Bulgaria VAT Guide

Introduction

Bulgaria has adopted the EU-wide VAT legislation introduced to harmonize the VAT principles of all EU Member States and remove conflicts. Thus, most Bulgarian VAT rules align with EU VAT Directive 2006/112/EC.

Should you collect VAT in Bulgaria?

If you are involved in any taxable transaction listed below, you must collect the VAT in Bulgaria:

1. Supply of Goods: Supply of goods means transferring the right to dispose of a tangible property as owner.
2. Intra-EU acquisition: Acquiring or purchasing goods within Bulgaria from another EU Member State as a VAT-registered person (typically known as the Reverse Charge Mechanism).
3. Supply of Services: Supply of services covers any transaction not covered in the supply of goods.
4. Import of Goods: Any transaction that imports goods from a non-EU state to an EU Member State.

For more details, please visit the Bulgarian VAT legislation. Additionally, as the VAT laws of most EU Member States are harmonized with the overall EU VAT law (i.e., Directive 2006/112/EC), you can refer to Articles 14-30 of the EU tax directive for detailed information on taxable transactions.

When should you register for VAT in Bulgaria?

As a general principle, the VAT is a destination-based tax (owing to place of supply rules – discussed separately in the One Stop Shop article), which means every person (registered anywhere or not) must register for VAT when making any taxable sales into Bulgaria. The following transactions would require a VAT registration in Bulgaria:

• Supply of Goods or Services in Bulgaria to non-taxable persons: Seller must register in Bulgaria and pay VAT only if they have not opted for One Stop Shop (see Notes 1 and 2 below).
• Supply of Services in Bulgaria to a taxable person: The recipient of services must register and pay VAT in the country if the supplier is not established in Bulgaria (under Article 196 of the EU VAT Directive (pg.39)).
• B2B Acquisition of Goods: Where the goods are sold by a taxable person from any EU Country to a taxable person in Bulgaria, the buyer should register for Bulgaria VAT (reverse charge basis under Article 197 of EU VAT Directive (pg. 39)).
• Import of Goods in Bulgaria: The importer must pay and register for VAT (if not covered in the Import One Stop Shop–see our OSS article for details).
• Export of Goods/ Services: Exporting goods/ services to non-EU countries would require a VAT number.

Important Note 1: When you supply goods from other EU Member States to Bulgaria, you must register for Bulgaria VAT only if your total annual EU sales (goods/ services) are more than EUR 10,000; otherwise, they should be taxed in the supplier’s member state. This is based on the EU-wide VAT threshold specified for TBE services and distance sale of goods. For more details, please refer to our EU One Stop Shop Article, which contains information about the EU-wide VAT threshold and distance sale of goods.

Important Note 2: If you have opted for EU One Stop Shop registration, you are no longer required to register separately for Bulgaria VAT. One Stop Shop applies to the B2C sales made by taxable persons from other EU countries to Bulgaria of over EUR 10,000 and the import of goods in Bulgaria below EUR 150. Visit our EU One Stop Shop article for more details.

“Example 1: Company A, a Bulgaria-based company, sells goods to a non-taxable buyer B in Bulgaria. Company A’s total annual sales exceed EUR 10,000 in the EU, excluding sales in Bulgaria.

Company A must either register for Bulgaria VAT (if it does not opt to register for One Stop Shop) or the One Stop Shop.”

Bulgaria VAT Threshold Summary

To read the official guidance, visit the Bulgarian VAT legislation.

How can you Register for VAT in Bulgaria?

To register for VAT in Bulgaria, you can apply through an online portal. The application can be processed in a couple of weeks. The following details must accompany the VAT application:

• Name, address, and nature of business.
• Details of Offices/ facilities including branches, warehouse, etc.
• Bank Account details.
• If a Company is registered elsewhere (or in another EU Member State), the tax office and VAT number under which the Company is registered must be provided.
• Articles of Association.
• Certificate of Incorporation.
• VAT Certificate.
• Power of Attorney when appointing a fiscal representative in Bulgaria.

Sometimes, the registration process may involve cumbersome formalities, so you can use TaxDo’s streamlined software without going anywhere else. Just fill out the required information on our software, and we will do the rest.

How should you collect and calculate VAT in Bulgaria?

VAT is generally charged on a destination-based principle (see the place of supply rules described in the OSS Article), which includes all taxable transactions (described earlier in this article) except those that are otherwise exempt; thus, the VAT Rate is applied to any sales made to Bulgaria.

VAT Rates

You must charge the VAT Rate of 20%, other than the products/ services you are supplying that are covered under the reduced rate of 9%. Below is an illustrative list of items covered under the reduced VAT Rate:

Refer to official website of Bulgarian Ministry of Finance for complete list of reduced-rate goods/ services. Alternatively, the VAT rates (pg. 30) in Bulgaria are available on the EU Commission website.

Certain conditions may apply to the reduced rates, where things get trickier. TaxDo is here for you! Our experts are well-equipped with VAT laws and will resolve all your concerns.

Below is the simple formula you can use to calculate your VAT collection on each merchandise/ service sold:

VAT collectible = Sale value * (Standard Rate or reduced Rate as may be applicable)

Digital Products/ Services

Digital Products are those stored, used, or delivered in electronic format or any such form. Bulgaria VAT must be applied for such digital products since the Bulgaria VAT laws align with EU VAT rules.

The digital products include the following:

• E-books, images, newspapers, movies, periodicals, videos, etc.
• Software-as-a-Service (SaaS), Platform-as-a-Services (PaaS) or Infrastructure-as-a-Service (IaaS).
• Online ads and affiliate marketing.
• Websites, site hosting services, and internet service providers.

A reduced VAT rate covers a few of the above. For instance, newspapers, books, and magazines in digital format are taxed at 9%. For more information on reduced rates, refer to the previous section of this article.

VAT Exemptions

The legislation provides certain exemptions from the VAT under Article 41 and Articles 46-48 of the Bulgarian VAT Code, such as:

• Export deliveries.
• Educational services as defined in Article 41 of the Bulgarian VAT Act.
• Supply of goods to an entrepreneur for his business (B2B).
• Financial services, e.g., granting of credit.
• Insurance activities.

B2B and Reverse Charge Mechanism in Bulgaria?

A taxable person from another EU Member State selling the goods/ services to a VAT-registered person in Bulgaria, the transaction is considered a B2B Intra-Community supply, and the seller is not required to charge the VAT on an invoice raised to the buyer. Instead, the Bulgaria buyer will account for VAT on the intra-community acquisition (under the reverse charge mechanism). In the VAT return, the buyer will calculate the input VAT on purchase from another state and show the output VAT for the same amount, allowing him to adjust the tax liability, resulting in a zero VAT payment. Reverse charge is applied under Articles 196 & 197 of the EU VAT Directive.

The same principle will apply when a taxable person from another EU Member State maintains a warehouse in Bulgaria and transfers his goods. The seller will need a VAT number in Bulgaria and should account for VAT as an Intra-Community acquisition under the reverse charge. He will show the deemed purchase (input VAT) and deemed sale (output VAT) when filing the return in Bulgaria, leading to zero tax being paid.

“Example 2: Company A in France sells goods in Europe. For this purpose, it has set up a warehouse in Bulgaria. It transfers the goods from France to the Bulgaria Warehouse and sells them in Bulgaria.

Company A must register and account for Bulgaria VAT on the stock transfer (considered an Intra-community B2B acquisition). While filing the VAT return in Bulgaria, Company A will show the input VAT on the intra-community acquisition and report the output VAT for the same amount. This way, the VAT liability would become zero on the stock transfer. Later, Company A must charge and pay Bulgaria VAT for goods sold to consumers in Bulgaria.

Should you appoint a fiscal representative in Bulgaria?

You must appoint a fiscal representative when you do not have an establishment, registered office, or branch office in the EU and carries out any VAT-exempted or taxable transaction in the country, however it is optional for businesses based in another EU Member State.

The appointed fiscal representative shall require a power of attorney from the taxable person registered in another EU Member State.  

Fiscal representative appointment and carrying out the transaction may be complex, as any defaults can attract heavy fines and penalties. TaxDo can help you by appointing a fiscal representative and handling all the duties, as we work with leading tax partners in Europe, so we can find it easily.

To learn more about the duties and responsibilities of a fiscal representative, refer to the Bulgarian VAT Code.

How should you file VAT in Bulgaria?

The VAT declaration frequency in Bulgaria is Monthly, regardless of the size and turnover of your business.

For more information, refer to the official website of the Bulgaria VAT legislation.

You must file your VAT return in Bulgaria by the 14^th of the month following the reporting period.

Note: If your tax due date is a holiday or weekend, the next business day would be considered the final due date.

You can file the VAT return in Bulgaria through the online portal or using TaxDo’s specialized software, which seamlessly files, calculates, and reports your taxes. Additionally, if you are selling to other EU Member States and opted for One-Stop-Shop, you must file an OSS return. Refer to our OSS article for further details.

Are there any fines or penalties for default when filing or paying VAT?

The legislation levies a penalty from BGN 500 up to BGN 10,000 for late or non-filing VAT returns.

Similarly, if you pay after the due date, the penalty is from BGN 500 up to BGN 5,000 depending upon the nature of default.

However, assigning your tax burden to TaxDo would not result in you paying any penalty or interest. We will adhere to the due dates. Please review the guidelines Bulgaria issued for penalties and interest.

VAT Invoice in Bulgaria

A VAT invoice is a testament to how much VAT is charged and collected and evidence of the B2B/B2C supply basis for applying the other rules. Accordingly, the Bulgaria VAT invoice must include the following information:

• Business Name and Address of buyer and seller.
• Business VAT number issued to the supplier.
• Date of issue.
• Quantity and type (customary trade name) of the goods supplied or the scope and nature of the other service.
• Time of delivery or other service.
• The applicable VAT rate and the amount of tax are attributable to the consideration.

For more details, refer to Article 113 of the Bulgarian VAT law.

Important Note 3: For any sales made to a country outside Bulgaria, you must convert the amounts to your official currency. For this purpose, you can use the European Central Bank’s official exchange Rates.

Keeping Records: You must keep the VAT records for at least ten years under Article 369 of the EU VAT Directive.