March 18, 2021
Bulgaria may “deactivate” VAT registrations of UK businesses following Brexit
Bulgaria, which is a Member State of the European Union (EU), has introduced changes to its Value Added Tax (VAT) law relating to United Kingdom (UK) businesses that are registered for VAT in the country, following the UK departure from the EU (Brexit). These rules also apply to businesses resident in other non-EU countries with which the EU has not concluded an agreement for mutual assistance similar in scope to Directive 2010/24 and Regulation 904/2010.
According to the Bulgarian authorities, VAT registrations of persons established in the UK may be automatically deactivated. This may lead to a Bulgarian VAT charge arising on available assets for which VAT has been deducted and to an inability to deduct VAT on domestic purchases, imports, and reverse charge services. To avoid deactivation, a UK business (or other non-EU business) may need to appoint a local VAT representative.
According to the Bulgarian VAT Act, a taxable person established or with a head office in the UK (or an affected third country) may remain registered for VAT in Bulgaria if the person appoints a local fiscal representative and notifies this appointment in writing to the Bulgarian National Revenue Agency by 31 March 2021.
A Bulgarian fiscal representative is jointly liable for the foreign person’s local VAT obligations. Such representative may be a Bulgarian natural or legal person. If no such representative is appointed by the end of March 2021, the VAT registration is terminated by the administration and the person may be deemed liable for Bulgarian VAT on any available assets for which input VAT credit was deducted (as of the VAT deregistration date).
To avoid potential automatic deactivation of a Bulgarian VAT registration, affected businesses should review their VAT registration status and consider appointment of a fiscal representative, as well as notifying the tax authorities and the Registry Agency by 31 March 2021 if a representative is appointed.
For additional information with respect to this Alert, please contact the following:
Ernst & Young Bulgaria EOOD, Sofia