January 9, 2024
Bulgaria amends VAT legislation
The Bulgarian Parliament has accepted amendments to the Value Added Tax (VAT) Act that aim to bring national legislation into line with the European legal acts and the caselaw of the Court of Justice of the European Union (EU), as well as to solve some practical issues.
Below is a brief summary of the proposed changes.
Contrary the practice thus far in Bulgaria, destroying/scrapping goods duly proven to have lost all usefulness in the taxable person's economic activities will not give rise to an adjustment obligation. This opens the door to the possibility of obtaining a refund of overpaid VAT for past periods as well as in terms of future optimization, review and updating of current internal policies for scrapping/destroying goods.
Several extensions of the current VAT rate apply:
Where authorization for centralized clearance is sought, the law envisages deferred payment of import VAT and outlines the conditions for its application as well as reporting and payment requirements.
The threshold triggering an obligation of VAT registration for entities established in Bulgaria as of 1 January 2025 is increased from 100,000 Bulgarian Lev (BGN 100,000) (approximately €51,129) to BGN 166,000 (approximately €84,874).
The law envisages that taxpayers who failed to apply for compulsory VAT registration in timely manner are entitled to issue tax documents and charge the VAT due for the supplies carried out for the period after the obligation for VAT registration has arisen. As a result, their clients may deduct input VAT under the newly issued tax documents.
Taxpayers not established in an EU country who apply for the "one-stop shop" (OSS) scheme are not obliged to assign a fiscal representative. This change simplifies the procedure for applying the OSS scheme.
The new law also clarifies the procedure for appealing the tax authorities' rejection of an application for bad-debt relief. Where the taxable person would like to apply bad-debt relief to taxable base in an amount more than BGN 100,000, he should notify the tax authorities in advance. Tax authorities may issue permission for reducing the taxable amount; declining to issue permission is deemed to be tacit confirmation that a credit note could be issued. The refusal of the tax authorities to issue permission is subject to appeal procedure before the competent director in the tax administration and further before court.
Whenever additional collateral is required, beyond annual collateral already made, this additional collateral should be provided in a reduced amount — 10% (instead of 20%) of the tax bases of the taxable supplies, acquisitions or the value of the received liquid fuels released for consumption for the previous tax period. Thus, the proposal achieves uniformity with the applicable amount of collateral.