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Galina Petkova |
Bulgaria officially published on December 1 2009 an amending Act to its Value Added Tax Act (VATA) providing for significant changes with regards to its VAT system. The amendments come into force from January 1 2010. The major amendments reinforce further Bulgaria's compliance with European regulations, and attempt to develop a more simplified and accessible VAT approach. An overall picture of the transformation in Bulgaria's VAT regime can be seen from the wide-ranging scope of the changes.
The first area of change was the actual place where services are judged to have been supplied, bringing Bulgaria in compliance with the EC council directive 2006/112 , due to be implemented in the domestic legislation of member states not later than January 1 2010.
The significance of this is that the VAT levied on services will be applied at the actual physical place where the customer is located, in those instances the customer is a taxable person (i.e. taxation at the place of consumption shall be observed).
Conversely, as a general rule, non-taxable persons' place of supply (final customers, most often individuals), shall be the country in which the supplier is established or carries out economic activity. The general rule is complemented by specific rules which override it, and change the place of taxation, depending on the nature of the supply and the residence of the customer (when the latter resides or has a permanent address outside the EU). The delivery of the following services is subject to specific rules:
provision or transfer of rights over license, patent, copyright, trade mark, know-how or other similar right over the industrial or intellectual property, as well as the transfer of rights over program product, different from standard software;
advertising services;
services, carried out by consultants, engineers, accountants, lawyers and other similar services, including the services for the processing of software;
data processing and information provision;
bank, financial, insuring, insurance and re-insurance services, except for the letting out of safes;
personnel provision;
letting out chattels, except for all kinds of vehicles;
electronic communication services;
radio and television dissemination services;
services, carried out via electronic way;
services regarding the provision of access, transport or transfer via distributing systems of natural gas or electric power and the delivery of other services, directly related to them;
undertaking obligations for not performing activities or for not exercising rights under any of the above cases;
intermediary services, carried out by a person, acting on behalf of and at expense of another person, in connection with the services under the above services.
Further substantive changes were also introduced to the VAT regime on a broader scale. Those changes provide as follows:
Obligation for VAT registration is introduced in the case of supplying or receiving reverse charge services before the date when the first transaction is performed or received
Procedural representation shall no longer be levied with a zero rate as a tax exempt supply;
The revenue authorities shall be entitled to register under VAT a tax person that has not assigned a tax representative;
The reimbursement tax shall be restored by the National Revenue Agency in 45-days term from the submission of the last reference-declaration (instead of the current 30-days period);
Imported goods that do not exceed BGN 30 ($22) as well as non-trade shipments in amount of up to BGN45 ($65) shall be tax exempt;
The registered person, who has made intra-Community supplies, or supplies as an intermediary in a trilateral operation, shall also submit together with the tax return for the tax period a VIES-declaration for those supplies for the respective tax period.
The revisions of Bulgaria's VAT legislation were essential to harmonise the existing legislation with relevant European standards. The result is a more straight forward and precise approach, to the benefit of businesses, promoting transparency and mitigating tax fraud.
Galina Petkova (galina.petkova@eurofast.net)
