Press release

22 Oct 2021 , 12:00

Proposed tax law changes

The Ministry of Finance has published for public consultation proposal for changes in three tax laws. The amendments aim to implement the requirements of a number of European directives, the provisions of which our country has to transpose by the end of 2021, as well as to bring it in line with the case law of the Court of Justice of the European Union (CJEU), established on Bulgarian preliminary rulings.

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Milen Raikov

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Nevena Kovacheva

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Viktor Mitev

EY Bulgaria, N. Macedonia, Albania and Kosovo Partner, International Tax and Transaction Services

International tax enthusiast. Chartered Certified Accountant. Father. Snowboarding amateur. Innovation aficionado.

The Ministry of Finance has published for public consultation 
proposal for changes in three tax laws. The amendments aim to implement the requirements of a number of European directives, the provisions of which our country has to transpose by the end of 2021, as well as to bring it in line with the case law of the Court of Justice of the European Union (CJEU), established on Bulgarian preliminary rulings.


Below is a brief summary of the proposed changes.

In the Value Added Tax Act (VATA)

In the Corporate Income Tax Act (CITA)

In the Excise and Tax Warehouses Act (ETWA)

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In the Value Added Tax Act (VATA)

  • Perhaps the most significant change relates to the possibility for correction of wrongly invoiced VAT, including when there is a tax audit act entered into force. The lack of such possibility so far in practice leads in many cases to double taxation of the same supply of goods or services.

If the texts of the new provisions are adopted, after 31 December 2021, persons to which VAT has been additionally assessed or VAT credit has been denied will have another opportunity for defense and mitigation of the negative consequences.

  • In relation to e-commerce, the wording of provisions relating to the application of regimes outside the Union, within the Union and for distance sales of goods imported from third countries or territories is being clarified.
  • VAT exemption on imports of goods intended for donation and dealing with the consequences of COVID-19 by the European Commission or an agency and authority established under EU law is provided. Local purchases of such goods and services should be zero-rated.
  • It is proposed the period until which the reduced rate of 9% can be applied to certain goods and services (e. g. books, baby goods, etc. ) to be extended. Rather than until the end of the year, the reduced rate could be applied until the end of the epidemic emergency, which requires careful monitoring of the associated timelines, but also opens up opportunities for sales efficiency planning.
  • A VAT exemption is introduced for imports of goods by the armed forces of EU Member States for use by them or their accompanying civilian personnel when the forces are engaged in defense activities within the framework of the EU's common security policy. Local purchases of such goods and services are intended to be zero-rated.
  • From 1 January 2022, the specific rules for the taxation of vouchers in the VATA should also apply to food vouchers.
  • A new ground for compulsory deregistration under the VAT Act is envisaged, namely the deregistration of a branch of a foreign legal entity.
  • In relation to trade with goods after Brexit, a drafting change is proposed for supplies to or from the United Kingdom of Great Britain and Northern Ireland.     

In the Corporate Income Tax Act (CITA)

  • It is proposed to equate certain hybrid entities incorporated or established in the country, which are outside the scope of the taxable persons specified in the current CITA, to taxable persons, subject to specific conditions.
  • Clarification is provided as to which costs, revenues, gains and losses in relation to sale and leaseback contracts are recognized for tax purposes.     

In the Excise and Tax Warehouses Act (ETWA)

  • A special regime is provided for the movement of excise goods which are released for consumption on the territory of one Member State and are moving to the territory of another Member State for commercial purposes. In this respect, the proposed amendments introduce simplification and updating of excise procedures.
  • It is proposed that in the case of partial loss due to the nature of the goods, no excise duty is payable where the amount of the loss is within the general thresholds for partial loss set by an act of the European Commission.
  • An update of the definitions used to describe alcoholic products is expected.
  • It is proposed the use of the external transit regime after the export regime to be allowed.
  • Provision shall be made for the exemption from excise duty of goods used by the armed forces of any Member State other than the Member State in which the excise duty is due, and for the needs of the civilian personnel accompanying them.