VAT Advisory

VAT Registration

Mandatory Registration

As of April 2025, the threshold for mandatory VAT registration has been raised to BGN 100,000 (Art. 96(1) VATA). Taxable turnover is measured over the preceding 12 consecutive months — not the calendar year.

• Filing deadline — 7 days from reaching the threshold (Art. 96(1) VATA)
• Registration by the NRA — where the threshold is found to have been reached, the NRA may register the person ex officio
• Penalties for delay — assessment of VAT for the period from the expiry of the deadline to the date of registration (Art. 102(3) VATA)

Voluntary Registration

Any taxable person may register voluntarily before reaching the threshold (Art. 100(1) VATA). Voluntary registration is strategically advisable in the following cases:

• Significant capital expenditure eligible for input VAT credit
• Main clients are VAT-registered legal entities
• Planned intra-Community acquisitions
• Exports (zero rate with full input VAT credit entitlement)

Other Grounds for Registration

• Intra-Community acquisition (ICA) — upon exceeding BGN 20,000 annually (Art. 99 VATA)
• Distance sales — the threshold was removed on 01.07.2021; the OSS regime applies for EU sales exceeding EUR 10,000
• Reverse Charge — upon receipt of services from foreign suppliers (Art. 97a VATA)

VAT Rates

• 20% — standard rate for most goods and services (Art. 66(1) VATA)
• 9% — reduced rate for hotel accommodation, restaurant services, takeaway food, baby food and nappies, books (Art. 66(2) VATA)
• 0% — for export of goods, intra-Community supplies, international transport (Art. 28, 53 VATA)

The zero rate is distinct from exemption — with a zero rate, the supplier retains full input VAT credit entitlement, whereas with an exemption, the right to input VAT credit does not arise.

VAT Refund

The VAT refund procedure is regulated under Art. 92 VATA and is one of the most frequently disputed areas in tax practice.

Standard Procedure

Where a VAT refund is declared, the tax is offset against subsequent liabilities over 2 consecutive tax periods (i.e. 2 months). If a balance remains after this period, it is refunded within a 30-day period from the filing of the return for the third period (Art. 92(1) VATA).

Accelerated Procedure

An accelerated refund within a 30-day period without the 2-month waiting period applies where (Art. 92(3) VATA):

• Over 30% of taxable supplies are zero-rated (exporters)
• Over 50% of total turnover is from supplies of agricultural products
• The person is an agricultural producer registered under the Agricultural Producers Support Act

Inspection and Audit upon Refund

The NRA may conduct an inspection within 30 days of the filing of the VAT return. If the inspection finds no discrepancies, the tax is refunded. Where discrepancies are found, a tax audit may be initiated, extending the refund period to 3 months or more.

Limitation Period for Refund

The right to deduct input VAT credit may be exercised within a 12-month period from its arising (Art. 72(1) VATA). Missing this deadline is irrecoverable — the input VAT credit is lost. The general limitation period for recovery of overpaid VAT is 5 years (Art. 129 TSIPC).

VAT on Real Estate

The VAT regime for real estate transactions is extremely complex and depends on several factors:

• Regulated building plots — the supply is taxable at 20% VAT (Art. 45(5)(1) VATA)
• New buildings (up to 5 years from the occupancy permit) — taxable at 20% VAT
• Old buildings (over 5 years) — the supply is exempt from VAT, but the supplier may exercise an option to tax under Art. 45(7) VATA
• Residential properties — the supply is exempt under Art. 45(4) VATA subject to certain conditions

Upon acquisition of a property with VAT, the buyer is entitled to input VAT credit if the property will be used for taxable supplies. Where the purpose changes, an adjustment of input VAT credit (Art. 79 VATA) is made over a 20-year period for immovable property.

Intra-Community Trade

Intra-Community Supplies (ICS)

ICS are taxable at the zero rate (Art. 53 VATA) where the following conditions are cumulatively met:

• The recipient is VAT-registered in another Member State
• The goods physically leave the territory of Bulgaria
• Documentation proving the transport (CMR, bills of lading) is available

Intra-Community Acquisitions (ICA)

In the case of ICA, the recipient is obliged to charge VAT through the Reverse Charge mechanism. Simultaneously with the charge, the right to input VAT credit arises (in the case of taxable activity), making the operation VAT-neutral.

VIES Declarations

Persons carrying out ICS and receiving/providing services from/to persons in the EU file a VIES declaration by the 14th day of the month following the tax period (Art. 125(2) VATA).

Common VAT Issues

Our practice shows that the most frequent disputes with the NRA in the area of VAT relate to the following issues:

• Denied input VAT credit — the most widespread problem. The NRA denies credit due to absence of a real supply, an irregular supplier (so-called "missing trader"), unproven transport, or lack of personnel and technical capacity
• Disputes over the moment of the tax event — discrepancies between the date of invoicing and the date of the tax event under Art. 25 VATA
• Classification of supplies — disputes whether a given supply is taxable or exempt, intra-Community or domestic
• Transfer pricing adjustments — increase of the tax base where prices between related parties are understated
• Missing or irregular invoices — formal irregularities leading to denial of input VAT credit
• Carousel fraud allegations — involvement (even unknowing) in a chain of fictitious transactions. May lead to a VAT charge and denial of input VAT credit along the entire chain
• Penalties for late registration — where the application is not filed within 7 days of reaching the threshold, the NRA charges VAT for the entire "missed" period

Frequently asked questions