2019 Worldwide VAT, GST and Sales Tax Guide - Bulgaria

A taxable person is a business entity or individual that carries out an economic activity in Bulgaria, whatever the purpose or the result of that activity. This rule applies regardless of whether the supplier is a local or foreign entity or an individual.

The VAT registration threshold is taxable turnover of BGN50,000 in any 12 consecutive months or within two consecutive months, which includes turnover from taxable supplies chargeable at the standard rate of VAT (20%) or the reduced rate (9% for hotel accommodation), zero-rated supplies and financial and insurance services within the principal activity of the supplier.

A taxable person, established in Bulgaria, rendering services with a place of supply in another EU Member State should register in Bulgaria regardless of its taxable turnover.

A non-established, EU-based taxable person supplying goods to be assembled and/or installed in Bulgaria on their behalf, where the recipient is not registered for VAT in Bulgaria, must register for VAT purposes regardless of its generated turnover.

A taxable person receiving cross-border services subject to the reverse charge in Bulgaria must register for VAT purposes in Bulgaria regardless of its taxable turnover.

Voluntary registration. A taxable person may register for VAT voluntarily irrespective of its taxable turnover.

Partnerships. An unincorporated partnership is treated as a taxpayer, separate from the founding entities that constitute it. The unincorporated partnership is subject to all the general rules of the Bulgarian VAT law, including those relating to VAT registration, deregistration and reporting. The VAT registration of an unincorporated partnership does not result in the VAT registration of the entities that have entered into the contract for joint activity. However, VAT registration of the partners triggers VAT registration of the partnership. In such case, the partnership is obliged to apply for VAT registration in seven days after the date of its registration as a partnership, in a special partnership register in Bulgaria.

The VAT registration of a partner triggers the VAT registration of the partnership, if the partnership is not already registered for VAT on any other grounds. Where the VAT registration of the partnership is triggered, the application should be filed within seven days of the date of VAT registration of the partner.

Upon inheritance of a VAT-registered person (including a sole trader) and in case of continuation of the same independent economic activity, the successor is entitled to register for VAT by submitting an application within seven days of acceptance of the succession. The date of registration is the date of delivering of the registration act.

Non-established businesses. A “non-established business” is a business that has neither a place of management/seat in Bulgaria nor a fixed establishment in Bulgaria. A non-established business must register for VAT in Bulgaria if it makes taxable supplies of goods or services (unless the reverse charge applies), intra-Community acquisitions exceeding the statutory thresholds or receives services with a place of supply in Bulgaria from a non-established foreign supplier.

Tax representatives. A foreign person established in a non-EU country that has not entered into an agreement for mutual assistance with Bulgaria must appoint a resident tax representative to register for VAT purposes in Bulgaria. The representative assumes joint and unlimited liability for the VAT obligations of the non-established business. The tax representative must be appointed using a notarized VAT agency agreement.

Group registration. Not applicable.

Registration procedures. The VAT registration form should be completed in Bulgarian following a standard template and should be submitted in hard copy together with all supporting documents. If originating in a foreign language, they should be accompanied by an official translation into Bulgarian.

Online registration is also possible via a qualified electronic signature registered with the Bulgarian tax authorities on their web interface: https://inetdec.nra.bg/eservices.html.

The application should be submitted and the registration procedure completed within the following deadlines:

• Mandatory general VAT registration: not later than the 7th day of the month following the month when the turnover has been reached; if the turnover is reached within two consecutive calendar months, the application should be filed within seven days of the date on which the turnover has been reached
• VAT registration for rendering or receiving cross-border services subject to reverse charge: at least seven days prior to the date when the tax for the supply becomes due
• VAT registration for intra-Community acquisitions: at least seven days prior to the date of the taxable event for the acquisition by which the total value of taxable intra-Community acquisitions exceeds BGN20,000 in a calendar year
• VAT registration for distance sales: at least seven days prior to the date of the taxable event for the supply to nontaxable individuals by which the total value of distance sales exceeds BGN70,000 in a calendar year
• VAT registration as regards the delivery of goods to be assembled or installed in Bulgaria, performed by persons established in other EU Member States, where the recipients are not VAT registered in Bulgaria: not later than seven days before taxable event of the supply
• VAT registration for digital services provided to local nontaxable persons where the supplier is neither registered under the Mini One-Stop Shop (MOSS) scheme nor has a Bulgarian VAT ID number and the turnover of the sales in Bulgaria has exceeded BGN19,558 (EUR10,000) in a calendar year: by the 10th day of the month following the month when the taxable event for the first supply has occurred

Within seven days after submission of the application form and supporting documents for mandatory and voluntary VAT registration, the tax authorities verify the grounds for registration. Within seven days after completing this verification, the tax authorities issue a certificate of VAT registration or a notice of rejection.

Aside from the mandatory general VAT registration (the first item above), the VAT registration procedure should be completed by the tax authorities within three days after the application is submitted.

Voluntary deregistration. A registered person may deregister when it ceases to make taxable supplies and the conditions for mandatory VAT registration are no longer met.

Statutory VAT deregistration. VAT deregistration is mandatory on the winding up of a company or on the death of a taxable individual.

Late-registration penalties. The penalty for non-registration ranges from BGN500 to BGN5,000. An additional penalty equal to the amount of VAT that should have been charged may be imposed. A penalty ranging from BGN500 to BGN5,000 may be assessed for failure to deregister on time.

Reverse charge. Bulgarian taxable persons are obliged to charge VAT on the acquisition of goods or receipt of services when the supplier is not established in Bulgaria:

• Intra-Community acquisitions
• Services with a place of supply in Bulgaria where the recipient is a taxable person
• Supplies of natural gas through pipelines or electricity when the recipient is a VAT-registered person
• Supplies of goods assembled or installed by or for the account of the supplier when the recipient is a VAT-registered person in Bulgaria and the supplier is established in another Member State

Effective 1 July 2019, VAT-registered taxable persons can apply the reverse charge for importation of certain base metals, organic and inorganic chemicals and mineral products if the customs value of the goods per unit equals or exceeds BGN50,000.

A local reverse charge applies for domestic supplies to customers identified for VAT in Bulgaria on the acquisition of:

• Investment gold
• Waste and related services, such as scrap metal and similar supplies
• Cereals and industrial crops (until 30 June 2022)

Digital economy. As of 1 January 2019, supplies of telecommunication, broadcasting and electronic services to nontaxable persons are taxable where the customer is established, has its permanent address or usually reside once the total amount of the supplies exceeds BGN19,558 (EUR10,000) in a calendar year. If the total amount of supplies does not exceed this threshold, such supplies are taxable in the country of establishment of the supplier, unless the supplier opts to tax them in the country of establishment, permanent address or usual residence of the customer.

Mini One-Stop Shop. As of 1 January 2015, an optional VAT registration scheme called Mini One-Stop Shop (MOSS) entered into force. As regulated on the EU level, it allows taxable persons providing broadcasting, telecommunication and electronic services to nontaxable customers in other EU Member States in which they do not have an establishment to report VAT due on those supplies in the Member State in which they are identified for VAT purposes.

This regime is optional and is introduced to simplify VAT reporting after the changes in the place of supply of digital economy effective as of 2015.

There are two types of MOSS registrations:

• For EU established businesses (Union scheme)
• For non-EU established businesses (non-Union scheme)

Both registrations are processed electronically via the web-site of the National Revenue Agency (NRA). Registration for the non-Union scheme is available without the use of qualified electronic signature (QES) on the following link: http://nraapp03.nra.bg/voes/registration.jsp. A username and password is generated for the purposes of the registration and the online access.

Registration for the Union scheme is available only with QES. The online application for the Union scheme is available only after the QES is registered with the NRA. Both registration applications (for Union scheme and for non-Union scheme) are prepared, submitted and processed electronically. No special rules regarding representation before the tax authorities apply. The general rules on representation regarding VAT registrations apply.

The tax authorities perform a tax check within seven days for both types of MOSS registrations and should issue a decision on the VAT registration within seven days after completion of the tax check. The notification for registration is delivered electronically via electronic message.

The registration date is considered to be the first day of the quarter following the calendar quarter after submission of the registration application, unless the first supply is made before that and the supplier has applied for the registration by the 10th of the month following the date of the first supply.

Exemption from registration. Incidental taxable activities and supplies of fixed assets do not account toward the VAT registration threshold.

The date when VAT becomes due is called the “date of supply” or “tax point.” The tax point for goods is the transfer of ownership of the goods. The tax point for services is the date of completion of the service. VAT also becomes due on the date of the receipt of an advance payment for supplies of goods or services to the extent of the payment received.

If the transfer of ownership in goods is deferred until the fulfillment of certain conditions, the date of supply is the date the goods are handed over.

Leased assets. The time of supply for leased assets may vary in view of the type of lease and the specific contractual arrangements:

• Operational leases (rentals) are taxed for Bulgarian VAT purposes as supplies of services. VAT becomes chargeable proportionately on each installment and the time of supply follows the rules for periodic and continuous supplies (see below).
• Finance leases are taxed either as a supply of services (rentals) or as a supply of goods depending on the contractual arrangements. VAT becomes chargeable proportionately on each installment if the lease is considered a supply of rental service. A finance lease qualifies as a supply of goods and the time of supply is upon handing over of the leased asset if one of the following is true under the contract:
  • Legal title over the leased asset will transfer upon expiry of the lease term.
  • An option for transferring the title on the leased asset is envisaged, but the total amount of the lease instalments, less the interest payments, equals the fair value of the leased asset.

VAT on the total price of the goods received under financial leasing with option to transfer their legal title, concluded after 1 January 2014, would be chargeable upon handing over of the goods if the total amount of the lease installments is identical to the fair value of the leased goods upon inception of the lease.

Private use. Private use of services and goods by a taxable person for nonbusiness purposes is deemed supply for consideration. Effective 1 January 2016, the taxable event is the last day of each month in which services were deemed supplied. The taxable amount is the attributable direct cost for rendering the supply. If capital goods are used to provide deemed supplies of services, the taxable amount is determined proportionately for each tax period, taking into account a 5-year depreciation period (20 years for real estate) as of the date input VAT was deducted for the capital good.

Upon purchases of immovable property and other capital goods/services that will be used both for the purposes of the taxable person’s business and for private use, input VAT should be deducted only up to the extent of their business use applying appropriate allocation methods.

If the purchases do not qualify as capital goods (taxable base of acquisition of less than BGN5,000), and the taxable person will use them for business and private purposes, only proportionate deduction up to the extent of the business use is allowed.

Taxable persons should annually adjust (increase or decrease) the input VAT deduction on their historical purchases of immovable property and capital goods depending on the actual annual business use. VAT credit should be adjusted within 20 years for immovable property and within 5 years for goods and services, which qualify as capital goods.

Continuous supplies. The time of supply for periodic or continuous supplies each period for which there is a payment agreed is considered as a separate supply and the tax event coincides with the date on which the payment becomes due. For supplies performed in stages, the tax event coincides with the date on which each stage is completed.

If a supply is rendered continuously for more than one year and if no payment is made or due during that period, the date of supply is considered the end of the calendar year.

The time of supply for continuous intra-Community supplies of goods that continue for more than one calendar month is the end of the calendar month in which the supplies have been performed.

Intra-Community acquisitions. The date of supply of intra-Community acquisitions follows the general rules. However, VAT on intra-Community acquisitions becomes chargeable on the 15th day of the month following the month in which the acquisition was made. If the supplier issues an invoice before this date, the date of supply is the date on which the invoice is issued, unless the invoice documents advance payments or unless the invoice is issued before the date of the tax event.

Reverse charge. If a non-established business makes certain supplies of services to a business established in Bulgaria, the reverse charge applies. Under the reverse-charge mechanism, the recipient must charge the Bulgarian VAT on the supply. The recipient of the service must account for and pay Bulgarian VAT on the supply, using a special form (protocol). The Bulgarian recipient of the service may fully or partially recover the self-assessed VAT if the recipient makes both taxable and exempt supplies (see Section F).

The date of supply for reverse-charge services is the date on which the service is completed, or the date when payment is made, whichever is earlier.

As of December 2013, the local reverse charge applies for supplies of certain cereal and industrial crops provided by agricultural producers. This is a temporary measure, applicable until 30 June 2022.

Imported goods. VAT for imported goods is chargeable when the goods are cleared for customs purposes.

A taxable person may postpone payment of import VAT on (i) goods imported for investment projects approved by the Ministry of Finance upon obtaining a special permission or (ii) importation of certain base metals, organic and inorganic chemicals and mineral products if the customs value of the goods per unit equals or exceeds BGN50,000 upon declaring the use of the reverse-charge mechanism in front of the customs office in Bulgaria.

Under the postponed accounting regime, the imported goods may be released from customs control without payment of VAT. Instead, the taxable person authorized to use the regime reverse-charges the import VAT. If the taxable person is able to recover the input tax in full, no actual payment is made.

Cash accounting. Under an optional cash accounting scheme for VAT effective as of 1 January 2014, VAT becomes chargeable when the payment is received by the supplier. The taxable person who opts to apply the cash accounting scheme has the right to deduct input VAT on the purchases only after transferring the payment to the supplier.

Prepayments. VAT becomes due on advance payments up to the amount of the payment made before the taxable event except for prepayments in relation to intra-Community acquisitions and intra-Community supplies. The prepayment is considered to be VAT inclusive. The VAT should be charged, and the invoice should be issued within five days after receipt of the advance payment, full or partial.

Intra-Community supplies of goods. The taxable event for intra-Community supplies of goods follows the general rules applicable to domestic supplies of goods. Intra-Community supplies of goods are subject to 0% VAT.

The VAT on intra-Community supplies and acquisitions becomes chargeable on the 15th day of the month following the month when the taxable event took place unless an invoice is issued before that. This does not apply if the invoice is for advance payment.

To substantiate the zero VAT rate on an intra-Community supply, the supplier should have an invoice indicating the EU VAT registration number of the customer. In addition, the supplier should have one of the following:

• Transport documents such as a bill of lading for road transportation under the Convention on the Contract for the International Carriage of Goods by Road (CMR), which verify the transportation of the goods outside Bulgaria to another EU Member State.
• If the customer is responsible for organizing the transportation, a written confirmation (реквизити на писменото потвърждение) from the customer for delivery of the goods, which should contain specific wording indicating the date and place of delivery, type and quantity of the goods, type, model and registration number of the vehicle that transported the goods, names and positions of the persons delivering and receiving the goods.

If the supplier does not collect the above documents by the end of the month following the month when the 0% VAT became chargeable, he should apply 20% Bulgarian VAT on the supply. If the documents are collected later, the 20% VAT charged could be adjusted with specific documents.

Goods sent on approval for sale or return. The taxable event of supplies of goods on approval for sale occurs at the moment at which they are actually received by the customer.

Return of received goods back to the supplier qualifies as cancellation of the supply. Such transactions should be documented through credit notes issued by the supplier.

Vouchers. Effective 1 January 2019, special rules for VAT treatment of transactions with vouchers enter into force. The new rules introduce two types of VAT-taxable vouchers: single-purpose vouchers (SPV) and multipurpose vouchers (MPV). Supplies of SPV are subject to VAT upon each transfer of the vouchers. The actual handing over of the goods and services in return for the SPV is not subject to VAT. However, MPVs are taxable at the moment of the actual supply of the goods or services to which they relate. The transfers of the MPV before the actual handing over of the goods and services is not subject to VAT.

The new regime does not apply for discount vouchers; cinema/museum/travel and similar vouchers; and food vouchers issued by authorized persons in Bulgaria.

The Bulgarian VAT authorities refund VAT incurred by businesses that are not established in Bulgaria and that are not registered for VAT in the country.

For businesses established in the EU, refunds are made under the terms of EU Directive 2008/9/EC. For businesses established outside the EU, refunds are made under the terms of Directive 86/560/EEC applying the principle of reciprocity; that is, the country where the claimant is established must also provide VAT refunds to Bulgarian businesses.

For foreign businesses established outside the EU, the principle of reciprocity applies; that is, the country where the claimant is established must also provide VAT refunds to Bulgarian businesses.

VAT returns. Bulgarian taxable persons file VAT returns monthly. VAT returns must be filed by the 14th day of the month following the tax period. Payment in full is required by the same date. VAT liabilities are due in Bulgarian leva, but they may be paid in any currency, provided the amount remitted is equivalent to the VAT due in BGN currency.

Special schemes. The following special schemes are introduced in Bulgaria:

• Margin scheme for travel agents: VAT applies on the difference between the total amount paid by the traveler (exclusive of VAT) and the actual cost born by the travel agent for supply of goods and services provided by other taxable persons.
• Optional margin scheme for taxable dealers of second-hand goods, works of art, collectors’ items and antiques.
• Cash accounting scheme for VAT: available for taxable persons with annual turnover in the previous 12 consecutive months not higher than the equivalent in Bulgarian currency of EUR500,000.
• Mini One-Stop Shop for taxable persons providing broadcasting, telecommunication and electronic services to nontaxable customers in other EU Member States.
• Special scheme for investment gold.
• Postponed accounting for investment projects.
• Postponed accounting for the importation of certain base metals, organic and inorganic chemicals and mineral products if the customs value of the goods per unit equals or exceeds BGN50,000.

Electronic filing and archiving. Effective 1 January 2018, VAT returns must be filed in electronic format only.

VIES returns (EC Sales List) and Intrastat returns should be filed only electronically.

Electronic archiving of documents is allowed in Bulgaria, as Directive 2010/45 EU has already been implemented in the local VAT rules. Electronic archiving should be organized by the taxable persons in such a way as to guarantee the authenticity of origin, the integrity of content and legibility of the electronic documents.

Minimum requirements for electronic archiving include:

• The taxable person has an obligation to guarantee during a tax audit an online access to the electronic archive.
• Reasonable business controls are required to create a reliable audit trail between the invoice and the supply. For electronic invoices examples of such technologies are EDI systems and qualified electronic signatures. Still, any other type of technology creating a reliable audit trail is accepted.

There are no restrictions on the location in which the electronic documents should be kept, i.e., the electronic archiving could be inland or abroad as long as an online access is guaranteed.

Annual returns. Not applicable.