Updated last 26.03.2021
Transactions and Payments between local and foreign persons may result in different VAT consequences, regulated in the Value Added Tax Act (VATA). For VAT purposes such transactions and payments may be provisionally divided into (1) deliveries from and to persons, established within the European Union (“EU“) and (2) deliveries from and to persons, established outside the EU.
What are the VAT consequences from the transactions and payments between local persons and persons from the EU?
When performing transactions and payments between local persons and persons from the EU, a question arise – which is the national regime for VAT taxation of the respective transaction. Тhe answer to this question depends on the place of performance of the delivery. According to the VATA, the place of performance of the delivery is determined, depending on various criteria (For example, whether or not there is a delivery of goods or services, and the respective type of the goods or the subject matter of the service, whether or not the parties to the transaction are registered for VAT purposes in their national countries, etc.)
When the place of delivery is Bulgaria, the regime of VAT taxation is determined, based on the VATA. This means that the parties to the delivery may incur obligations for the administration and depositing VAT to the national budget of Bulgaria.
From VAT perspective there may be different cases of transactions between local persons and persons from the EU.
Thus, the acquisition of goods by a person in Bulgaria, transported from the territory of an EU Member State to the territory of Bulgaria, will be treated as intra-Community acquisition with respect to the person, established in Bulgaria. As a rule, such a delivery must be taxed at 20 % VAT in Bulgaria. In the opposite case, the sale and transportation of goods from Bulgaria to an EU Member State, could be considered an intra-Community delivery with respect to the person, established outside Bulgaria. In this case the Bulgarian supplier should charge 0% VAT and practically, VAT is payable by the recipient of the delivery, in accordance with the legislation of the country, where the goods are received. In this case the Bulgarian supplier shall charge 0 % VAT, and in fact the VAT shall be due by the recipient of the delivery in accordance with the legislation of the country, in which the goods are delivered.
More information regarding the intra-Community acquisition and intra-Community delivery of goods may be found at the following address.
The determination of the national regime for the taxation of the deliveries of services by and to the EU Member States, also depends on the place of performance of the delivery. Generally, the delivery of a service by a person, registered for VAT purposes in Bulgaria, to a person, registered for VAT purposes in an EU Member State, would result in VAT taxation in the country of the recipient of the service in accordance with the national VAT legislation of such country. This rule is also applicable, if the service is provided to the person, registered in Bulgaria. In this case VAT is payable in accordance with the Bulgarian legislation.
And vice-versa, generally, if the delivery is performed by a person, registered for VAT purposes in Bulgaria, to a person, not registered for VAT purposes in an EU Member State (e.g., natural person-consumer), then the delivery will be taxable in Bulgaria in accordance with the VATA. This also applies to the case, when a Bulgarian person, which is not registered under the VATA, receives services from a person, registered for VAT purposes in an EU Member State. It is important that the subject matter of the service, the capacity of the service-provider and other factors may result in a different from the general taxation, pursuant to the VATA (e.g., financial services, see chapter 4 of the VATA “Exempt Deliveries and Acquisitions“).
|Important to know|
Exemption: Despite Northern Ireland is a part of the United Kingdom of Great Britain, after “Brexit” the relations regarding transactions with goods and/or services with persons, living in Northern Ireland, from VAT point of view, are treated as deals with a person from EU member – state.
What are the VAT consequences of transactions and payments between local persons and persons outside the EU?
In accordance with the VATA the export of goods to persons outside the EU is subject to 0 % VAT taxation, if the place of performance of the delivery is in the country outside the EU. However, such delivery must be included in the monthly VAT return. In the opposite case – when importing goods from a country outside the EU, the importer must declare the import, paying 20 % VAT to the customs authorities and including it in the monthly declaration.
Is it possible to recover VAT, paid in another EU Member State?
EU’s common VAT system makes it possible for a VAT payer to recover VAT, paid in another EU Member State. Тhe applicable rules can be found in Ordinance No. H-9 on the recovery of value added tax to tax payers, not established in the EU Member State of recovery, but established in another European Union Member State. You can find the Ordinance at the following address.
|Important to know|
It is important that the transactions and payments between local and foreign persons could give rise to obligations for the payment of withholding tax both in Bulgaria, and in the other EU Member State. Тhe regime of the withholding tax, is set out in the Corporate Income Taxation Act, as for the taxation, it is of significance whether or not Bulgaria and the respective other country have signed a Treaty for the Avoidance of Double Taxation. For more information regarding the taxation with withholding tax please refer to the webpage of the Ministry of Finance.
|For more information|
More information on the rules conditions for the recovery of VAT, paid in another EU Member State can be found on the website of the National Revenue Agency.