Bulgaria is a developing country with its economy being a part of European Single Market, it is placed within upper-middle-income economy bracket and in 2018 has received recognition as the most corrupt country in Europe. As a member of European Single Market, it is subject to EU VAT regulations and Bulgarian VAT legislation is superseded by them. However, for an adventurous entrepreneur there is bound to be a place within Bulgarian market. In this article we will provide basic information about VAT in Bulgaria.
In Bulgaria Value-Added Tax (VAT) legislation is contained within Zakon za Danak varhu Dobawenata Stoinost or Value Added Tax Act 2006. Within it, taxable person may find all VAT rules and directives that may apply to it. Bulgarian tax authorities responsible for the administration of VAT are National Revenue Agency (NRA) with Bulgarian Ministry of Finance as overseer. These are the authorities that will ensure that you have correctly filed VAT, paid your dues and in the worst case – corrected and/or paid fees for your mistakes.
Foreign, non-resident taxable persons and legal entities are allowed to register for VAT without establishing local business. Mandatory VAT registration for all traders is in order upon exceeding VAT registration threshold in Bulgaria in amount of 50,000.00 BGN or approximately 25,500 EUR with the requirement for registration application to be submitted within 14 days after the end of the months during which exceeding the threshold took place, if it happens in any period of 12 months or less. The threshold is expected to be increased to 100,000.00 BGN in the future. Registration for VAT purposes is also required in case of:
- Bringing goods into Bulgaria
- Storing products in a warehouse as stock for resale for more than three months
- Distance selling to private individuals in Bulgaria (online retail)
- Selling items from Bulgaria to other EU countries during 12-month period
- Intra-EU acquisitions
- As recipient in case of taxable supplies, goods and services, when tax is charged on recipient
Bulgarian VAT registration can be done voluntarily, when the threshold was not reached. One of the reasons to do so may be to obtain the residence permit in Bulgaria – opening company is one of ways to obtain it for foreign citizens.
Representative and penalties
Fiscal representative is not required for EU non-resident companies, although it is still recommended to appoint a local agent in order to represent and interact with Bulgarian tax authorities. For non-EU companies the requirement remains in place, making it mandatory to find local agent as representative. Regardless of the case, it is highly recommended to make use of services of experts in this aspect, as improper actions might lead to fines, troublesome procedures and other things all of us would rather avoid. Some sanctions that might be inflicted upon improper dealing with the obligations:
- Failing to register for VAT purposes – 500 BGN upwards to 5,000 BGN
- Failing to submit VAT returns and attachments – 500 BGN upwards to 10,000 BGN
- Failing to submit intra-EU acquisition return – 1,000 upwards to 10,000 BGN and 5,000 BGN upwards to 20,000 BGN for repeated offenders
Bulgarian VAT number is composed of 11 or 12 characters, with the first two being the capital letters BG and remaining being the digits forming two patterns:
Validity of Bulgarian VAT number can be checked using VIES – EU online tool for purpose of verification of the VAT numbers issued in the member countries and Northern Ireland.
Bulgarian VAT compliance
Bulgarian VAT regulations require monthly VAT returns with the fillings due on the 14th day of the month following end of the tax period. Bulgarian VAT returns are to be submitted in electronic form along with sales and purchase ledgers and other required documentation with valid electronic signatures. Corrections of errors on VAT returns can be done through resubmission of the form within original deadline or by informing the National Revenue Agency.
Bulgarian VAT rates
In Bulgaria, VAT is divided into three rates:
- Standard VAT rate – 20%
- Reduced VAT rate – 9%
- Zero VAT rate
Standard rate is applicable in all cases, when other rates are not available. Reduced VAT rate of 9% in normal circumstances applies to certain tourist services, however until 31.12.2022 the scope of this category extends to restaurant and catering services (with exclusion of alcoholic beverages), books, limited choice of baby food, use of sports facilities. Until 01.07.2023 9% VAT rates in Bulgaria also apply to natural gas and central heating. Zero VAT rate is applicable towards international transport of passengers and goods, supplies concerning international transport, duty-free trade supplies, etc.
In addition to that there is a fourth category, VAT exempt, which includes:
- Health care supplies
- Postage services
- Supplies related to culture and/or religion
- Social security and welfare supplies
- Supplies related to land and buildings
When the input VAT deducted from the tax liabilities exceeds the amount due, there is a possibility of obtaining VAT refund. VAT refunds are obtainable within maximum time frame of three tax reporting periods or 90 days. VAT refund procedure sees the VAT credit first subtracted to pay the dues for:
- Tax and social security responsibilities payable at the time of filing tax return
- Tax liabilities for the next two tax reporting periods (two months)
Finally, any remaining excess may be taken from public receivables collected by the National Revenue Agency or repaid within 30 days of the last tax return being filed.
VAT compliance services
For any entrepreneur, who is about to embark on his business adventure in Bulgaria, it might be worthwhile to take a moment and consider the option of employing services of tax experts. There are many accounting offices and tax law firms, who offer their services in this category – making the process much smoother and less prone to accidents. Expert advice might go a long way in aiding your business, saving you a lot of trouble.