The mass-catering and entertainment establishments are traders and taxable legal entities. They shall as such comply with many of the amendments in the tax laws from the close of 2023.
However, which of these amendments are specific to the establishments?
Introduced taxation with license tax
This is done with the amendments in the Local Taxes and Fees Act (LTFA) related to the activity of the mass-catering and entertainment establishments (under item 2 of Annex No 4). These amendments will be effective from January 1st of the year following the year in which the European Commission determines that the measure is not State aid or is compatible State aid.
The turnover threshold below which individuals or legal entities are liable for the annual license tax under the LTFA is increased – the turnover for the previous year should not exceed BGN 100,000.
The threshold is applicable in the following cases:
- When an individual terminates an activity under the LTFA within 12 consecutive months and/or establishes a new enterprise engaging in such activity, and the combined turnover of the two enterprises exceeds this threshold for 12 consecutive months. Taxation is conducted under the Personal Income Tax Act (PITA).
- When, within the current tax year, the turnover of an individual or legal entity surpasses this threshold, or when the individual or legal entity registers under the Value Added Tax Act. Taxation is then governed by the general rules of the PITA or the Corporate Income Tax Act (CITA), respectively.
The amendments regarding the thresholds for the license tax took effect on January 1, 2024, except for the reference to the CITA, which will be in force from January 1st of the year following the year of the European Commission’s ruling.
When is the license tax applicable and when – the corporate tax?
The CITA is amended in compliance with the LTFA: the legal entities/individuals under Article 2, para. 1, p. 1, 2 and 3 of the CITA, who operate as mass-catering and entertainment establishments within the meaning of the LTFA, are taxed with license tax under the LTFA. For all other activities, these legal entities/individuals are taxed under the CITA.
When during the current tax year:
- The grounds for taxation with a license tax under the LTFA are no longer applicable, the incomes of these legal entities/individuals are taxed under the CITA. Any license tax due and paid up to the date of submission of the declaration indicating that the grounds for license tax are no longer applicable is deducted from the annual corporate tax. The certified amount of the license tax is determined by a document issued by the competent municipality. In these cases, legal entities/individuals are not required to make advance payments for the current year under the provisions of the CITA.
- If any of these legal entities/individuals are deregistered under the Value Added Tax Act, they are taxed according to the general rules of the CITA for the entire fiscal year.
The amendments in the CITA come into effect on January 1stof the year following the year in which the European Commission ruled that the measure was not state aid or was compatible state aid.
Introduced requirement for provision of possibility for payment through a POS terminal device
This is done with amendments to the Tax-Insurance Procedure Code (TIPC), which amends the Tourism Act. The requirement concerns individuals and legal entities operating restaurant businesses in catering and entertainment establishments with two, three, four, or five-star ratings.
These establishments must prominently display information about this payment option where it is visible to clients.
Failure to comply with these obligations may result in fines for individuals and pecuniary sanctions for legal entities and sole traders. Repeat violations may incur higher fines or pecuniary sanctions.
The amendments shall enter into force on 01.03.2024.
Extended term for application of value added tax (VAT) of 9 % for the supply of restaurant and catering services
The tax rate of 9 % these services is applicable till December 31, 2024.
The amendment is in the Value Added Tax Act.
Non-issuance of fiscal receipts
When an establishment or other individual/legal entity is required to issue a fiscal receipt or system receipt under section 118 of the VATA but fails to do so, the recipient shall have the right to retain the payment for the supply or sale value. Rules are provided for issuance and sending of an electronic fiscal receipt.
The sanctions specified under Article 185 of VATA pertaining to the failure to issue a fiscal receipt have been substantially increased.
The article covers only some of the more specific amendments related to mass-catering and entertainment establishments. You can find more detailed information about the amendments in the tax legislation from the close of 2023 in articles published on our website on February 7, 2024.
