September 2022 / Bulgaria

The Ministry of Finance has launched a public consultation on proposed amendments to the Value Added Tax Act. The main suggested changes are the following:

• introduction of VAT bad debt relief and related requirements for its application;
• application of a special procedure for declaring the supply of goods dispatched or transported outside the territory of the European Union by a supplier not established in the EU;
• introduction of an obligation for providers of payment services in relation to cross-border payments to keep an electronic register of the recipients and of the payments in connection with the payment services they perform for each calendar quarter of the supply of goods and services; and
• proposal for persons registered for VAT purposes, at the initiative of the tax authorities, to be allowed to deduct input VAT as of the date of the effective VAT registration.

The full text of the proposal, issued on 5 September 2022, is available here (in Bulgarian only).

The Ministry of Finance has launched a public consultation on proposed amendments to the Corporate Income Tax Act, which would align the Bulgarian legislation with the European Commission's Guidelines on regional State aid (2021/C 153/01). The proposed legislation would amend the rules for applying tax relief for regional State aid which were in force until the end of 2021.

Currently, a tax incentive consisting of remission of corporate income tax up to 100% is applicable to enterprises conducting manufacturing activities in municipalities with a high unemployment rate. The amendment would extend the scope of the sectors in which the tax relief cannot be applied (e.g. by including the lignite coal sector). Furthermore, the scope of the tax relief would be limited to micro, small and medium-sized enterprises.

The new rules are envisaged to be applied during the period 2022-2027, following an approval from the European Commission.

The full text of the proposal, issued on 5 September 2022, is available here (in Bulgarian only).

The public consultation will be open until 5 October 2022. Further developments will be reported when they occur.

The Ministry of Finance has published a clarification explaining that central heating should be considered a continuous supply for VAT purposes. As such, the taxable event is considered to arise on the date when the payment becomes due. Therefore, compensation payments which are due after 9 July 2022 should be subject to the reduced 9% VAT rate regardless of the fact that they are related to periods before that date.

As of 9 July 2022, Bulgaria introduced, as a temporary measure, a reduced 9% VAT rate for central heating (among others). However, central heating companies continued issuing invoices for compensation payments related to periods before 9 July 2022 by applying the standard 20% VAT rate. In this respect, the Ombudsman of the Republic of Bulgaria sent a request for clarification to the Ministry of Finance as to whether a 9% or 20% VAT rate should be applied to the customers.

Lastly, the clarification provides that the invoices issued incorrectly with 20% VAT rate should be cancelled and new invoices with 9% VAT rate should be issued instead.

The full text of the announcement, issued on 26 August 2022, is available here (in Bulgarian only).