On December 22, 2023, amendments to the Value Added Tax Act (“VATA”) were published in the Official Gazette. These revisions aim to synchronize the VATA with European Union legislation and align it with the case law of the Court of Justice of the European Union (“CJEU”). Additionally, they aim to address specific challenges encountered in the application of the VAT regime.
Some of the more significant amendments are:
Introduction of Deferred Tax Payment for Centralized Clearance of Imported Goods
Deferred payment entails delaying the payment of import VAT to customs for a period determined nationally. Payment is deferred provided that the individual or legal entity holds the following at the time of importation:
- A central clearance authorization issued in accordance with the terms and conditions of EU customs legislation.
- A Bulgarian VAT registration number, which is included in the central clearance authorization.
- A deferred payment of import duties authorization issued or approved by the customs authorities in Bulgaria, in accordance with the terms and conditions of EU customs legislation.
Requirements are now mandated regarding the declaration contents for centralized import clearance. Customs authorities will levy the tax, with its amount accounted for as per the prescribed customs debt procedure. The individual or legal entity must settle the tax for the respective period by no later than the 16th day of the following month after the customs declaration’s acceptance.
Adjustments to Tax Credits Deducted for Goods Written Off or Destroyed
The amendments align with the CJEU’s ruling in case C-127/22, involving a Bulgarian company and the adjustments to tax credits deducted for scrapped and destroyed goods. We discussed this CJEU judgment in an earlier article.
Article 80, paragraph 2 of VATA, in connection with Article 79 of the VATA, has been revised and broadened. It specifies that no adjustment of VAT credit shall be made if goods written off later become waste or are destroyed, provided adequate documentation substantiates this.
New higher threshold for compulsory VAT registration
As from 01.01.2025 the taxable turnover for compulsory VAT registration is increased from BGN 100 000 to BGN 166 000.
Documentation for Supplies in Cases of Individual/Legal Entity Registration After the Deadline
Individuals or legal entities who were liable but failed to submit applications for registration under the Value Added Tax Act within the stipulated timeframe may still charge the VAT due on taxable supplies made during the period of mandatory registration. They are permitted to issue a tax document, allowing the recipient of the supply to claim a tax credit. Specifically, these individuals or entities may void the original invoice without the tax charged and issue a new invoice indicating the tax separately. The tax shall be considered included in the agreed price, and the new invoice should be recorded in the sales ledger for the tax period in which it was issued.
If the option to invoice the tax due is not exercised, the tax must be invoiced with a protocol.
In these cases, liabilities shall not be determined through a tax audit report under the Tax and Social Security Procedural Code (TSSPC), thereby alleviating the administrative burden.
Non-Issuance of Receipts and Cases of Choice Software Listed by the National Revenue Agency for Use in Commercial Premises
When an individual or 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.
Individuals or legal entities who have chosen to use software listed by the National Revenue Agency for commercial premises will be able to record and report the sale of goods or services in these premises by issuing an electronic fiscal receipt sent to the recipient’s email address, in accordance with the ordinance issued by the Minister of Finance.
Clarification of Specific Provisions in the Value Added Tax Act
Clarifications have been introduced in specific provisions of the VATA, focusing on the following areas:
- Authorization or refusal to adjust in cases of unpaid supply or uncollectible receivable.
- Providers of payment services and the registers maintained by the providers;
- Security requirements for individuals trading in liquid fuels, to be provided under certain conditions to the competent territorial directorate of the National Revenue Agency.
These amendments aim to simplify the application of the VAT Act and enhance tax collection processes.
Tax Rates
The extension of the term for the application of the following tax rates has been enacted:
- Zero tax rate for the supply of bread and flour extended until June 30, 2024.
- 9% tax rate for the supply of restaurant and catering services extended until December 31, 2024.
- 9% tax rate for the supply of general tourist services and excursions organized by tour operators and travel agents extended until June 30, 2024.
- 9% tax rate for the supply of services for the use of sports facilities extended until June 30, 2024.
Administrative sanctions
The sanctions specified under Article 185 of VATA pertaining to the failure to issue a receipt as defined in Article 118 of the VATA have been substantially increased. This adjustment reflects significant inflationary factors.
Additionally, a new provision, Article 192a of the VATA, has been introduced to impose sanctions for failure to declare or falsely declare amounts in cash and receivables under Article 123, paragraph 10 of the VATA.
