The intra-Community supplies (ICS) are taxed at zero rate under the Bulgarian Value Added Tax Act (VATА), except in cases of exempt supplies.
The tax authorities my not acknowledge declared ICS if during a tax audit the seller has not presented the necessary evidence. The tax authorities may then accept that the supplies were carried out in Bulgaria and will charge 20 % VAT.
Therefore, proving ICS during a tax audit is of crucial importance.
- What is an ICS in general?
ICS in general is the supply where (at the same time):
- the seller is registered under the VATA;
- the goods are transported from Bulgaria to the territory of another Member State;
- the goods are transported by or on behalf of the seller or of the acquirer;
- the acquirer is a taxable person or non-taxable legal entity registered for VAT purposes in another Member State;
- the acquirer has provided their identification VAT number to the seller.
Some other cases of supplies of goods may also be ICS under certain legally provided circumstances. These particular cases will be commented separately.
This article aims to clarify the most common case of ICS.
The essence of the ICS determines the logic and facts to be proved.
- What documents shall the seller have so to prove the ICS?
These documents are provided in:
- Council Implementing Regulation (EU) 2018/1912 dated 4 December 2018 amending Implementing Regulation (EU) No 282/2011 as regards certain exemptions for intra-Community transactions (“the EU Regulation”);
- Rules on Application of the VATA (RAVATA).
According to the RAVATA the seller may choose one of the following two ways for prove of the ICS:
- not to apply the Regulation – the seller shall collect and present the documents in compliance with the RAVATA or
- to apply the Regulation – the seller shall collect and present an invoice for the supply and the documents under the EU Regulation.
2.1 According to the RAVATA and if the seller does not apply the EU Regulation, the seller shall have:
2.1.1 A document for the supply:
- an invoice for the supply which contains the acquirer’s identification VAT number which is issued by another Member State and used upon the carrying out of the supply;
2.1.2 Documents for the dispatch or transport of the goods from Bulgaria till the territory of a Member State:
When the transport is carried out by the acquirer or by a third party on behalf of the acquirer – a transport document or written confirmation from the acquirer which certifies that the goods have been acquired on the territory of another Member State. The confirmation should contain:
- date and place of receipt;
- type and quantity of the goods;
- type, make and registration number of the vehicle with which the transport was carried out;
- name of the person who handed over the goods and his official capacity;
- name of the person who received the goods and his official capacity;
When the transport is carried out by the seller or by another party on behalf of the seller – the transport document which certifies that the goods are received on the territory of another Member State.
2.2 According to the EU Regulation the documents for evidence of an ICS are:
2.2.1 Documents related to the dispatch or transport of the goods from Bulgaria to the territory of a Member State:
- a signed CMR document or note;
- a bill of lading;
- an airfreight invoice;
- an invoice from the carrier of the goods.
2.2.2 Documents related to the supply:
- an insurance policy with regard to the dispatch or transport of the goods, or bank documents proving payment for the dispatch or transport of the goods;
- official documents issued by a public authority, such as a notary, confirming the arrival of the goods in the Member State of destination;
- a receipt issued by a warehouse keeper in the Member State of destination, confirming the storage of the goods in that Member State;
The documents shall be issued by two different parties that are independent of each other, of the seller and of the acquirer.
2.3 According to the EU Regulation, the ICS shall be proved in one of the following ways:
2.3.1 When the goods have been dispatched or transported by the seller or by a third party on behalf of the seller – the seller shall indicate that and have at least:
- either two non-contradictory documents under point 2.2.1 above;
- or any document under point 2.2.1 above together with one of the documents under point 2.2.2 above, which confirms the dispatch or transport of the goods.
2.3.2 When the goods have been dispatched or transported by the acquirer or by a third party on behalf of the acquirer – the seller shall have:
A written statement from the acquirer with the following contents:
- statement that the goods have been dispatched or transported by the acquirer or by a third party on behalf of the acquirer;
- the Member State of destination of the goods;
- the date of issue;
- the name and address of the acquirer;
- the quantity and nature of the goods;
- the date and place of the arrival of the goods;
- the identification of the individual who accepts the goods on behalf of the acquirer;
As well as at least:
- either two non-contradictory documents under point 2.2.1 above;
- or any document under point 2.2.1 above together with one of the documents under point 2.2.2 above, which confirms the dispatch or transport of the goods.
The acquirer shall provide the seller with the above statement by the tenth day of the month following the supply.
The EU Regulation shall apply directly and have preeminence to contradictory norms of the RAVATA. However, the RAVATA gives the seller the option not to apply the EU Regulation. Therefore, the tax authorities should equally acknowledge the documents under RAVATA and those under the EU Regulation.
- 3. At what point shall the seller have the documents related to the ICS?
The seller shall obtain the documents by the end of the calendar month following the calendar month in which the tax for the supply has become chargeable.
If the seller fails to do so, the supply shall be deemed not to be an ICS, but taxable at a rate of 20 %. The tax is charged by the seller by issuing a special protocol under the VATA. The protocol shall be issued within 15 days from the last day of the calendar month following the calendar month during which the tax has become chargeable.
If later the seller obtains the necessary documents, he corrects the result by canceling the protocol. No new protocol is issued for the cancellation. The cancellation is made within 5 days from the date on which the seller has obtained the necessary documents.
It is of primary importance during a tax audit that the seller provides in due time the necessary documents related to the ICS. It is also important that the acquirer has included the supply in his registers – this is verified by the tax authorities through international exchange. Otherwise, the tax authorities may assume that the supply was made on the territory of Bulgaria and charge VAT in the amount of 20%.
