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Bulgaria: Dealing with VAT in Bulgaria

Petar Varbanov of Eurofast Global gives a comprehensive guide to navigating Bulgaria's VAT reporting package requirements, and how foreigners can claim VAT refunds.

Bulgaria's VAT reporting package contains four reports - sales register, purchase register, consolidated VAT return and VIES (VAT information exchange system) return. The purchase and sales registers list all documents received or issued, including their type, number, date, counterparty, and more information.

The VAT return summarises the information in the registers and the total monthly position of the entity. The VIES return provides a summary of the inter-community supplies of goods and services to EU suppliers. The VAT reporting package is submitted in hard copy and, in case of more than five entries, as electronic '.txt' files in Bulgarian (Cyrillic). The layout of the forms and the format of the files are predefined and will not be accepted by the tax authorities if they do not comply with the requirements.

Essential elements of the invoice include:

  • the name and full address of the supplier;

  • the VAT identification number or tax reference number of the supplier except in the case of

  • importation;

  • the prefix of the member state of refund (except in the case of importation);

  • date and number of the invoice or importation document;

  • taxable amount and amount of VAT expressed in the currency of the member state of refund;

  • the amount of deductible VAT calculated expressed in the currency of the member state of refund;

  • where applicable, the deductible proportion expressed as a percentage;

  • description of the goods and services acquired according to the codes 1 to 10; and, where requested,

  • further information on the nature of the goods and services acquired.

Compliance obligations for local and foreign companies:


Reporting period

Filing deadline

Payment deadline

Filing format

VAT return

Monthly

14th day of the current month for the previous reporting period

14th day of month following reporting period

Electronic / hard copy

EU sales list

Monthly

14th day of the current month for the previous reporting period

N/A

Electronic / hard copy

Intrastat

Monthly

14th day of month following reporting period

N/A

Electronic / hard copy

VAT cases

According to the local legislation, there are various VAT cases which are reported and documented in a specific way. Below are listed the most frequently applicable transactions depending on their reporting in the VAT, as well as information about the documents and the VAT rates applicable.

Sales:

Description

Documents applicable

VAT rate

Type of the counterparty in the general case

Sales of goods or services subject to full local VAT;

Invoices, credit/debit notes, protocols

20 %

Local

Sales of goods or services subject to full local VAT registered in cash register report;

Monthly cash register report

20 %

Local

Sales of goods or services subject to reduced VAT rate (applicable to tourist services)

Invoices, credit/debit notes, protocols

9 %

Local

Intercommunity supplies of goods (ICS)

Invoices, credit/debit notes, protocols

0%

EU

Sales of services to foreign customers with a place of supply outside Bulgaria

Invoices, credit/debit notes, protocols

0%

Foreign (EU or non-EU)

Export of goods outside EU

Export custom declaration

0%

non-EU

VAT charged in other cases (VAT adjustment due to shortages, scrap of assets etc.)

Protocol

20 %

n/a

Exempt supplies (eg health services, financial and insurances services etc.)

Invoices, credit/debit notes, protocols

n/a

Any

Supplies carried out as an intermediary in triangular transaction

Invoices, credit/debit notes, protocols

0%

EU

Purchases:

Description

VAT credit

VAT rate

Type of the counterparty in the general case

Local purchase of goods and services

Full

20 %

Local

Not entitled

0 %

Local

Partial

20 %

Local

Import of goods via custom declaration

Full

20 %

Non-EU

Not entitled

0 %

Non-EU

Partial

20 %

Non-EU

Intercommunity acquisition of goods, documented via a protocol (memorandum) – reported in both sales and purchase ledger

Full

20 %

EU

Not entitled

0 %

EU

Partial

20 %

EU

Received supplies of services subject to reverse charge in Bulgaria, documented via a protocol (memorandum) – reported in both sales and purchase ledger

Full

20 %

EU or non-EU

Not entitled

0 %

EU or non-EU

Partial

20 %

EU or non-EU

There are some specific VAT transactions which are not listed above. Therefore, before setting up the VAT solution for the company, all type of transactions that might be applicable should be reviewed and analysed.

Limitation of the VAT right

Depending on the nature of the above transactions, companies might be fully, partially or not entitled to reclaim the related VAT credit. The main cases where companies are not entitled to VAT credit are:

  • purchases of goods and services which are also used to make non-VAT/exempt supplies;

  • purchases of goods and services which further used to make free of charge supplies;

  • purchases of goods and services which are further used to make supplies which are not related to the business activity of the company;

  • purchases of goods and services related to representation and entertainment activities (food and drinks, customer and employees entertainment, presents, team events etc); and

  • purchases of goods and services related to the repair, maintenance and exploitation of vehicles with number of seats below 6+1 seats.

Eligibility for a VAT refund

To qualify for a refund, the applicant is obliged to be a taxable person established in the EU and to make taxable supplies in their own member state (the member state of establishment). They must have incurred VAT on expenses in a member state where they have no establishment (the member state of refund), and must have made no supplies within that member state other than reverse charge supplies, or exempt transport services, during the period of refund.

From January 1 2015 any taxable person not established in the member state of refund supplying services covered by the EU's 2015 place of supply VAT changes is entitled to a refund.

If the taxable person making use of the mini one-stop shop (MOSS) also carries out, in the member state of refund, they lose their right to deduct VAT.

VAT refunds to foreigners not established in the EU

Every taxable person has the right to request a VAT refund has every taxable person when the following conditions have been met simultaneously for the period for which the refund request refers to:

  1. The person does not have seat and address of management, permanent site, permanent address, or habitual abode on the territory of the state;

  2. The person has not carried out deliveries with a place of performance on the territory of the state pursuant to VAT Act, except for delivery of:

    - Transport services and services related to international transport as described in articles 30 and 31 of the VAT Law (VATL);

    - Goods and services for which the tax is to be requested from the recipient of the delivery, pursuant to article 82, paragraph 2 of VATL.

  3. The state of establishment of the person is specified in the list of states which refund VAT or another similar tax to Bulgarian persons, approved by the Minister of Finance and the Minster of Foreign Affairs.

The person is entitled to refund of VAT charged for goods and services received and import realized by them, which will subsequently be used for taxable deliveries carried out by the person in their state of establishment, provided that these deliveries would entitle them to tax credit had they been performed on the territory of the state, as long as the amount of the tax for which the right to VAT refund has arisen during the calendar year or for the remaining part of the said year is greater than BGN 50 ($29).

Terms for claiming

The right to refund should be exercised before June 30 of the year following the year when the refund right arose. The VAT refund application may apply for period shorter between three months and a year, though the VAT refund application may also apply for a period shorter than three months if the period in question is a remaining part of the calendar year, and the tax amount is not less than BGN 50.

Paying the tax to the foreign individual

When the agent receives the certified documents and verifies the fulfilment of all the conditions that gives right for VAT tax refund, the agent pays the foreign individual the refunded tax in BGN. The payment is made when the foreign individual provides the documents or within another agreed term, but not later than the end of the month following the month which marks the six month expiry period for the issuance of the invoice. If the agent refuses to pay the VAT, the latter is obliged to immediately return the received documents and to notify the foreign individual about the reasons for refusing to pay the tax.

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