In this issue of KPMG Tax News, we present the electronic check which a supplier can make on the input VAT deducted by the recipient, and which was made possible via the e-system of the NRA in relation to the so-called bad debts.

Starting from October 2023, a new electronic service of the NRA was introduced, which enables VAT registered suppliers to receive information about the reporting of their sales invoices in the recipients purchase ledger’s. This is necessary in the context of a bad debt, for which the supplier is considering an adjustment (reduction) of the tax base and the charged VAT in accordance with chapter 13a of the VAT Act, Reduction of the tax base and the VAT in the event of an uncollected receivable

This service solves a particular practical problem for businesses, since for some of the situations provided for in chapter 13a of the VATA it is essential whether or not the recipient of the supply has deducted input VAT. This may be decisive for determining the mechanism and the extent to which an adjustment can be made. At the same time, before the introduction of the new electronic service, suppliers did not have a reliable instrument to check how their customers reported the respective supplies in their VAT ledgers. 

We expect that the newly implemented e-service will give businesses a new impulse to analyse bad debt portfolios and more taxpayers will take advantage of the legal opportunity to adjust the tax base and the charged VAT on supplies that remained unpaid. If the topic is also relevant to your company, the Tax and Legal team of KPMG in Bulgaria would be happy to assist you with additional analysis, advice, or practical help.