VAT returns in Bulgaria are a crucial aspect of tax compliance for businesses operating within the country. Whether you’re a local business or a foreign company with Bulgarian operations, understanding the Value Added Tax (Danak varhu dobavenata stoinost or DDS) reporting requirements is essential for maintaining good standing with Bulgarian tax authorities. This comprehensive guide covers everything you need to know about VAT returns in Bulgaria, from registration requirements to filing procedures and common compliance issues.
What is a VAT Return in Bulgaria?
A VAT return in Bulgaria is an official document submitted to the National Revenue Agency (NRA). Businesses report their taxable transactions, calculate VAT owed or refundable, and declare their tax liability for a specific period. VAT returns are mandatory for all VAT-registered businesses in Bulgaria and serve as the primary method through which the Bulgarian tax authorities monitor VAT compliance.
The Bulgarian VAT return system follows the European Union’s VAT framework, as Bulgaria has been an EU member state since January 2007. Bulgarian VAT legislation is contained in the Value Added Tax Act 2006 (Zakon za Danak varhu Dobavenata Stoinost), which incorporates the VAT rules and Directives established by the European Union.
Purpose of VAT Returns
VAT returns in Bulgaria serve several important purposes:
- Reporting taxable transactions within Bulgaria
- Calculating VAT due or refundable amounts
- Reconciling output VAT (charged on sales) against input VAT (paid on purchases)
- Providing tax authorities with information to monitor compliance
- Supporting the government’s revenue collection process
Current VAT Rates in Bulgaria
Understanding the applicable VAT rates is essential for correctly preparing VAT returns in Bulgaria. The country applies different rates depending on the type of goods or services provided.
Standard VAT Rate
The standard VAT rate in Bulgaria is 20%. This rate applies to most goods and services for which no exemption or reduced rate is specified.
Reduced VAT Rates
Bulgaria applies a reduced rate of 9% to certain goods and services, including:
- Hotel accommodation
- Other specific services determined by Bulgarian tax legislation
Temporary Reduced Rates
The Bulgarian authorities have occasionally approved temporary VAT rate reductions for certain categories of products, including:
- Foodstuffs for children and babies
- Books
- Energy products
These temporary reductions are typically implemented to combat the adverse effects of inflation or economic challenges like the pandemic.
Who Needs to Register for VAT in Bulgaria?
VAT Registration Requirements for Local Businesses
Bulgarian businesses must register for VAT when their taxable turnover exceeds the registration threshold. Once registered, they must file regular VAT returns and comply with all VAT obligations.
VAT Registration Requirements for Foreign Businesses
Non-resident businesses must register for VAT in Bulgaria when they conduct taxable activities in the country. Common situations requiring VAT registration include:
- Supply of goods within Bulgaria
- Providing services with a place of supply in Bulgaria
- Distance selling to Bulgarian customers above the threshold
- Making intra-Community acquisitions of goods
Foreign, non-resident companies providing goods, and to a lesser extent, services, may be required to register with the tax authorities as Bulgarian taxpayers.
How Often Must VAT Returns Be Filed in Bulgaria?
The filing frequency for VAT returns in Bulgaria depends on the type of business and its activities:
Monthly Filing
Most businesses, including all non-resident traders with a Bulgarian VAT number, are required to file monthly VAT returns regardless of their turnover level.
Quarterly Filing
Suppliers of online services (electronic, broadcast, or telecommunications services) to Bulgarian consumers may file quarterly returns under the Mini One-Stop Shop (MOSS) scheme. This allows them to file a single return covering all EU member states rather than registering separately in each country where they have customers.
VAT Return Deadlines in Bulgaria
Meeting VAT return deadlines is crucial to avoid penalties in Bulgaria. The specific deadlines are:
Monthly Returns
For standard monthly VAT returns, the filing deadline is the 14th day of the month following the tax period end.
Quarterly Returns (for Online Service Providers)
For electronically supplied services, VAT filings are due before the 20th day of the month following the relevant quarter.
Deadline Adjustments
If the regular due date falls on a weekend or public holiday, the deadline will be extended to the next working day. Any Bulgarian VAT due must be paid by the same date as the filing deadline.
How to File VAT Returns in Bulgaria
Filing Methods
VAT returns in Bulgaria can be filed electronically through the National Revenue Agency’s portal. Foreign businesses can use the electronic filing and payment system available at www.portal.nap.bg.
Required Documents and Information
When filing VAT returns in Bulgaria, businesses need to submit:
- VAT Declaration – The main return document
- EC Listing (VIES Declaration) – For businesses making intra-Community supplies
- Intrastat Declaration – For businesses exceeding Intrastat thresholds
- VAT Books – Detailed records of transactions in a specific format (TXT)
Filing Process
The VAT filing process involves calculating the difference between output VAT (collected on sales) and input VAT (paid on purchases). If output VAT exceeds input VAT, the difference must be paid to the tax authorities. If input VAT is greater, the business may be entitled to a VAT refund.
VAT Invoicing Requirements in Bulgaria
Proper invoicing is essential for VAT compliance in Bulgaria. Every provider is obligated to issue an invoice for every supply of goods and services, as well as for advance payments received.
Mandatory Invoice Elements
Bulgarian VAT invoices must include:
- Invoice date and number
- Supplier’s name, address, and VAT identification number
- Customer’s name, address, and VAT identification number (for business customers)
- Description of goods or services supplied
- Quantity of goods or description of services
- Date of supply (if different from invoice date)
- Taxable amount
- VAT rate applied and VAT amount
- Total amount including VAT
Issuance Deadlines
Invoices must be issued within specific timeframes:
- For general supplies, within seven days from the date of dispatch of goods or provision of services
- For intra-community supplies and reverse chargeable services: within 15 days of the month in which the goods or services were provided
Simplified Invoices
A simplified VAT invoice can be issued when the total of the taxable base and the VAT does not exceed EUR 100 or the equivalent in Bulgarian currency. However, simplified invoicing cannot be used for intra-Community supplies, distance sales, or supplies executed in another Member State.
What VAT Can Businesses Deduct in Bulgaria?
Deductible Input VAT
Companies registered in Bulgaria and charging Bulgarian VAT may offset the VAT charged on sales (output VAT) against the VAT paid on Bulgarian supplies (input VAT). This includes VAT charged on the import of goods.
Non-Deductible VAT
However, there are some exceptions where input VAT cannot be deducted. These typically include:
- VAT on goods and services used for exempt supplies
- Personal expenses of business owners or employees
- Entertainment expenses
- Certain vehicle expenses
How to Recover VAT Credits and Refunds in Bulgaria
VAT Refund Process
If there is a surplus of VAT inputs over outputs (more VAT incurred than charged), a Bulgarian VAT credit may be available. The excess input VAT can either be:
- Carried forward to offset against future VAT liabilities
- Refunded to the taxpayer under specific conditions
Refund Timeframes
The typical timeframe for processing VAT refunds in Bulgaria ranges from 30 to 90 days, depending on the taxpayer’s compliance history and other factors.
VAT on Imports and Exports in Bulgaria
Importation of Goods
The importation of goods is a taxable supply in Bulgaria. Any importation performed is subject to VAT at the standard rate of 20%. The chargeable event for the importation of goods occurs when the goods enter Bulgaria.
Importation of goods taxable with VAT in Bulgaria includes:
- The introduction of non-European Union goods into Bulgarian territory
- The release of goods for free circulation after being placed under outward processing
- The introduction of EU goods from third countries or territories that form part of the EU customs territory
Exports and Intra-Community Supplies
Exports of goods to non-EU countries are generally zero-rated for VAT purposes, provided proper documentation is maintained. Intra-Community supplies (sales to VAT-registered businesses in other EU countries) are also zero-rated but must be reported in EC Sales Lists.
Reverse Charge Mechanism for VAT in Bulgaria
What is the Reverse Charge?
The reverse VAT charge mechanism shifts the responsibility for VAT payment from the supplier to the recipient of goods or services. Instead of the seller charging and collecting VAT, the buyer records and pays the VAT directly to their tax authority.
When Does Reverse Charge Apply?
In Bulgaria, the reverse charge applies in several situations:
- Cross-border B2B transactions: When a Bulgarian VAT-registered business provides services to another VAT-registered business in an EU country
- Intra-community acquisitions: When a Bulgarian business buys goods from a VAT-registered supplier in another EU country
- Import of services: When a Bulgarian business purchases services from a supplier based outside Bulgaria
- Domestic reverse charge: For specific goods and services within Bulgaria, to prevent fraud, such as construction services and certain high-value items like gold, electronics
- Non-EU transactions: When Bulgarian businesses buy services from non-EU suppliers
Documentation Requirements
For reverse charge transactions, suppliers typically issue invoices without VAT but include a note stating “Reverse charge applicable under Article 196 of Directive 2006/112/EC.” The recipient must self-assess the VAT and declare it in their VAT return.
Digital Services and VAT Obligations in Bulgaria
One-Stop Shop (OSS) Scheme
Providers of electronic, broadcast, or telecoms services to consumers in Bulgaria can register under the One-Stop Shop (OSS) scheme, allowing them to file a single return covering all 27 EU member states rather than registering separately in each country.
Filing Requirements
Under the OSS scheme, quarterly returns are due before the 20th day of the month following the relevant quarter.
Common VAT Compliance Mistakes to Avoid in Bulgaria
Frequent Errors
Businesses often make these common mistakes when dealing with Bulgarian VAT:
- Failing to verify VAT numbers: Always confirm the VAT registration of your EU trading partners using the VIES system
- Incorrect invoicing: Ensure invoices correctly state the reverse charge when applicable and cite the appropriate legislation
- Late VAT declarations: File and pay VAT under reverse charge rules promptly to avoid penalties.
- Improper record-keeping: Maintain all required documentation to support VAT claims and deductions
VAT Penalties and Compliance Risks in Bulgaria
Penalty Structure
Failure to comply with VAT regulations in Bulgaria can result in significant penalties:
- Failure to register for VAT: BGN 500 to BGN 20,000 (approximately EUR 255 to EUR 10,186)
- Late submission of Bulgarian returns: Similar penalty ranges
- Late VAT payments: Interest charged at 10.02% per annum (calculated by adding 10% to the Bulgarian National Bank base rate, currently set at 0.02%)
Risk Mitigation
To minimize compliance risks, businesses should:
- Register for VAT promptly when thresholds are reached
- File returns and make payments by the deadlines
- Maintain accurate and complete records.
- Consider working with local tax advisors familiar with the Bulgarian requirements.
Simplify Your VAT Registration and Filing in Bulgaria with Commenda
Managing VAT compliance in Bulgaria can be complex, especially for foreign businesses unfamiliar with local regulations. Commenda can help streamline the process by:
- Handling VAT registration
- Preparing and filing VAT returns
- Ensuring compliance with invoicing requirements
- Managing documentation for VAT reclaims
- Representing businesses during tax audits
Conclusion
In summary, staying compliant with VAT returns in Bulgaria is essential for any business operating within the country. By understanding the filing requirements, deadlines, and proper documentation, you can avoid costly penalties and ensure smooth business operations. If you’re unsure about any aspect of VAT compliance, partnering with Commenda can simplify the process and give you peace of mind, allowing you to focus on growing your business in Bulgaria.
FAQs about VAT Returns in Bulgaria
- What is VAT, and why do I need to file VAT returns in Bulgaria?
VAT (Value Added Tax) is a consumption tax applied to goods and services. In Bulgaria, it’s known as “Danak varhu dobavenata stoinost” (DDS). All VAT-registered businesses must file regular returns to report taxable transactions and pay any VAT due to the National Revenue Agency.
- How often do I need to submit my VAT returns in Bulgaria, and what is the deadline?
Most businesses must file monthly VAT returns by the 14th day of the month following the tax period. Online service providers may file quarterly returns due by the 20th day of the month following the quarter. Any VAT due must be paid by the same deadline.
- What happens if I miss the VAT return deadline in Bulgaria?
Missing VAT return deadlines can result in penalties ranging from BGN 500 to BGN 20,000 (approximately EUR 255 to EUR 10,186). Additionally, interest is charged on late payments at a rate of 10.02% per annum.
- How do I calculate the VAT I owe or the refund I’m entitled to in Bulgaria?
Calculate VAT by subtracting input VAT (paid on purchases) from output VAT (charged on sales). If output VAT exceeds input VAT, you owe the difference to the tax authorities. If input VAT is greater, you may be entitled to a refund or credit.
- What should I do if I make an error on my VAT return in Bulgaria?
If you discover an error on a submitted VAT return, you should file a corrective return as soon as possible. For significant errors, it’s advisable to consult with a tax professional to determine the best approach and minimize potential penalties.
- Can I claim VAT refunds on business expenses in Bulgaria?
Yes, VAT-registered businesses can generally reclaim input VAT on business expenses, provided they relate to taxable business activities. Some restrictions apply to certain types of expenses, such as entertainment and personal use items.
- What records do I need to keep for VAT purposes in Bulgaria?
Businesses must maintain comprehensive records of all transactions, including sales and purchase invoices, import and export documentation, credit notes, and VAT calculations. These records must be kept for at least 5 years and be available for inspection by tax authorities.
- Do I need to register for VAT in Bulgaria if my business is based outside of Bulgaria?
Foreign businesses must register for VAT in Bulgaria if they conduct taxable activities there, such as selling goods or providing services with a place of supply in Bulgaria. The registration threshold does not apply to non-resident businesses.
- Are there any penalties for submitting inaccurate VAT returns in Bulgaria?
Yes, submitting inaccurate VAT returns can result in penalties similar to those for late filing. The exact penalty depends on the nature and severity of the inaccuracy, and whether it appears to be deliberate or negligent.
- How can I file my VAT returns in Bulgaria?
VAT returns can be filed electronically through the National Revenue Agency’s portal at www.portal.nap.bg. Foreign businesses can also use this electronic filing and payment system.
For more resources on international tax and compliance, visit the Commenda Blog.
