Country Guide - VAT in Bulgaria

VAT in Bulgaria - Three Types of Rates

There are three types of VAT rates in Bulgaria:

1. Standard VAT rate,

2. Reduced VAT rate,

3. Zero VAT rate.
   

How Much is VAT in Bulgaria’s Regions?

In Bulgaria, no region is subject to special VAT Bulgaria rates.

VAT Registration Threshold

VAT Bulgaria law and official comments from the Ministry of Finance on VAT-related matters provide all the necessary information about the VAT threshold in Bulgaria and its applicable provisions. 

The Bulgarian VAT legislation was amended several times in previous years, changing the VAT registration threshold for resident businesses. The threshold for local taxpayers is currently BGN 100,000. In opposition to this, there is no defined threshold for non-resident businesses.

Following the European Union's (EU) rule, Bulgaria implemented an EU-wide VAT registration threshold of EUR 10,000 into its national laws for intra-EU distance sales of goods and B2C supplies of services. Regarding the VAT registration threshold for non-EU established suppliers of electronically supplied services, similarly to other EU Member States, there is no VAT registration threshold.

Types of Taxable Activities in Bulgaria

Under Bulgarian VAT rules, any legal person or individual who independently carries out an economic activity, regardless of the purpose or results, may be considered a taxable person for VAT purposes. 

The determining factor is whether an economic activity includes any of the activities treated taxable under VAT regulations, which include the supply of goods and services to consumers in Bulgaria for a fee, reception for reverse-charge services by a Bulgarian taxable person, or export and import of goods.

VAT Registration Process

Bulgaria has different rules related to the VAT registration process for domestic and foreign businesses.

Bulgaria VAT Registration for Domestic Businesses

Domestic businesses must register for Bulgarian VAT if their taxable turnover surpasses BGN 100,000 within 12 consecutive months preceding the present month. 

However, a taxable person, e.g., domestic businesses, can voluntarily register for VAT anytime, even if they have not reached the turnover threshold or engage in specific taxable transactions. This can be done even at the point of incorporation of the legal entities through an application submitted to the Registry Agency. Those who choose to register voluntarily must remain VAT-registered for 24 months.

Registration applications and accompanying documents, such as evidence of turnover, executed supplies, and the scope of the taxable person's operations, can be submitted on paper or electronically. In most situations, the VAT registration process is completed within 14 days from the day the application is received by the National Revenue Agency (NRA).

Bulgaria VAT Registration for Foreign Businesses 

Since the regulations for applying VAT in Bulgaria do not define a registration threshold for suppliers who are not residents, e.g., foreign businesses, they must register for VAT purposes if they supply taxable goods or services to local consumers.

To complete the registration, non-EU taxable persons must appoint a tax representative responsible for representing the foreign taxpayer in all VAT matters. This rule does not apply to EU-based businesses, which can complete the registration process independently or appoint a tax representative.

VAT Returns in Bulgaria

VAT-registered businesses and individuals submit VAT returns electronically every month by the 14th day of the month following the reporting month, regardless of the taxpayer's size or turnover.

Penalties for Failure to File Tax Return

Failing to file a VAT return on time may result in penalties imposed by the NRA, ranging from BGN 500 to BGN 10,000. 

In addition, failing to register or deregister for VAT purposes may result in a penalty from BGN 500 to BGN 5,000 and a minimum fine of BGN 500 for not charging VAT when applicable.

VAT Rules for Electronically Supplied Services 

As an EU Member State, Bulgaria implemented the EU e-commerce package adopted in 2021 into its national legal framework. Implementing the EU VAT Directive rules made the taxability rule for Electronically Supplied Services (ESS) more transparent.

Taxability Rules for ESS:

Taxability rules for ESS on the EU level, including Bulgaria, reduced administrative burdens and compliance costs for all involved parties and increased tax transparency.

The general place of supply rules applies when the buyer is another business, such as in B2B ESS transactions. Rules for B2C ESS transactions state that suppliers from another EU Member State should follow the EU-wide VAT rules, meaning that they need to apply the VAT rate of the country where the consumer resides. If the supplier is a non-EU business, it should follow the EU place of supply rules without leveraging the EUR 10,000 threshold.

The EUR 10,000 threshold plays an essential role in VAT rules for distance sales of goods and B2C ESS. Depending on whether the annual turnover exceeds the threshold, suppliers can apply the VAT rules of their home country if the turnover is lower than the threshold, or they must apply the VAT rate of the county where the customer receiving the services is located, e.g., VAT rate Bulgaria, if the turnover is higher than the threshold.

How much is VAT in Bulgaria on ESS?

The Bulgaria VAT rate for ESS is 20%.

E-Commerce Rules

The year 2021 marks a pivotal point for defining the e-commerce rules at the EU level since that was the year when new rules regarding the cross-border sales of low-value goods of up to EUR 150, intra-EU distance sales, deemed supplier rules for digital platforms, and provision of B2C services were introduced.

The EU-wide reform of the e-commerce legislature not only introduced new rules but also a new import One Stop Shop (IOSS) scheme to complement the existing schemes implemented in 2015 with the Mini One Stop Shop (MOSS), thus creating a One Stop Shop (OSS) system.

The enlarged and harmonized OSS system currently consists of three schemes available under different conditions to EU and non-EU businesses:

• Union Scheme,

• Non-Union Scheme,

• Import Scheme.

VAT EU Reporting

Regarding reporting requirements on the EU level, Bulgaria requires both EC Sales List and Intrastat reports.

EC Sales List

Bulgarian businesses must report their engagement in EU transactions, that is, supplies of goods and services to another EU country, by submitting an EC Sale List (ECL).  An ESL is not required for periods in which the taxable person made no EU supplies that fall under the scope of the ECL reporting requirements.

Intrastat 

Taxable persons exceeding BGN 1,650,000 for intra-EU imports or BGN 1,900,000 for intra-EU exports must provide the NRA with a yearly Intrastat report containing specific statistical data. In addition, if taxpayers exceed unique Intrastat thresholds set at BGN 16,000,000 for intra-EU imports or BGN 37,200,000 for intra-EU exports, they must submit a more detailed report.

Intrastat reports are submitted electronically and must be signed with a qualified signature. However, suppose this is not possible due to technical difficulties. In that case, Intrastat reports in .xml or PDF format may be submitted to the competent NRA office accompanied by a letter explaining the technical problems that occurred.

Digital Reporting

Local Businesses

In Bulgaria, two types of digital reports must be filed by local businesses:

1. E-invoicing,

2. Sales and Purchase Ledgers.

Although the plans to introduce SAF-T were published in 2022, the implementation process is still in development. It is expected to be introduced in several stages starting in 2025.

E-invoicing

Local businesses in Bulgaria are required to issue e-invoices for B2G transactions. While this obligation and option are not implemented for B2C transactions, local companies can voluntarily issue e-invoices for B2B transactions. 

Sales and Purchase Ledgers

Sale and Purchase Ledgers (SPL) are mandatory accompanying information submitted with VAT returns. SPL information provides additional data to the NRA on tax documents, such as invoices issued by the supplier or on the supplier's behalf.

Non-Resident Businesses

The obligation to submit SLP applies to all taxable persons registered in Bulgaria for VAT, including non-resident businesses.