The main principle underlying this regime is the VAT to be payable in the tax period when the company received payment, fully or partially, from its client but not when the related invoice is issued. Respectively companies, registered under this regime will accrue and deduct VAT of the preceding deals after payment to the supplier is executed. Once payment is executed a protocol for payment should be issued and based on this protocol the relevant amount will be included into the VAT statement for the related tax period. It is important to note the regime is applicable only for deals that have place of performance in the territory of Bulgaria, and is not applicable for import of goods, inter-community sales and deliveries; zero rated deals; deals between related parties and sales to non-registered under VAT regime entities. The regime does not have a mandatory character and Bulgarian companies can choose to register voluntary under this regime.
In accordance with the Bulgarian legislation, there are some restrictions on applying of the 'cash reporting' regime. It could be applicable for entities that are VAT registered; have turnover not more than €500,000 ($685,000) for the last 12 months; the entity is not classified as risky from the National Revenue Agency structures; the entity has not been appointed for cases of abuses and has no claims for collection of public liabilities. All the payments from and to companies, registered under the cash reporting regime should be bank transfers or post transfers via license post operators.
The changes aim to help to the Bulgarian business by improving the liquidity of the companies, especially to the small and medium business level. Last but not least is the attempt of the politics by these changes to avoid the possibility of tax frauds, which is showing their will to secure much better future business environment.