation in due time, is registered ex officio by the NRA authorities upon ascertainment of the omission.
Chapter Fifteen of VATA provides for certain specific cases of compulsory registration: as a result of transformation of commercial companies, in connection with the activity of non-resident persons who are not established in the country.Registration of the following persons is effected through the agency of an accredited representative:
- A non-resident person, who has a fixed establishment within the territory of the country from which the person carries out economic activity and who satisfies the conditions for compulsory registration or for optional registration;
- A non-resident person, who is not established within the territory of the country but effects taxable supplies made within the territory of the country and who satisfies the conditions of VATA for registration.
- Registration is made at the NRA territorial directorate exercising competence over the place of registration of the accredited representative. This requirement does not apply to branches of non-residents, to which the standard procedure applies.
- They supply services electronically to recipients who are non-taxable persons, who are established or have a permanent address or usually reside within the territory of the country;
- They are not established within the territory of the Community;
- They are registered for VAT purposes for their activity referred to in Item 1 in another Member State.
Any taxable person, regardless of the amount of his taxable turnover, may register under VATA at his own option.
Right to deduct credit for input tax. VAT refund
The right to deduct credit for input tax exists where the goods and services received are used for taxable supplies. The credit for input tax becomes deductible where the tax subject to deduction becomes chargeable by the payer, i.e. in the standard case for the tax period in which the supplier owes the tax to the Exchequer, the recipient will have the right to deduct this tax as credit for input tax. According to one substantial change in the Act, the credit for input tax becomes deductible even in cases where the supplier has not charged VAT. The credit for input tax furthermore becomes deductible for supplies whose place of transaction is outside the territory of the country but which would have been taxable if effected within the territory of Bulgaria.
The tax period is fixed as one month in respect of all registered persons and is concurrent with the calendar month. Upon the lapse of the tax period, a registered person must submit a VAT return showing the net tax for the tax period (i.e. the difference between the total amount of the tax chargeable from the person and the total amount of the credit for input tax in respect of which the right to deduction has been exercised during the same tax period). Where the credit for input tax exceeds the tax charged, the difference constitutes input tax claimable.
The input tax claimable is set off against other chargeable and unpaid tax liabilities and liabilities for social-insurance contributions collected by the NRA, and where there are no such liabilities or their amount is less than the amount of the input tax claimable, the registered person deducts the input tax claimable during the next three months.The following groups of persons have the right to refund the tax paid:
- 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 by them within the territory of the country;
- Any persons who are not established within the territory of the Community 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 Community, who have effected purchases of goods for private use inclusive of tax charged: after leaving the territory of the country, subject to the condition that these goods are exported in an unaltered state.