6. VAT System
Pursuant to Bulgarian legislation the following transaction should be VAT taxable:
- each taxable supply of goods or services effected for consideration;
- each intra-Community acquisition effected for consideration, whereof the place of transaction is within the territory of the country, by a person registered under this Act or by a person in respect of which an obligation to register has arisen;
- each intra-Community acquisition of new means of transport effected for consideration, whereof the place of transaction is within the territory of the country;
- the importation of goods;
- each intra-Community acquisition whereof the place of transaction is within the territory of the country of excisable goods.
Under Bulgarian legislation taxable person shall mean any person who independently carries out an economic activity, whatever the purpose and results of that activity.
Non-taxable persons should be these which are not a taxable within the meaning given above and which effects intra-Community acquisition of goods. The intra-Community acquisition of goods is defined in details in the Value Added Tax Act.
6.1. Tax Rates
The rate of tax is 20% and is applicable to:
• the taxable supplies, except for those expressly specified as subject to the zero rate;
• the importation of goods into the territory of the country;
• the taxable intra-Community acquisitions.
The rate of tax applicable to accommodation provided by hoteliers, is 9%.
6.2. VAT Exemptions
The following major transactions are entitled to zero rate of VAT:
• supplies of goods dispatched or transported to destination outside territory of the European Community;
• certain transactions related to international transportation;
• supply for handling of goods;
• supply related to duty-free trade;
• supply of goods provided by agents, brokers and other intermediaries.
Main transactions which are exempt from VAT are:
• supply linked to health care;
• supply linked to welfare and social security work;
• the transfer of the right of ownership of land, excluding development land and land situated under the buildings; the creation or transfer of limited rights in rem to land (excluding the establishment or transfer of right of construction, which is VAT exempted only until the issuance of construction permit for the building), as well as the letting or leasing of land; transactions with buildings or parts thereof, which are not new, with building land, as well as the creation and transfer of other rights in rem thereto, are an exempt supply. The letting of a building or part thereof for residential use to a natural person who is not a merchant shall likewise be an exempt supply. However the transfer of a right of ownership of a regulated lot within the meaning given by the Spatial Development Act, with the exception of the building land of buildings which are not new, is not exempt from VAT.
6.3. Intra-community Supply of Goods
The new VAT Act provides the intra-community supply of goods which actually replaces the regulation of export under the previous VAT Act as far as transaction between merchants from different member states is concerned. Intra-community supply of goods is any supply of goods, transported from the territory of the country to the territory of another Member State, where both supplier and recipient are registered for VAT. Intra-Community acquisition is acquisition of the right of ownership of goods, as well as the actual receipt of goods, which are dispatched or transported to the territory of the country from the territory of another Member State, where the supplier is a taxable person registered for VAT purposes in another Member State.
Intra-community supplies with the exception of the exempt intra-community supplies referred are liable to tax at the zero rate.
Regarding intra-community acquisition, the recipient charges 20% VAT and is entitled to deduct credit for input tax.
6.4. VAT Documents, Reporting and Payment
Tax documents are:
• the invoice;
• the advice to an invoice;
• the memorandum.
1. Invoice. Each taxable person who is a supplier is obligated to issue an invoice for a supply of goods or service affected thereby or upon receipt of an advance payment before affecting such a supply except in the cases where the supply is documented by a memorandum. The invoice shall mandatory be issued not later than five days after the date of occurrence of the chargeable event for the supply, and in the cases of advance payment, not later than five days after the date of receipt of the payment. However, upon an intra-Community supply, including in the cases of advance payment, the invoice shall mandatory be issued not later that the 15th day of the month following the month during which the chargeable event occurred
2. Advice to an invoice. It is issued if the taxable amount has changed or where other circumstances have occurred which result in change of the due tax and an invoice has already been issued.
3. Memorandum. It is a new tax document, issued where the VAT is due by the recipient. As of 19 December 2007 the memorandum shall be issued not later than 15 days after the date on which the tax became chargeable instead of 5 days as it was provided for before the amendment of the law.
VAT is generally reported and paid monthly. The monthly VAT returns are to be filed and monthly VAT payments by the 14-th day of the following month.
The tax under this Act shall become chargeable in respect of the taxable supplies and an obligation for the registered person to charge the said tax shall arise on the date when the supply of goods or services is affected. The tax upon an intra-Community acquisition shall become chargeable on the 15th day of the month following the month during which the supply of goods or services is affected. Any registered person, in respect of whom the tax has become chargeable, shall be obliged to charge the said tax and, to this end, must issue a tax document and indicate the tax on a separate line therein
6.5. VAT Refunds
Where VAT incurred on purchases exceeds VAT charged on sales, the excess VAT deduction is first carried forward for a period of two months to offset VAT debt due in these two months. If at the end of the two-month period the excess VAT or part thereof has not been recovered, the balance is refunded within 30 days after the date of filing of the VAT return for the second month.
6.6. Special Rules for Material Investment Projects
VAT-registered investors who perform certain eligible investment projects are entitled to import assets needed for the project without effective payment of import VAT. In addition, such investors are entitled to refund VAT incurred on local purchases within 30 days after filing of the tax return. In order to benefit from the special investment rules, the investor needs to obtain an advance approval from the Minister of Finance. In order to receive the approval, the investment project must meet certain conditions, such as:
• the time limit for implementation of the project does not exceed two years;
• the amount of investment exceeds BGN 5 million for a period not longer than two years;
• more than 20 new jobs are created;
• the person is capable of financing the project, as well as of constructing and maintaining facilities ensuring the implementation of the said project.