Subject matter and purpose of VATA
This law governs the levying of value added tax (VAT) on local persons (physical, legal and unincorporated, performing independent economic activity) as well as to non-residents when provided for by law. Value added tax is levied on:
• any taxable supply of a good or service;
• any intra-Community acquisition (VOC) for a place of performance in the territory of the country by a person registered under this law or by a person for whom an obligation to register has arisen;
• any compensation for new vehicles with a place of performance on the territory of the country;
• any remunerated BPO having a place of performance on the territory of the country of excise goods where the recipient is a taxable person or a non-taxable legal person not registered under this law;
• import of goods.
TAXABLE PERSONS ACCORDING TO VAT
A taxable person is any person who carries out independent economic activity, irrespective of his purpose and results, as well as any person who accidentally carries out intra-Community supplies of a new vehicle.
The state, state and local authorities are not taxable persons for all activities or supplies performed by them and their status as a body of state or local authority, except for the following activities or supplies:
a) electronic communications services;
b) the supply of water, gas, electricity or steam;
c) the carriage of goods;
d) port and airport services;
e) passenger transport;
f) sale of new goods produced for sale;
g) supplies carried out for the purpose of regulating the market in agricultural produce;
h) organization or holding of trade fairs, exhibitions;
j) activities of commercial information organizations, advertising services, including rental of advertising space;
k) tourist services;
l) operation of shops, chairs and other retail outlets, rental of buildings, parts thereof and commercial areas;
m) radio and television activities of a commercial character;
n) supplies other than those mentioned above which will lead to significant distortions of competition;
o) services of a state enforcement agent.
Taxable persons in respect of services received (with the obligation to self-assess VAT) are also the non-taxable legal entities registered under VATA as well as those taxable persons who also carry out exempt supplies and / or deliveries or activities outside the framework of the independent economic activity.
DEFINITIONS IN THE LAW
A non-taxable legal person is a non-taxable legal person who carries out an intra-Community acquisition of goods.
Independent economic activity is the activity of producers, traders and persons providing services, including in the field of mining and agriculture, as well as the exercise of a liberal profession, including a private enforcement agent and a notary. Independent economic activity is any activity carried out on a regular or occupational basis against remuneration, including the exploitation of tangible and intangible property in order to obtain regular income from it.
It is not an independent economic activity the activity performed by natural persons under an employment relationship or a legal relation, equated to labor as well as the activity of the natural persons, who are not sole traders, for the activities of their management and control of legal entities.
Goods are each item (including electricity, water, gas, heating and cooling, and standard software).
Service is anything other than a good that has value (including the transfer of intangible property - licenses or the purchase of a software product other than standard software), except for money in circulation and the foreign currency used as a means of payment.
Delivery - the transfer of ownership or other right in rem on a good or the provision of a service for remuneration.
Standard software is a software product that is recorded on a technical medium that is intended for mass use and does not take into account the specificities of the activity of the particular user.
New buildings are the buildings which, at the date when the tax has become chargeable, are in the "rough construction" stage or 60 months have elapsed since the date on which a permit for use was issued under the Territory Building Act.
Old buildings - buildings for more than 60 months since the date of their use.
A passenger car is a vehicle in which the number of seating positions in the driver's seat does not exceed 5. It is not a passenger car which is intended for the carriage of goods or a car which has permanently built-in additional technical equipment for the purpose of the activity by the registered person.
Repair is the activity of incurring subsequent costs associated with a leased asset that does not result in an economic benefit over that of the initially estimated standard performance of that asset.
Improvement is the activity of incurring subsequent costs associated with a leased asset that results in an economic benefit above that of the initially estimated standard performance of that asset.
Grant is free of charge, and there is no remuneration, or the value of the amount repeatedly exceeds what has been received.
Goods of negligible value and services of negligible value are goods or services whose market price is below BGN 30 and their supply is not part of a series of deliveries to which the recipient is the same person.
Taxable amount - the amount at which the tax is charged or not, depending on whether the supply is taxable or exempt. The tax base is determined on the basis of everything that includes the remuneration, excluding the tax under this law. The tax base is increased by:
• all other taxes and charges, incl. excise duty when such are due for delivery;
• All subsidies and funding directly related to the supply;
• the incidental costs charged by the recipient's supplier, such as commission, packing, transport, insurance, and others directly related to delivery;
• the value of packaging materials or containers if they are not subject to return or if the recipient is not a taxable person; if these packaging materials or containers are returned by the recipient, the taxable amount is reduced by their return value.
Permanent object is a commercial representation, branch, office, office, workshop, plant, workshop (factory), shop, store for trade, service, assembly site, construction site, mine, quarry, well, oil or gas well, (private, hired or otherwise used) or any other place whereby one person carries out all or part of an economic activity in the territory of a country.
A person established on the territory of the country is a person who has its seat and address of management on the territory of the country or has a permanent establishment in the territory of the country. A non-resident person who has an establishment in the territory of the country who does not participate in the supply is not deemed to be established in the territory of the country.
A person established in the territory of the Community is a person who has its registered office or registered office in the Community or has a permanent establishment in the territory of the Community.
New vehicles are:
• motor vehicles with a cylinder capacity exceeding 48 cubic centimeters or with a power exceeding 7,2 kilowatts, intended for the carriage of passengers or goods for which one of the following conditions is met: no more than the date of occurrence of the tax event 6 months from the date of first registration or no more than 6 000 km.
• vessels and aircraft meeting identical criteria
1. MAIN ISSUES
The Bulgarian Value Added Tax Act (VATA) is the main normative act transposing the provisions of the European VAT Directive. In this regard, Bulgarian VAT legislation can be considered as almost fully harmonized with the European legislation.
Tax rates for taxable supplies
20% - Standard rate applicable to taxable deliveries with place of performance in Bulgaria, BPO and import.
9% - Reduced rate applicable only to accommodation services provided in hotels and similar establishments, including the provision of holiday accommodation and the rental of camping or caravan sites.
0% - Zero rate is applicable for intra-Community supplies (VOD), exports of non-EU goods, international transport, etc. (also known as VAT-exempt supplies with the right to a tax credit)
VAT is not charged when an exempt supply, an exempt intra-Community acquisition is made, and a delivery with a place of performance outside the territory of the country.
Taxable persons under VATA are all persons who carry out independent economic activity. In this respect, individuals are legally bound to the law by the legal entities.
It is not uncommon for individuals to practice freelance services, consultancy services under civil contracts or to rent out properties and are obliged to register under the VAT Act (since they have exceeded the mandatory threshold for registration by BGN 50 thousand if they provide such services to local persons or even have not exceeded the threshold for mandatory registration provide certain services to foreign persons in a Member State of the European Union). The important criterion here is whether the activity takes place regularly or by occupation, ie. incidental transactions (for example: sale of two family owned real estate) would not result in an obligation to register under the VAT Act.
In addition, non-statutory persons are also required to comply with certain provisions of the law (for example: documenting supplies). In other words, a taxable person under the VATA must not associate himself with a legal entity or a registered person.
On delivery, the VATA is understood to mean the transfer of a right of ownership or other property right over a good or the provision of a service for remuneration. In this connection, it is important to distinguish between goods and services within the meaning of the VAT Act, as the law often works with concepts, the meaning of which differs from that used in other tax laws or in normal commercial practice.
Similarly, goods and services have different VAT treatment regimes in terms of the place of supply and the date of occurrence of the tax event.
Similar to the delivery of goods are the cases of:
• the creation of limited rights in rem - for example right to use, right to build, right of way. Here, VAT is charged at the outset (for example: at the time of the notary transaction), although it may have been agreed to pay the price in installments. For comparison, for the rental contracts (VAT-based service) VAT is charged for each rental installment.
• the actual delivery of the good if the ownership is transferred under a postponement condition - for example a sale of a payment, the ownership being transferred only after the last installment of the price. Here VAT is charged at the outset, even though the full price has not yet been paid and ownership has not been transferred;
• the actual delivery of the goods under a lease contract if the ownership of the good is definitely transferred to the end of the contract - that is, this is not only an option (option) but a pre-agreed fact. Here, again, VAT is charged at the outset. In the case of a finance lease, where there is only an option for the transfer of ownership, it is considered that there is a supply of a service for VAT purposes and VAT is due to each lease payment;
• the actual supply of goods to a person acting in his own name and for someone else's account;
• Free transfer of ownership of goods to third parties or the provision of goods for the private use of partners as well as employees, with some exceptions.
A service delivery is also treated as:
• Remuneration for not performing a certain action;
• Repair of a rented asset if its use is shorter than 3 years;
• the improvements of a rented asset regardless of the term of use;
• Free provision of services to third parties or provision of services for the personal needs of partners, employees, with some exceptions.
Supply (in-kind contribution to the capital of a company), transfer of an enterprise (aggregate of assets, liabilities and factual relationships) and the transformation of companies (mergers, mergers, divisions, etc.) are not considered as deliveries.
No provision of goods or services for the supply of a good or service of negligible value for advertising purposes or for the provision of samples is not considered.
Penalty payments as well as compensatory interest are also outside the scope of the VATA.
2. SUPPLY AND PURCHASE OF GOODS WITH THIRD COUNTRY CONTRACTORS
Place of performance for deliveries of goods
The place of supply of goods is:
• for goods not shipped or shipped - the place where the goods are located when the property is transferred or when the goods are actually delivered;
• for goods shipped or shipped by the supplier, the consignee or a third party - the place of the goods at the time the consignment is dispatched or the shipment to the consignee begins;
• In the case of a supply of goods by an intermediary in a triangular operation, the Member State where the acquirer in the tripartite transaction is registered for VAT purposes;
• for goods that are installed or installed by or on behalf of the supplier - the place where the goods are installed or installed.
From a practical point of view, the question of the place of performance of the supplies is particularly relevant for transactions where the supplier and the recipient are located in different countries, since in such situations it is necessary to determine the VAT legislation of which country should be applied, i. will VAT be charged and the tax rate of which country. It is also possible that place of execution is relevant for supplies between companies in the same country (for example, if a Bulgarian company sells to another Bulgarian company goods located in France which are not transported, the place of performance will be in France and the sale may lead to an obligation to register the Bulgarian supplier there, under French law).
Intra-Community Delivery (VOD)
VOD is the supply of goods from one EU country to another where both the supplier and the consignee are registered for VAT purposes in the respective Member States (ie in order for there to be a VOD, usually the supplier and the recipient are registered for VAT in two different Member States and the goods are necessarily transported from one EU Member State to the other).
VOD is close to export in that the goods leave the territory of Bulgaria and that VAT is not charged (since it is taxable at a zero rate) and the tax is payable by the recipient. On the other hand, as Bulgaria is part of the customs territory of the EU, the goods do not undergo a customs declaration and check on the VOD.
However, there is a specific system for monitoring transactions between EU Member States, called VIES (VAT Information Exchange System).
Information on the water supply and services performed on the territory of another EU country is submitted to the VIES system (by submitting a VIES declaration from the supplier) and, if necessary, compared with the VOP information sent and the services received from the EU counterparties.
Undertakings dealing with the EU must be careful in the implementation of VOD as it is necessary to obtain a certain set of documents (transport, etc.) proving VOD and consequently the reason for non-charging VAT. Otherwise, if, in the course of a tax audit, there are no documents proving the VOD, the review team may charge 20% VAT and the corresponding penalties.
Intra-Community Acquisition (VOP)
VOP is the acquisition of goods from another EU country where the supplier is registered for VAT purposes in that other Member State (ie to have VOP, the supplier and the recipient are usually registered for VAT in two different Member States, with some exceptions concerning the consignee, and the goods are necessarily transported from one EU Member State to the other).
VOP is close to imports in that the goods arrive on the territory of Bulgaria. However, unlike imports where customs control and VAT are paid to the Customs Agency, there is no customs control in the VOP and there is in principle no effective payment of VAT. The recipient of the VOP is obliged to self-assess 20% VAT and, if at the same time he is entitled to a tax credit, he would not have any net tax effect.
The VOP information is compared in the VIES system (but recipients do not submit VIES declarations). Undertakings purchasing goods from the EU must be careful in reporting to VOP in order not to miss the set deadlines for VAT recalculation and VAT reporting.
A tripartite operation is the supply of goods between three persons registered for VAT purposes in three different Member States A, B and C for which the following conditions are simultaneously met:
• a registered person in Member State A (a transferor) makes a delivery of goods to a person registered in Member State B (an intermediary) who then supplies that product to a person registered in Member State C (acquirer);
• the goods are transported directly from A to C;
• the intermediary is not registered for VAT purposes in Member States A and C.
In this case, the acquirer in country C should self-assess VAT, with the transferor (in country A) and the forwarder (in country B) not charging VAT.
Distance selling of goods
To have a remote delivery:
• Goods must be dispatched from or on behalf of the supplier from one Member State to another;
• the supplier of the goods (A) must be registered under the VAT Act in the Member State from which dispatch or transport begins;
• the recipient (B) should not be obliged to charge VAT on the BPI of the goods in the Member State where the transport ends (ie it is not registered for VAT there)
• the goods are not new vehicles, goods which are installed and / or installed by or on behalf of the supplier and goods for which a special procedure for charging the price margin is provided.
The most frequent case of distance selling of goods is whether a registered person is trading on the Internet and sells goods to unregistered individuals in other Member States. In general, it is a requirement of VATA that the goods be taxed according to the location of their final consumption, ie. where they will be consumed or consumed. However, in the case of distance sales, where there are many unlisted buyers in different countries, this requirement would entail an obligation on the supplier to register in each of the countries in which the goods are consumed. In order to avoid this inconvenience, an instrument called the "distance selling threshold" was introduced.
Where the amount of sales made by the supplier over the year exceeds this threshold, the supplier is required to register for VAT in any Member State for which he has exceeded the applicable threshold and to levy VAT at the rate of VAT for that Member State VAT number obtained on registration in country concerned. For example, if a Bulgarian company sells goods remotely in Great Britain, Austria and Germany, it will be obliged to register for VAT purposes in each of these countries after exceeding the materiality threshold determined by each individual country.
The VAT system provides for a relaxed regime where the supplier has not reached the relevant threshold. In such a case, the supplier shall be entitled:
• not to register for VAT in that other Member State, in which case the supplier should charge VAT at the rate in the country where VAT purposes are established and registered. As in the above example, if we accept that a Bulgarian company is making distance sales in the UK, Austria and Germany and has not exceeded the threshold of materiality in any of these countries, it should charge Bulgarian VAT. Once it reaches the materiality threshold, for example, in Austria, it should register for VAT purposes there but can continue to charge Bulgarian VAT up to the thresholds set in the UK and Germany.
• if he / she wishes, he / she has the right to register for VAT purposes in the respective country and to charge VAT at the rate and VAT number in that country even if he / she has not reached the applicable threshold (for example, if a Bulgarian company distributes sales in Luxembourg, preferable to register for VAT purposes there and to charge 15% VAT to final customers under Luxembourg law and not 20% Bulgarian VAT even if it does not reach the threshold for mandatory distance sales registration applicable in Luxembourg).
Import of goods
Goods are imported from a non-EU country when goods are imported. In this case, the goods are cleared by customs with a customs declaration and the VAT is due to customs. We have an effective payment of the amount of tax to the customs authorities, and in the case of a tax credit, the VAT amount paid will be deducted from the VAT obligations of the enterprise or actually reimbursed.
3. SUPPLY AND PURCHASE OF THIRD-COUNTRY CONTRACTORS
Place of delivery of services
The place of execution is a tax fiction and should not be confused with the place where the service is performed or the service is actually provided. The place of performance in the supply of services depends on the status of the recipient (taxable or non-taxable person). Although different assumptions are possible from a practical point of view, the supplier defines as a taxable person a person who has a VAT number issued by another Member State and, respectively, as a non-taxable counterparty with no VAT number.
The place of performance is defined as follows:
• As a general rule, if the recipient is a taxable person (ie registered under VAT), the place of performance is in the country where the recipient is established - the so-called "business to business". However, if the recipient has a permanent establishment (eg warehouse, workshop, office, etc.) in another country for the purposes of which the service is used, the place of performance is in the State of the permanent establishment. In such cases, where the place of performance is outside the territory of Bulgaria, the Bulgarian supplier does not charge VAT but is entitled to a tax credit for the purchases related to the delivery. If the recipient is established in the EU, he will be liable for VAT at the rate in the country concerned using the VAT reverse charge method. If the recipient is established outside the EU, he will pay VAT if this is a requirement of the relevant local law.
• If the recipient is a non-taxable person (eg a foundation or a natural person who does not carry out an economic activity), the place of performance of the service is in the country of the service provider (so-called "business to consumer supplies"). If the service is from a fixed establishment situated outside the country where the provider is primarily established, the place of performance will be in the State of the permanent establishment. In these cases, the supplier charges VAT at the rate of the country in which he is established (or has a fixed establishment), that is, the recipient does not have the obligation to self-assess VAT in his own country.
An exception to the latter rule is where the recipient - a non-taxable person is established outside the EU and the services received are from the so-called " intellectual property (eg: consultancy, advertising services, transfer of rights, patents, licenses, software development, data processing, etc.). In this case, the place of performance is in the recipient's country, the supplier should not charge VAT and the recipient will self-apply if local law requires this.
• For a service group, the above rules for determining the place of performance depending on the status of the recipient are not applicable. For example:
- the place of performance in the case of a supply of a service related to a real estate is the place where the immovable property is located;
- in the case of passenger transport, the place where the passenger transport takes place in proportion to the mileage achieved;
- services relating to cultural, artistic, sporting, scientific, educational, entertainment or similar activities, including the activity of organizing them, if the recipient is a non-taxable person or if the service consists in providing access (against tickets or pay- ) - the place where the service is actually performed;
- in the case of supply of restaurant and catering services, the place where the services are physically carried out
- for short-term rental of vehicles for a period not exceeding 30 days (for vessels - 90 days), the place where the vehicles are actually delivered to the recipient.
4. TAX EVENT AND TAX BASE
The tax event is the moment when VAT becomes chargeable, must be charged (eg: stated on the sales invoice) and declared. The tax event is the moment when the ownership of the goods is transferred (or in fact provided in certain cases) or the service is performed. In the case of services with a periodic, staged or extended period of application, special rules are applied in order to ensure that VAT is charged on a regular basis.
If, prior to the occurrence of the tax event, there is an advance payment, VAT becomes chargeable at the time of the advance payment. Taxable persons are required to issue an invoice in order to charge VAT within 5 days from the date of the tax event.
The taxable amount is the amount on which VAT is charged (or not accrued if the supply is exempt). In principle, the tax base is all that the recipient owes the supplier. In this regard, the cost of the good or service may be increased by some incidental costs (eg transport, packing, fees), which are also included in the tax base.
In the case of gratuitous supplies, which are VAT equivalents for consideration purposes, the tax base can not be lower than the tax base when acquiring the respective asset.
The taxable amount is the market price in some cases of related party transactions where one is not entitled to full tax credit and the negotiated transaction price differs from the market in a way that may harm the state budget. If both related parties are entitled to full tax credit, no adjustment of the tax base to market levels is made.
The tax base does not include:
• the amount of the trade discount or reduction if it is provided at the date of occurrence of the tax event; if provided to the payee after the date of the occurrence of the tax event, the taxable amount is reduced upon delivery;
• the value of ordinary or custom packaging materials or containers if the recipient is a taxable person and these materials or containers are subject to return; if they are not returned within 12 months of their dispatch, the taxable amount shall be increased by their value at the end of that period;
• the lessor's and the lessee's costs associated with the use of a good under a lease, such as: Property, Property, Property and Other Expenses, Property Taxes and Fees, Ecotaxes, and Costs of Registration;
• the amounts paid to the supplier to cover the costs incurred in the name and on behalf of the recipient; the supplier is not entitled to a tax credit for such purchases.
It is not considered to be a supply within the meaning of the VATA and does not include in the tax base penalties and interest of compensatory nature.
5. DELIVERED DELIVERIES
In the case of exempt supplies, VAT is not charged, but at the same time the person is not entitled to a tax credit for the purchases associated with these exempt supplies.
The following types of deliveries are exempt:
• Supplies related to healthcare
• Supplies related to social care and social security, social security, social security, etc.
• Supplies related to education, sport and physical education - certain educational services, textbooks, sports events, etc.
• Deliveries related to culture - concerts, exhibitions, theaters (but not cinemas), etc.
• Deliveries related to religious denominations
• Non-profit deliveries - membership fees, fundraising events, etc.
• Deliveries related to land and buildings - only the supply of land that is not a regulated landed property (URE) is exempt. The transfer of title to (sale) of a Regulated Office is a taxable supply, whereas the creation or transfer of a right to build on a Regulated Real Estate is considered an exempt supply until the building permit (building visa) of the building is issued. Exempt delivery is both the transfer of ownership and the creation of limited real rights over old buildings (more than 60 months have passed since the date of their use). Deliveries of new buildings are taxable. Exemption is also the letting of a building (or part thereof - eg: an apartment) for rent for residential use by individuals.
The supplier may choose to treat all such exempt supplies as taxable. In this case, the supplier should charge VAT, but it is not necessary to make adjustments for the tax credit used.
• Financial services - interest on loans granted, loan agreements, service fees, guarantees, including interest under the terms of a lease contract; deals with guarantees or securities establishing rights to pecuniary claims; transactions relating to payment bills, payment services, electronic money, payments, debts, receivables, checks and other similar contractual instruments, excluding the debt collection and factoring transaction and the rental of safes; transactions relating to currency, banknotes, coins used as legal tender; transactions relating to shares, stocks or other securities and derivatives thereof, excluding management and custody (this does not apply to securities establishing rights over goods or services outside financial services, transactions in financial futures and options.
Interest on finance leases is exempt or taxable at the option of the lessor.
• Supply of insurance services;
• Delivery of postage stamps and postal services;
• Delivery of goods or services for which no tax credit has been used - if the enterprise was not entitled to a tax credit (eg purchase of a 4 + 1 car), it should not charge VAT on a subsequent sale. The idea is not to receive a tax on a tax (ie VAT on a purchase for which there is no right to a tax credit by law). However, if the enterprise had a right to a tax credit but did not use it (eg due to omission of the right to exercise the right, lack of necessary documents), it would be obliged to charge VAT on a subsequent sale. The same applies if the purchase is from an unregistered person (eg when buying a 4 + 1 car from an unregistered person and subsequent sale, the seller will be required to charge VAT).
6. DELIVERY WITH ZERO RATES
For a supply group, the tax rate is 0%, i.e. there is no real tax charge. However, unlike exempt supplies, an enterprise is entitled to a tax credit for purchases associated with post-zero delivery sinks.
The following rates are charged at zero rate:
• Exports of goods outside the EU - The supplier must have certain documents proving that the export is actually carried out;
• Intra-Community deliveries (VOD) - The supplier must have certain documents proving that the export is actually carried out;
• International passenger transport;
• International transport of goods from outside the EU to Bulgaria and vice versa;
• Supply related to international transport;
• Delivery of goods handling;
• Supplies related to duty-free trade - sales from duty-free shops;
• Deliveries exempt under international agreements and supplies to which the armed forces of foreign countries or EU institutions are recipients - For example, the deliveries of the main contractor for ISPA, SAPARD, etc., the sale of goods and the provision of services to the territory of Bulgaria of military bases, agencies to the EU and others.
7. TAX CREDIT
The tax credit is the amount of the tax that is charged to the person for the purchases he has made, the amount of which can reduce his VAT liability. The VATA entitles you to a tax credit for the acquired goods or services that will be used for taxable supplies (including a 0% rate) as well as for deliveries with place of execution outside Bulgaria.
The VATA contains formal requirements for the exercise of the right to a tax credit, including the obligatory possession of the relevant document (eg invoice, customs declaration, etc.) and its declaration in the month when the tax credit entitlement arises or one of the following 12 months. The right to a tax credit arises at the moment when the tax was due (ie there was a tax event, including a down payment on the transaction).
Undertakings are not entitled to a tax credit where the goods and services are related to:
• Exempt deliveries
• Free supplies or activities other than the business of the person - for example: donations, use of goods for personal needs, etc.
Undertakings are entitled to a tax credit for workwear, transport and overnight stays, as well as small value promotional items (up to BGN 30 per unit value) and for samples provided free of charge.
• Representative and entertainment purposes - eg: business lunches and dinners, gifts, etc.
• Buying, renting and operating costs of cars (ie cars where the number of seating positions without the driver's seat does not exceed 5). This group does not include passenger cars intended for freight (so-called 1 + 1). Non-taxable operating expenses include fuel, repairs, maintenance, parking, and more. similar. The idea of this limitation is that the tax authorities can not sufficiently judge the extent to which cars are used purely for business purposes, and thus completely eliminates the right to tax credit so that there is no misuse of incorrect taxpayers. However, companies involved in the sale of cars, courier services, taxi transfers and others. similar are entitled to a tax credit. It should be noted that the provisions of the CITA concerning the tax recognition of the costs of using vehicles and their taxation on the costs are different from those under the VAT Act.
Companies often carry out both taxable and exempt supplies. In practice, it is difficult to identify purchases that are entirely related to exempt supplies for which the person is not entitled to a tax credit. For this reason, purchases that are coupled with exempt and taxable supplies (eg: general administrative costs - rent, electricity, etc.) give rise to a partial tax credit. only part of the VAT charged by the supplier benefits the enterprise as a tax credit. This part is based on the ratio of taxable supplies to all deliveries made by the enterprise.
The amount of the partial tax credit shall be determined by multiplying the amount of the tax credit by a coefficient calculated to the nearest the second decimal place obtained as the ratio between the turnover for the supplies for which the person is entitled to a tax credit and the turnover of all by the person deliveries. The coefficient for the current year is calculated on the basis of the turnover for the previous calendar year and the amount of the partial tax credit is recalculated in the December statement of the current year on the basis of the turnover for the current year.
Individuals are required to adjust their tax credit (most often to increase their tax liability by the amount of the tax credit or part of it) in cases of destruction, detection of missing (including theft), scrapping of assets or their subsequent use for exempt supplies. An exception to this rule is made in the following cases:
• Force-force - for example: earthquake, flood, fire, etc.;
• Accidents and accidents that are not the fault of the enterprise;
• Lack of storage and transport and natural fibers within valid regulations - eg: scattering, crushing, evaporation, etc.
• Technological marriage in permissible standards - mainly for manufacturing enterprises
• Marriage due to expiration date
• Marriage of tangible fixed assets with a carrying value of less than 10% of their book value;
• for goods or services, if 5 years have elapsed since the beginning of the year in which tax credit was exercised, and for real estate - 20 years.
The adjustment is made in the tax period during which the relevant circumstances occurred and in the case of adjustments for the partial tax credit used during the last tax period of the year.
VAT refund from a registered person for purchases before the date of registration
A registered person is entitled to deduct as a tax credit the VAT paid on the purchased or acquired assets before the date of his registration if the latter are available at the date of registration and the general conditions for using the VAT credit are met. For this purpose, an inventory of available assets is submitted no later than 45 days from the date of registration.
The registered person has the right to deduct a tax credit and a limited range of services related to his registration under the Commercial Law received before the date of the VAT registration if a number of conditions are met. For this purpose, an inventory of the services received shall be submitted again no later than seven days from the date of registration.
8. TAX DOCUMENTS
The tax documents are:
• Invoice notice - debit or credit;
• Other - customs declaration, sales report;
Invoices should be issued within 5 days of the tax due (the tax event, including the advance payment). Invoices contain the following mandatory requisites:
• Document name - ie. invoice. In practice, the term tax invoice also refers to a VAT invoice and a simplified invoice - where there is no VAT even though there is no such distinction in the current VAT Act and non-registered persons should issue invoices as the basis for non-charging VAT refer to Art. 113, para. 9 of VATA;
• Invoice number - Mandatory must be ten digits. For this purpose, lead zeros are used for smaller number invoices (for example: 0000001043);
• Issue date invoice;
• The date of the tax event or the receipt of the advance payment - may be different from the date of issue of the invoice;
• Name, address and VAT number of the supplier and the recipient - VAT numbers are extremely important from the point of view of the identification of the parties to the deal. If the counterpart is an EU company, the indication of VAT number plays a key role in the tax treatment of the transaction. The validity of an EU counterparty VAT number can be found at the following website: http://ec.europa.eu/taxation_customs/vies/;
• Kind, quantity and unit price of the good or service;
• Tax basis of delivery - may be different from the sale price given the increases added to the tax base;
• VAT rate - 20%, 9% or 0%. In the case of a zero rate of VAT or non-charging VAT, the reason for this should be noted;
• Amount of tax and total payment.
A debit note is issued when the tax base of an already invoiced delivery is increased. For example, an additional charge on an already invoiced transaction. In practice, it is relatively rare.
A credit note is issued when the tax base of an already invoiced delivery is reduced or when the transaction is terminated. For example: subsequently giving a discount on the price, returning a part of the good, canceling the delivery. The effect of the credit notification on the provider is that it reduces the amount of VAT charged to it and, for the payee, that the amount of the tax credit already used is adjusted. Credit notifications are commonplace in practice and require particular attention, as the recipient credit note company is required to record it in its log book for negative sign-off purchases in the same month in which it was issued. Otherwise, administrative sanctions may be imposed.
Incorrect invoices and notifications can not be corrected, ie. any additions and corrections are prohibited. Such documents are canceled (ie invalidated) and new ones are issued.
Various types of protocols are issued in different cases. Most protocols are issued when a person has to self-assess VAT (for example: for BPO, for services with a place of performance in Bulgaria provided by a foreign supplier for which the tax is owed by the recipient, etc.). In this self-assessment, VAT is included in both the sales log (that is, the VAT charge) and the purchase log - with or without a tax credit, following the general rules of the law. In other words, in the case of firms entitled to full tax credit, self-assessing VAT with a protocol does not result in any additional tax liabilities. But for companies without the right to a tax credit or just partial tax credit, there will be a real tax liability to the Bulgarian tax due to self-billing.
A sales report is issued when an invoice is not required (for example, sales to individuals, documented only by cash receipts, financial services, airline ticket sales, etc.). The sales report is issued daily or once a month. It should be noted that this report is different from the daily and monthly reports of the cash registers.
9. DECLARATION OF IMPORTATION AND REIMBURSEMENT OF VAT
Declaring and submitting VAT
The tax period under the VATA is one calendar month, which means that individuals must determine their tax result for each month. The result may be either an input tax (if the amount of VAT charged by the enterprise is greater than the amount of the tax credit used) or a refund tax (if the amount of the tax credit used is greater than the amount of VAT charged on deliveries).
VAT registered persons are obliged to submit monthly, by the 14th of the following month, a summary declaration with summarized information about the deliveries made and received during the month and with the result for the month - VAT for VAT or VAT for reimbursement. Together with the declaration, a purchase log and a sales log containing detailed information for each purchase or sale during the month shall be filed. All tax documents issued and received should be reflected in the sales and purchases logs. If there are more than 5 records in one of the journals, the VAT return and VAT logs must be submitted electronically to the NRA.
When an enterprise carried out deliveries in the month in question to which the beneficiaries were EU companies (eg: VOD, services with a place of performance in an EU Member State, etc.), it is also required to file a VIES declaration.
VAT due to be paid must also be paid by the 14th of the following month. Goods purchased from or sold to EU persons are also reflected in Intrastat declarations. The latter are submitted by the 10th day of the following month by persons who have exceeded the following thresholds: 2013 for Flows - 240 000 BGN, and for arrivals - also 240 000 BGN.
VAT refund of registered persons
If the result for the month is VAT refund, this result is deducted in the next 2 months from a possible monthly deposit result. Remaining VAT refund shall be refunded within 30 days of submission of the last statement of the deduction period and after deduction of any other taxable and unpaid tax liabilities of the registered person.
If a tax audit on the obligations of the person under the VATA is imposed, the reimbursement period is extended until the end of the tax audit.
VAT refunds to non-resident foreigners
The legislation provides for the possibility of VAT refunds on:
• Diplomatic representations, consulates and representatives of intergovernmental organizations and members of their staff. The specific procedures are set out in Ordinance No. H-14 of 27 September 2006 on the refund of VAT and excise duty of diplomatic missions, consulates and representatives of intergovernmental organizations and members of their staff.
• Foreign natural and legal persons not established within the EU (subject to the reciprocal conditions). The specific procedures are set out in Ordinance No H-10 of 24 August 2006 for the refund of VAT paid to non-resident non-residents and Ordinance No H-12 of 24 August 2006 for the refund of VAT paid to non-taxable natural persons who are not established in the territory of the Entity.
• Bulgarians (registered under VATA) - for VAT paid in another EU Member State, as well as foreign persons established and registered with VAT in another Member State - for VAT paid in Bulgaria. Specific procedures are governed by Ordinance No H-9 of 16 December 2009 on the refund of VAT to taxable persons not established in the Member State of refund but established in another Member State of the Community.
International contracts ratified by Bulgaria may provide for exemption from VAT. For supplies exempt from VAT under an international treaty, a zero rate of tax is applicable and the import of such goods is exempt from VAT. For the application of the zero rate the supplier is obliged to request in writing an opinion from the competent territorial directorate of the National Revenue Agency. The supplier is entitled to a VAT credit for the purchases under the general rules of the law.
10. VAT REGISTRATION
Only persons registered under the VAT Act can and should charge Bulgarian VAT. Registration under the law is mandatory for persons with a taxable turnover exceeding BGN 50,000 for the last 12 consecutive months. There is also mandatory registration for persons with a total VOP value for the current calendar year of over BGN 20,000.
Taxable persons who receive services from foreign suppliers (EU or non-EU) with a place of performance on the territory of Bulgaria or who provide services with a place of performance in the EU are obliged to register under the VAT Act before receiving or rendering the service , i.e. regardless of the accumulated taxable turnover. For example, if a Bulgarian company with a turnover of less than 50,000 receives a consulting service from an Austrian company, the Bulgarian company will be obliged to register for VAT in Bulgaria, although it does not exceed the threshold of BGN 50,000.
All taxable persons are also entitled to voluntary registration for VAT purposes.
Foreign entities from countries outside the European Union, except for those having a branch in Bulgaria, are registered under the VAT Act through an accredited representative. Foreign persons from the European Union can register under VATA without an accredited representative.
Under the VATA, the following penalties may be imposed for violation of its provisions:
• Non-registration in time of VAT - a fine from 500 to 5 000 levs, plus the principal of the VAT not charged and a penalty in the amount of the VAT not charged;
• Non-charging VAT (eg, not issuing or late issuing an invoice) - the amount of VAT that should have been charged but not less than $ 500 plus the VAT principal if the tax is not charged. In other words, VAT is not charged (including when registering after the expiry of the mandatory period) (i) the tax itself plus (ii) the penalty in the amount of the unrecorded tax, and (iii) default interest. If the charge is delayed by 1 month, the fine is 25% of the amount of VAT, but not less than BGN 250.
• Failure to submit declarations or diaries on time - a fine from 500 to 10 000 BGN;
• VAT not charged in the case of VAT reverse charge - 5% of the VAT amount, but not less than BGN 50. If the accrual is delayed by 1 month, the fine is 2% of the VAT amount, less than $ 25.
• Not issuing a document or not issuing a document issued or received (eg credit note) leading to a lower tax amount - the amount of the tax reduction, but not less than BGN 1,000. When the document is issued or reflected in the following month the fine is 25 per cent of the lower tax, but not less than 250 levs.
• Breach of the order for approval, registration or entry into / out of operation or service of fiscal devices or non-fulfillment of the requirements for remote connection with the National Revenue Agency leading to non-receipt of revenue - a fine from 3 000 to 10 000.
• Taxation by a person not registered under the VAT Act - the amount of the VAT charged, but not less than BGN 1,000.
• No receipt of a receipt - from BGN 500 to BGN 2,000.