KPMG Bulgaria Tax News presents a summary of recently promulgated amendments to the Bulgarian VAT legislation effective from 1 January 2024.
In the first issue of Tax News for 2024 we summarize the most significant changes in the Value Added Tax Act (hereinafter "the VAT Act"), promulgated in State Gazette Issue No. 106 dated 22 December 2023.
The changes enter into force from 1 January 2024, except for the provision relating to the threshold for mandatory VAT registration (increased from BGN 100,000 to BGN 166,000) which will be enforced as of 1 January 2025.
Deferred VAT payment in the case of centralized clearance when importing goods
With regards to some inconsistencies identified between the Bulgarian VAT legislation and the EU rules, a regime for deferred payment of VAT in case of centralized clearance upon importation of goods is introduced in the VAT Act. To apply the regime, it is necessary the importer, a VAT registered person, to have certain permits (permit for centralized clearance of goods and permit for deferred payment of import duties). The due VAT should be paid by the 16th of the month following the month in which the customs declaration was accepted.
Adjustment of initial input VAT deduction
The provisions of Art. 79 and Art. 80 of the VAT Act are amended to align the national law with the interpretation of the EU rules provided by the Court of Justice of the EU on the regime for correcting an initially deducted input VAT in the event of destruction/ scrapping of goods1.
An adjustment will no longer be required for proven or confirmed destruction, loss or absence of goods as a result of events beyond the control of taxable persons, which they can prove were not caused by their fault. Also, no correction will be due in cases of proven or confirmed destruction, including disposal of goods in a manner that leads to their irreversible disappearance as a result of:
- scrapping goods which have become objectively unusable for the taxable person following their habitual use; and
- scrapping of goods which are objectively unusable for the taxable person, when they are subsequently disposed of by way of a taxable transaction, including such under Art. 163a of the VAT Act (i.e. sold as waste).
1 Decision of the Court of Justice of the EU on case С-127/22, ruled on a request for a preliminary ruling raised by the Bulgarian Supreme Administrative Court (analyzed in KPMG Bulgaria Tax News, issue May 2023).
Documentation of supplies in case of late VAT registration
New rules are introduced in the VAT Act with regards to documenting supplies performed by taxable persons who have not fulfilled their obligation to apply for a mandatory VAT registration within the prescribed terms. Following their VAT registration, such persons will have to issue tax documents (invoices, protocols, sales report) in which they will charge the VAT due for the taxable supplies performed in the period when they had to be registered but remained unregistered due to the committed omission. When an invoice is issued under the new rules, the recipient of the supply will be entitled to input VAT deduction if the recipient has reported in his VAT registers the invoice originally issued by the unregistered supplier.
- The threshold for mandatory VAT registration is increased and as of 1 January 2025 it will be BGN 166,000.00.
- Taxable persons using software for management of sales, which is included in the list maintained by the NRA, will have the opportunity to register their supplies by issuing a fiscal/ system receipt, generated in an electronic form, and provide it to the recipient electronically.
- The texts regarding the obligation of payment service providers to keep special registers for some cross-border payments are refined.
- The application of the temporary reduced VAT rates is further extended as follows: (i) the reduced 9% VAT rate for restaurant and catering services is extended until 31 December 2024 and (ii) the reduced 9% VAT rate for tour operator services and the use of sports facilities and the 0% VAT rate for supplies of bread and flour is extended until 30 June 2024.
- The obligation to appoint a fiscal representative is no longer required for the persons who will benefit from the special VAT registration for the application of the non-Union scheme (OSS registration for non-EU entities).
- The rules for determining the amount of the additional collateral due by persons trading with liquid fuels are amended in the hypothesis of change in the relevant circumstances.
- The administrative sanctions for omissions related to fiscal and system receipts are increased.