Recent important amendments to the Bulgarian Law on VAT became effective on January 1 2017. The amendments are related to mixed supplies of assets and immovable property, the tour operator margin scheme, the obligation for VAT registration in cases of inheritance, and changes in the rules for supplies made by a person acting in his own name but for the account of another person.
A new model of proportional VAT deduction for mixed supplies has also been introduced. Besides the partial deduction applicable to the use of an asset for both taxable and tax-exempt supplies, a pro-rata deduction will be applied when these assets are used for both business and personal purposes. The proportion will be determined on the basis of reasonable criteria for allocating between personal and corporate use, according to the specifics of the asset. This deduction applies to:
- Immovable property;
- Transport vehicles (with the exception of those intended for use by disabled persons); and
- Any other long-term assets with a value exceeding €2,500 ($2,600) (under the law for Cooperative Income Tax).
The amendment to Article 79 of the VAT Act introduces a new formula for the adjustment of the deduction of input VAT in cases of destruction or discarding of goods.
Furthermore, the amendments introduce a regime of annual adjustment (either upwards or downwards) in the event of a change in use of the asset. This will be completed by applying coefficients for the different types of assets and the adjustment will be carried out in the last tax period of the calendar year by drawing up a protocol for the adjustment and reflection of the change in the amount of the tax credit.
The amended Article 136, paragraph 3 of the VAT Act introduces a special tour operator margin scheme (TOMS) to supplies of single services by a tour operator to any person, including another tour operator or travel agent. The amendments stipulate a five-day period after the date of which an advance is refunded which is followed by the issuing of a credit note if the price is reduced or contract is terminated.
Amendments to the provisions concerning the actions of heirs upon death of a VAT-registered individual define what happens in case they continue the business activities. These persons are obligated to register under the VAT Act within six months of the death (new Article 132a of the VAT Act).
Additionally, from January 1 2017, if a taxable person acts in his own name but for the account of another person with respect to the supply of goods or services (such as a commission agent or mandatary), such person will be considered to have supplied/received the goods or services. In these cases, the date of sale/purchase of goods or services will be determined under general VAT rules but cannot be later/earlier than the date of the contract between the parties.
These changes in the Bulgarian Law on Value Added Tax are applicable from January 1 2017 and affect a wide range of VAT-registered persons.