Administration
The Ministry of Finance and the Customs Authorities who also work within the Ministry of Finance administer VAT. Although VAT is administered separately from the other taxes at present, any VAT refunds that arise can be used to cover other tax liabilities. This, however, has to be agreed in advance with the relevant tax office.

Registration
Any person (legal or physical, resident or non-resident) who has a taxable turnover exceeding BGN 75,000 during the preceding twelve months is obliged to register for
VAT purposes.

The most important changes compared to the old VAT regime are in the area of the
registration of foreign persons performing taxable supplies in Bulgaria. According to VAT Act, such persons are subject to mandatory VAT registration, through an agent, upon achieving the respective turnover, regardless of whether:

• they have a permanent establishment in Bulgaria, and
• the activities are continuing and/or performed from an "object" in Bulgaria.

Voluntary registration is possible for persons whose taxable turnover is below BGN 75,000, who at the same time carry on non-exempt export supplies, accumulating a
turnover above BGN 50,000.

Group or divisional registration is not allowed. Therefore, a group of companies or a subsidiary of a company and its parent cannot be registered as one fiscal unit for
VAT purposes.

VAT Act provides for a few new instances of optional VAT registration:

• A local legal entity that does not meet the requirements for mandatory VAT registration can register if its contributed share capital is at least the BGN
  equivalence of USD 1 million. Such a person can keep its VAT registration for a period of three years following the date of registration. After the expiry of
  this term the person is de-registered ex officio, unless it has met the requirements for mandatory registration or optional registration, based on effected exports.
• As of 1 January 2000 any person who is not subject to mandatory VAT registration can register for VAT purposes when the value of its basic funds acquired in the preceding 12 months exceed BGN 150,000. Such a person can keep its registration for 12 months, after whose expiry it is de-registered, unless it has reached the required turnover for mandatory VAT registration.

There are considerable changes in the rules on the VAT registration in some cases of commercial companies’ transformation and acquisition. There are a number of new grounds for optional VAT registration applicable to transformation of commercial companies and acquisitions of companies and company assets.

Filing requirements
A VAT-registered person files annual and monthly tax returns. The tax return must be submitted within 14 days as of the end of each tax period. VAT-registered
persons who provide both taxable (including export) and exempt supplies are obliged to submit annual VAT returns.

Payment requirements
VAT payments to the state and VAT refunds from the state can only be made in BGN The payment must be made within 14 days as of the end of the tax period.

VAT credit refund
The VAT credit to be refunded can be set off against the VAT due, as well as against other liabilities to the state. The offsetting takes place during a 6-month term
following the period in which the VAT credit occurred. If after this term there is still VAT to be refunded, the refund is to be made within 45 days.

Exporters are entitled to a VAT credit refund within 45 days, if they do not have pending liabilities to the state. The scope of taxpayers, treated as exporters is
expanded under the new VAT Act. Persons whose turnover from export supplies, exceeds 30 per cent of the value of their supplies in aggregate, are also considered
exporters.

Tax base
The tax base for local supplies is the price (exclusive of VAT) invoiced to the customer, and all other taxes and fees, including excise duties, subsidies and financing relating to a transaction, as well as any interest and penalties under a transaction. The tax base also includes transportation, package and other expenses relating to the supply, provided that these are borne by the customer.

The tax base for transactions between related persons is at least the market value of the goods and/or services involved.

VAT is also charged on goods and services provided by the employer (if registered) to the employees (benefits in kind).

The VAT mechanism applicable to sales of goods at a loss has been changed as follows:

• The VAT refund available to the supplier for such sales will not be subject to adjustments. Instead, the supplier will be obliged to charge VAT to the customer on an amount not lower than the acquisition value of the goods, or their cost, respectively, if the goods are manufactured by the supplier.
• The above rule will not apply to sales of tangible fixed assets.
• General rules for charging VAT will not apply where the sale at a loss is due to objective market conditions.

The tax base for imports includes the customs value, the customs duties and excise duties (if any) on the import goods.

Place of supply
Bulgaria has adopted the EC definitions of place of supply of goods and services.

VAT Exemptions
There are three types of exempt supplies:

• Supplies that, according to the statutory “place of supply” rule, are provided outside the territory of Bulgaria.
• Supplies of goods in customs warehouses within the frame of the respective customs procedure.
• Supplies exempt due to their subject, such as:
  - transfer of ownership and limited property rights on land;
  - financial services;
  - insurance services;
  - lease of buildings and parts thereof, provided these are leased out for
  dwelling purposes;
  - transfer of the commercial enterprises of a company as per article 15 of the Commerce Act as well as businesses or parts thereof as per the Privatization Act;
  - provision of legal advice by registered attorneys in accordance with Bulgarian Bar Association Act and of services in accordance with the Public Notaries Act;
  - land processing services rendered by co-operatives by means of their own equipment, provided that the land is owned by the co-operative members;
  - supply of grain as an in-kind rent for use of land;
  - betting and gambling;
  · donations in favour of charity institutions
  · others.

Export of goods and services
According to the Act, the export of goods and services is subject to VAT at a zero rate.

Within the meaning of the VAT Act export of goods is exportation abroad or to the free zones, free warehouses and duty-free outlets. However, export supply to customs warehouses does not qualify as export.

The most important changes refer to international transport and the relating services. International transport is defined to be the transportation between two points abroad, irrespective of whether part of the transport route passes through Bulgaria or not. The transport between the free zones and the free warehouses within Bulgaria is also considered international transport. A number of services relating to international transport (including forwarding or agent services) are also considered export services.

Processing of import good that are further re-exported is also zero-rated.

Partial exemption
Where a registered person makes both taxable (including zero-rated) and exempt
supplies the following rules apply:

1. The input VAT charged for goods or services entirely used in relation to taxable
   (including zero-rated) supplies is fully recoverable.
2. The input VAT charged for goods or services entirely used in relation to exempt
   supplies is not recoverable.
3. The input VAT charged for goods or services used both in relation to taxable
   (including zero-rated) supplies and exempt supplies is partially recoverable. The
   amount of recoverable input VAT is calculated by reference to the proportion of
   taxable supplies to exempt supplies.

VAT rates
Under the Act two rates are applicable to taxable supplies.

• 20% applicable to taxable supplies, including import of goods and services.
• A zero-rate applicable to imports and supplies of precious metals to the
  Bulgarian National Bank.

Disallowable input VAT
As a rule, input VAT cannot be reclaimed for goods and services that are:

• used for promotional purposes,
• relating to cars,
• used for exempt transactions.

Refund of VAT to non-registered persons
VAT is not refundable to non-registered persons. However, a number of new possibilities as to recovery of VAT charged upon acquisition of assets in the period when the taxpayer has not been VAT-registered, or upon cancellation of previous VAT registration, are introduced. Such VAT refund can be claimed, if the following requirements are met cumulatively:

• the taxpayer registers for VAT purposes
• the assets are available with the taxpayer on the date of the VAT registration, and
• the required documentation is available.

If VAT is not refunded within the statutory term, interest is charged at the statutory interest rate.

Reverse charge
Only where services are imported VAT at 20% must be charged and paid by the recipient if:

• the latter is registered for VAT, and
• the supplier is not a VAT-registered person, and
• the services relate to exempt supplies.

In all other cases no reverse charge applies in Bulgaria to import services.