The Bulgarian Supreme Administrative Court (SAC) has issued its decision No. 10037 in administrative case No. 10108/2017 г., according to which it revoked as unconstitutional the provision under article 87a, paragraph 2 of the Regulation for Application of the VAT Act. Article 87a (2) of the VAT Act excluded from Bulgaria's Tour Operators' Margin Scheme (TOMS) goods or services acquired for resale from non-taxable vendors.
Under the TOMS, tour operators that buy and resell travel, accommodation and certain other services operating as principal or undisclosed agents do not recover input VAT on all direct costs and apply output VAT on the realized resale margin only.
The revoked VAT provision excluded from the scope of the TOMS goods or services acquired for resale from non-taxable vendors. As a result, tour operators had to apply 20% output VAT on the resale price of such purchases under the general VAT regime. Under the SAC's decision to revoke the contested VAT provision, tour operators may include such purchases under the scope of the TOMS and apply 20% output VAT only on the realized resale margin.
The SAC decision is effective as from 26 June 2020 and can be accessed through the SAC website (in Bulgarian only).