The eleventh issue of Tax News comments on the key amendments to the Act to Amend the Excise Duty and Tax Warehouses Act (AAEDTWA) which has been adopted at second reading and promulgated.

Introduction

Issue 92 of the State Gazette dated 27 November 2015 promulgates the text of the Act to Amend the Excise Duty and Tax Warehouses Act (AAEDTWA) adopted at second hearing. Below we present the key amendments to the AAEDTWA which will enter into force as of 1 January 2016.

Amendments to existing definitions and introduction of new definitions 

In addition to the amendments to the definition of “energy product used for heating purposes” (discussed in detail in the tenth issue of Tax News), the AAEDTWA introduces amendments to other definitions as well as completely new definitions, e.g.: “licensed warehousekeeper”, “specialized small distillery”, “ethers derived from bioethanol”, “legally and economically independent specialized small distillery site”, “energy from renewable sources”, “unsettled public liabilities”, “majority partner or shareholder”.

Excise duty rates 

The amendments provide for a significant increase in the rates for certain energy products used for heating purposes. The aim of the increased rates is to prevent the improper use of heavy and marked fuels as motor fuel instead of fuel for heating purposes.

The AAEDTWA also provides for a change in the excise duty rates applicable to cigarettes.

Combined production of heating and electrical energy 

The amendments provide that in case of combined production of heating and electrical energy (the so called “co-generation”) excise duty is due for the produced heating energy. The tax base in this case is equal to 30% of the total amount of energy products used during the combined production. The end users exempt from excise duty (EUEED) will also be required to submit a monthly report for the energy products used during the combined production in compliance with procedures to be additionally determined in the Regulation for Application of the EDTWA.

Mandatory registration

Pursuant to the AAEDTWA, the following persons will be subject to mandatory registration:

• Persons who produce and sell biogas for business purposes and those who produce and use biogas for their own needs (except for the persons using own biogas for household purposes) 
• Persons who sell own electricity generated from energy from renewable sources in a power station with a total capacity of up to 5 MW, to users for household and/or business purposes
  
• Persons who use for their own needs own electricity generated from energy from renewable sources in a power station with a total capacity of up to 5 MW (except for persons who use own electricity for household purposes) 
  
• Persons who import from outside the European Union (EU) or introduce from EU countries, use own or sell compressed or liquefied natural gas as well as persons who perform activities of liquefying of natural gas or regasification of liquefied natural gas. 
  

Within a two-month period from the entry into force of the AAEDTWA, the aforementioned persons are to submit requests for registration.

Lubricants

The AAEDTWA provides for exemption from excise duty of lubricants in packages of up to 5 liters (currently 3 liters) while the movement of such goods from another EU Member State to Bulgaria in quantities between 5 and 210 liters will be performed under a simplified clearance procedure.

Sales in a tax warehouse

New provisions are introduced aiming to strengthen the administrative control in cases of ownership transfer over excise duty goods within a tax warehouse. In cases of such transactions which do not constitute “release for consumption” under the regulations of the EDTWA, the depositor will be obliged to file a notification to the National Revenue Agency (NRA) and the warehousekeeper within a three-day term prior to the transfer of ownership to the new depositor.

Terms for excise duty refund

Pursuant to the AAEDTWA, the excise duty is to be refunded within 7 days from the entry into force of the respective act for reimbursement. Prior to the changes, this period was 14 days.

The terms for reimbursement of excise duty on electricity are shortened and the head of the competent customs office will be obliged to reply within a two-month period (instead of three months) from the date of submission of the refund claim. It should be noted that the reimbursement will continue to be effected on the basis of a written claim which is to be submitted no later than 30 April of the year following the year of the electricity consumption.

Denatured ethyl alcohol

The AAEDTWA provides for an excise duty exemption for persons who use in their activities ethyl alcohol denatured under a specific method and the ethyl alcohol is used for the manufacture of end products not for human consumption. Under the current provisions of the EDTWA, such excise duty is initially paid and subsequently reimbursed. Pursuant to the AAEDTWA, a separate certificate for EUEED is to be issued for each site whereby ethyl alcohol denatured by means of a specific method is delivered to and used. A transitional regime is provided under certain hypotheses.

Other amendments

The AAEDTWA sets out other amendments which, inter alia, include:

• New measures which aim to preclude the possibility for persons with unsettled public liabilities to the Customs Agency or the NRA to avoid payment of their liabilities by transferring the liable company to other persons and by creating new companies. A prohibition is introduced for issuing certificates and licenses under the EDTWA to entities whose owners, managers, procurators, majority partners or shareholders have performed, as at the moment of occurrence of the liabilities, similar functions in other companies with unsettled public liabilities. 
• Excise goods with tax markings affixed to them may be moved under excise duty suspension regime between tax warehouses of the same warehousekeeper. Prior to the changes, such movement was possible only in the case of a pending termination of the license of the tax warehouse from which the goods are being dispatched. 
  
• The production of alcoholic beverages with CN code 2208 (rakya) under the Combined Nomenclature in registered specialized small distilleries is to be performed only during the period from 1 July to 31 December of the respective year. Outside this timeframe, the production of rakya is allowed in registered specialized small distilleries following the submission of a written notification to the head of the competent customs office within 14 days before commencement of the activities. 
  

Assistance by KPMG in Bulgaria

Taking into consideration that the amendments to the EDTWA will come into force as of 1 January 2016, the tax liable persons under the EDTWA face a short term to analyze the effects of the changes and make their activities compliant with the new rules. In this regard, professionals from the Tax practice of KPMG in Bulgaria could assist you in examining the amendments discussed above as well as other changes provided for in the AAEDTWA, assessing the effects that these changes could have on your activities and preparing an action plan.