The amendments of Value Added Tax Act (“VAT”) adopted and published in issue 105 of the State Gazette (“SG”) as of 19th of December 2014 entered into force on 1st of January 2015. The amendments transpose the regulations of Directive 2008/8/EC of the Council, amending Directive 2006/112 /EC with regards to the place of supply of services as well as Regulation 1407/2013 on the application of articles 107 and 108 of the Treaty on the Functioning of the European Union on the nature and essence of the de minimis aid. The purpose of this article is to examine the amendments introduced in the VAT Act.
Firstly, the amendments concern the provision of telecommunications services, radio and television broadcasting services and electronically executed services. According to Art. 21, para. 6 of the VAT Act the place of supply of the services mentioned above when the recipient is a non-taxable person is the place of establishment of this person. For comparison, the previous version of the same provision stated that the place of such supplies shall be considered the country’s territory, subject to certain conditions.
A special registration procedure is introduced for suppliers of telecommunications services, radio and television broadcasting services and services executed electronically. According to Art. 97b of VAT Act, obliged for VAT registration are all taxable person not established in the country and carrying out the aforementioned services when recipients are non-taxable persons established in the country where the service provider is not VAT registered on other grounds. In connection with this provision is the new sentence two in Art. 70, para. 4 of the VAT Act. According to this provision a person registered under Art. 97b is not entitled to a tax credit in respect to goods and services that are used for supplies other than telecommunications services, radio and television broadcasting services and services executed electronically, with recipients taxable persons established in the country.
Chapter Eighteen of the VAT Act is repealed and a new one entitled “Special regime for the taxation of supplies of telecommunications services, radio and television broadcasting services and services executed electronically in which recipients are non-taxable persons” is, created. The special scheme for VAT, the so called “Mini-one-stop-shop” or MOSS is introduced in this chapter. It will allow taxable persons supplying telecommunications services, radio and television broadcasting services and services executed electronically, in which recipients are persons established in other Member States to declare payable by these services VAT in the Member State in which they are registered. This regime is optional and it is an opportunity for providers of these services to avoid VAT registration in each Member State where they provide services. The first regime, under the new Chapter Eighteen is “non-Union regime” applicable to providers of services that are not established within the European Union. The second one is the “Union regime” and is applicable to providers established in the European Union.
A supplier registered under this regime, provides quarterly statements-declarations electronically for VAT under the regime for mini-one-stop-shop, in which he should describe the supplies provided under Art. 159b, para. 4 of the VAT Act. VAT due for that period shall be paid into the account of the NRA. VAT paid, together with the submitted statements-declaration are then submitted to the Member State of consumption.
Besides above the amendments of Regulation 1407/2013/EC were transposed through which the new conditions for de minimis aid were introduced while others were changed. An example of one of the new conditions is in connection with the receipt of the permit for the application of special procedure for taxation on import and/or refund in 30 days period. According to Art. 166, para. 4 of the VAT Act a new requirement to obtain the aforementioned permit is introduced, namely: the de minimis aid received, regardless of their form and source, for the last three fiscal years shall not exceed the threshold of the BGN equivalent amount of EUR 200 000.
Furthermore, it is important to be mentioned that the issue regarding already issued permits for the application of the special taxation procedure on import and/or for refund in a 30 days period is solved by the provision of § 33 of the Transitional and Final Provisions of the Act for amendment and supplementation of the VAT Act. According to that, a person who has received such permit that has not been expired to the date of entry into force of amendments to the VAT Act, must submit the information on the implementation of the investment for the remaining term project with the Ministry of Finance within the terms specified in the VAT Act. The introduced amendments to the VAT Act were necessary in order to align the Bulgarian legislation with those of the European Union. The amendments in the de minimis aid, introduce stricter requirements, which should limit the abuses in this area. The new scheme “Mini-one-stop-shop” is an option for suppliers of telecommunications services, radio and television broadcasting services and services executed electronically that provide these services in other Member States to continue providing them, without the need to register for VAT in the Member States of consumption of their services.
The amendments of the Regulation for implementation of VAT Act, published in issue 1 of SG as of 6th of January 2015 must be taken into account when applying the VAT Act.
This article is for information purposes only and is intended to draw attention to the new amendments and additions to the VAT Act. This does not constitute legal advice. For a complete understanding of the issues discussed and before taking any action in this regard we recommend you to consult the attorneys at BWSP Ilieva Voutcheva & Co. Law Firm.