EU VAT GUIDE – Bulgaria

How much is VAT in Bulgaria? 

The Standard VAT Rate (Данък добавена стойност (ДДС)) in Bulgaria is 20%. 

Some supplies are exempt from VAT. This applies to business activities like education, health care, insurance, and banking services.

The exact list of taxable transactions and allocated Bulgaria VAT rate can be found in VAT Bulgaria regulations. 

VAT thresholds in Bulgaria 

Valuable information about the VAT threshold in Bulgaria and applicable provisions can be found in the VAT legislation. Also, a helpful source of information is an interpretation of the appropriate information shared by Tax Authority officials. 

VAT registration threshold for resident businesses: Threshold of BGN 100,000 or voluntary registration.

VAT registration threshold for non-resident businesses: No registration threshold.

VAT registration threshold for intra-EU distance sales of goods and B2C supplies of services: EU-wide harmonized threshold of EUR 10,000.

VAT registration threshold for non-EU established suppliers of Electronically Supplied Services: No registration threshold.

VAT Taxable Activities in Bulgaria

A taxable person by Bulgaria VAT Law is a legal person or individual who carries out economic activity independently, whatever the purpose or results. 

Types of taxable activities that trigger the imposition of Bulgaria VAT: 

• The supply of goods and rendering of services in Bulgaria for consideration;
• Receipt of reverse-charge services by a taxable person in Bulgaria;
• Export of goods;
• Import of goods.

Other case scenarios exist where domestic or foreign businesses should impose Bulgaria VAT on their transactions. 

Tax Representative in Bulgaria 

For non-EU-established businesses, having a tax representative for all VAT compliance-related activities is often mandatory. The taxable persons with tax residence in third countries or territories with mutual assistance agreements signed with Bulgaria can fulfill their tax obligations without the compulsory requirement to contract a tax representative. 

For EU-established companies, having a tax intermediary isn’t compulsory. Still, the economic operator could acquire the professional to ease up and streamline compliance challenges for its operations in the country. 

VAT on Electronically Supplied Services in Bulgaria 

Electronically Supplied Services 

Following the EU VAT Directive changes and the accompanying regulations after adopting the E-Commerce package in July 2021,  Bulgarian regulators have implemented key updates into their national legislation. 

This integration of the EU’s VAT guidelines has established a solid foundation for consistent tax regulations within the digital economy. 

This legislative update and coherence with EU VAT rules regarding the digital economy brought transparency for taxable persons in this area.

Taxability Rules for ESS

The introduction of the E-commerce regulatory package in July 2021 was a prominent step, expected one directly speaking due to the evolving demands of the digital economy.  These amendments were essential to aligning the tax provisions with emerging business models and taxation scenarios.

This move has undoubtedly clarified the taxability rules, reduced compliance costs for taxable persons and tax authorities, and made things easier for all participants.  

The aim was to strengthen the uniformity and transparency of tax practices.

Key VAT Provisions from the E-Commerce Package:

• B2B Electronically Supplied Services: The general EU-wide tax rules apply for these types of transactions where a buyer is a taxable person. 
• B2C Electronically Supplied Services by Non-Resident taxable persons: Taxable persons providing services to customers in different EU Member States should follow the coherent  EU-wide tax rules regarding determining the place of supply.

• B2C Transactions for Electronically Supplied Services by Non-EU Suppliers: Suppliers based outside the EU must comply with EU standards for determining the place of supply without having a possibility to leverage the instituted threshold of the EUR 10,000.
• VAT Rules for Distance Sales of Goods and B2C ESS: EU-based suppliers generating less than EUR 10,000 annually from distance sales of goods and/ or B2C ESS can opt between applying the VAT rules of their home country or adhering to the One-Stop Shop (OSS) rules, offering flexibility for smaller enterprises.
• VAT Rules for Distance Sales of Goods and B2C ESS: For annual turnovers exceeding EUR 10,000, suppliers must apply the VAT rate attributable to the customer’s place of residence.  Aligning the applicable tax rules with the place of consumption and ensuring VAT is levied where economic activity occurs.

This uniformity in VAT regulations simplifies the compliance process for businesses operating within the European Union and extends its benefits to international entities engaging with the EU market. 

How much is VAT in Bulgaria for Electronically Supplied Services?

VAT rate Bulgaria: A standard VAT rate of 20% is applied in most cases on sales of Electronically Supplied Services in Bulgaria

E-Commerce VAT Rules in Bulgaria 

On July 1, 2021, the European Union took a crucial and impactful step by revising VAT regulations to meet the dynamic requirements of the digital economy. This legislative adjustment aimed to simplify the VAT landscape for businesses engaging in cross-border sales, addressing the need for a more streamlined process.

Key Features of the 2021 E-Commerce VAT Reforms:

• Cross-Border Sales of Low-Value Goods: The introduction of the EU-wide threshold for imports of low-value goods from third countries or third territories and the related possibility to report tax liabilities under the simplified scheme;
• Intra-Community Distance Sales: The reforms have eliminated the previously established threshold for intra-community distance sales of goods. These thresholds have been defined per national rules, further complicating the transfer of goods’ supply;
• Domestic Sales by Deemed Suppliers: In certain cases, digital platform operators will be the responsible taxable persons for VAT;
• Provision of B2C Services: The scope of provision of services that could be reported under the OSS schemes has been drastically broadened. This expansion simplifies VAT reporting for businesses providing digital services across the EU, fostering a more streamlined approach to VAT compliance and reducing administrative burdens.

These adjustments reflect the EU’s commitment to simplifying VAT compliance, reducing business operational hurdles, and enhancing transparency and fairness in the digital single market.

E-Commerce VAT Simplification:

Far from being just an update, this reform involved thoroughly reevaluating the existing VAT systems and introducing the Import One Stop Shop (IOSS) scheme. The refinement of VAT special schemes, particularly the addition of a new reporting tool – IOSS, represents a key stride in the EU’s strategy towards e-commerce taxation.

This initiative greatly eases the challenge of managing VAT responsibilities for businesses, paving the way for a streamlined and cohesive digital market.

The E-Commerce VAT package made the following special schemes available:

• Union One-Stop-Shop Scheme;

• Non-Union One-Stop-Scheme;

• Import One-Stop-Shop Scheme.

Overview of EU VAT Special Schemes

Non-Union Scheme can be leveraged by:

The Non-Union Scheme is tailored for businesses not based in the European Union. This scheme provides an effective solution for non-EU suppliers, enabling them to utilize it as a streamlined method for reporting almost all their B2C supplies of services that fall within the specified parameters.

Union Scheme can be leveraged by:

• EU-based businesses: Taxable entities that are residents in one of the Member States can take advantage of this scheme if they provide B2C services or engage in intra-community distance sales of goods. An important condition that cannot be overlooked is that domestic supplies, i.e., where the customer is a resident of the same MS, cannot be reported under this scheme;
• Non-EU Based Businesses on Intra-Community Sales: Businesses not based in the EU are also eligible to use the Union Scheme specifically for intra-community distance sales of goods;
• Digital Marketplaces: Whether based in the EU or not, digital marketplaces facilitating intra-community distance sales of goods and for certain domestic supplies can leverage the Union Scheme. 

Import Scheme can be leveraged by:

The Import Scheme is available to any taxable entity involved in the distance selling of goods imported from non-EU countries or territories, provided these goods are shipped in consignments valued at or below EUR 150. 

This special scheme is accessible to a broad range of users, including EU-established businesses, entities without establishment in the EU, and operators of electronic marketplaces. It offers a simplified method for managing VAT obligations on low-value imports.

These schemes, integral parts of the extensive regulatory framework of the E-commerce landscape, are designed to simplify things for different types of taxable persons that make their supplies within the EU.  Their goal is to streamline VAT compliance, making it feasible and uniform throughout the European Union. 

Thus, they support enterprises of all sizes in navigating the complexities of VAT regulations with greater ease and consistency.

OSS Return and Payment 

The Bulgaria VAT rules don’t provide a simplified registration or reporting approach tailored explicitly to foreign suppliers of Electronically Supplied Services. However, non-resident businesses can leverage the OSS schemes as an electronic reporting tool – thanks to which they will not be obliged to register for BG VAT. 

The development and introduction of the EU-wide OSS schemes will ease compliance challenges for many cross-border businesses with customers residing in Bulgaria. Before the introduction of the VAT updates that came along with the E-commerce package, many companies that provide services or goods to customers residing in Bulgaria would have to register for local VAT numbers.  

When the situation doesn’t permit foreign merchants to report their transactions through OSS schemes, the taxable person in question should be aware of domestic regulations and operate under the rules of national legislation. 

Electronic Platform and Deemed Supplier Rules 

Bulgaria has adopted the EU’s VAT Directive provisions for e-commerce into its national laws, streamlining the reporting process for cross-border businesses serving customers in Bulgaria. This legislative update made bureaucratic and compliance challenges less fragmented and expensive.

This harmonization introduces the “deemed supplier” concept, greatly simplifying the taxation procedure for certain types of online sales. 

Currently, under the EU VAT Directive, there are two specific scenarios where a digital marketplace operator is identified as a “deemed supplier”:

• When goods with a value equal to or less than  EUR 150 imported from non-EU countries or territories are sold to EU consumers by the original seller via the marketplace;
• When goods that are placed in free circulation within the EU are supplied by original vendors established outside the EU to the end customers thanks to the usage of the marketplace facilitator.

These provisions ensure a more straightforward VAT process for digital marketplaces and their transactions within the EU.

This adoption reflects Bulgaria’s dedication to adhering to EU VAT standards, aiming to improve the transparency and uniformity of tax regulations applicable to digital sales. Consequently, this adjustment introduces new obligations for deemed suppliers, significantly altering the VAT implications of this sales model.

This regulatory framework introduces additional responsibilities for deemed suppliers, vastly changing this sales model’s VAT obligations for taxable entities. In this multi-sided business model, we have two separate transactions: 

1. The initial supply from the original vendor to the digital platform is recognized as a business-to-business (B2B) transaction.
2. The subsequent supply from the platform to the final consumer is classified as a business-to-consumer (B2C) transaction.

This ensures compliance and facilitates smoother operations under the simplified tax framework provided by the EU.

Invoice Requirements in Bulgaria 

General invoice information:

• Date of invoice issuance;
• Date of the supply of goods or provision of services;
• Unique invoice number issued in sequence(ten-digit Arabic numerals).

Seller information:

• Company name;
• Full address (head office);
• Billing address if different from company address;
•  VAT number.

Customer information:

• Name;
• Full address;
• VAT number;
• Delivery address;
• The billing address is different from the delivery address.

Fiscal Information:

• Description and breakdown of the goods or services – quantity, discounts, unit price excl. VAT;
• Net amount;
• The VAT rate(s) applied and the breakdown of VAT per rate;
• Invoice Total.

Additional information required in particular cases:

• Exemption reference – guaranteed by precise norm;
• Reverse charge – term if applicable;
• Self-billing – term if applicable;
• Tax Representative information for non-resident business.

Foreign Currency Invoice in Bulgaria  

In Bulgaria, it’s permissible to issue tax invoices in foreign currencies, but the VAT amount on the invoice must be shown in local currency.

VAT Return in Bulgaria 

Domestic returns

Domestic taxpayers and non-established foreign businesses who conduct business under the national VAT Bulgaria rules should submit monthly declarations. 

Penalties for late reporting and omitted declarations 

Taxpayers should charge Bulgaria VAT on their transactions when the responsibility rises and submit the VAT return. If they do the return fillings after the deadline, they can expect to allocate more funds than they would if they had filled the return within the permitted time frame. 

A taxable person who missed the deadline for submitting the declaration or hasn’t submitted the return at all could expect a fine between BGN 500 and 10,000. 

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