In this article we will consider the basics of the import of goods under the Value Added Tax Act (VAT), under what conditions is the exemption from value added tax (VAT) of imported goods under Customs procedure 42 and how goods, which are imported through another EU member state are treated by Bulgarian customs.

What is the import according to the VAT Act?

The import of goods within the meaning of the VAT Act is the introduction of goods into the country by non-EU countries. This is the placing of goods under the free circulation regime after a passive improvement procedure, the introduction of allied goods in the country from third territories, which are part of the EU customs territory, and any other event as a result of which customs obligation occurs (Art. 16, para. 1-4 VAT Act).

No import is required when at entering the territory of the state, the goods have obtained the status of temporarily stored goods or are placed in a free zone or under customs regimes – customs storing, inward processing, temporary import with full exemption from import duties, external transit. The import shall be considered as implemented only when the goods cease to be treated under the relevant regime in the territory of the country (Art. 16, para. 5 VAT Act).

Chargeable event at import

The chargeable event at import of goods shall occur and the tax shall become chargeable on the date, on which the obligation for paying import duties on the territory of the country arises or should arise, including when obligation does not exist or its amount is zero (Art. 54, para. 1 VAT Act).

A tax upon importation of goods shall be charged regardless of whether the importer is a person registered or not registered under the Act (Art. 48, para. 1 VAT Act). VAT on import is charged by the customs authorities, except in cases where the importer has an investment project, approved by the Minister of Finance, which is charged by the importer by a memorandum (Article 56 and Article 57 of the VAT Act). No tax shall be charged upon placement of goods under free circulation arrangement after "temporary importation with partial exemption from import duty" procedure (Art. 48, para. 3 VAT Act).

Taxable Amount

In accordance with Art. 55 of the VAT Act the taxable amount shall be the value for customs purposes, credited with:

• taxes, duties, imposts and other charges due outside the territory of the country;
• customs duties, excise duties and other charges due by reason of importation into the territory of the country;
• the expenses linked to the importation, such as commission, packing, transport and insurance costs, incurred up to the first place of destination of the goods within the territory of the country.
• - in case said costs result from transport of the goods from the territory of the country to the territory of another member state.

Exemption from Tax upon Importation

According to Art. 58, para. 1 of the VAT Act exemption from tax shall be granted in respect of the importation of:

• goods intended for diplomatic missions;
• human organs, tissues and cells;
• textbooks and teaching aids;
• goods, which will be directly subjected to Intra-European Union supplies (Customs procedure 42);
• gold by the Bulgarian National Bank;
• goods which have been temporarily exported for repair;
• goods, intended for personal use/ or of negligible value;
• personal items etc.

Payment of Tax upon Importation

The tax charged by the customs authorities shall be remitted to Executive Budget Revenue according to the procedure and within the time limits provided for payment of import duties and it can’t be set off against other receivables by the revenue or customs authorities. In case of import under Art. 16 of the VAT Act under a regime "temporary importation with partial exemption from import duty" the tax charged by the customs authorities shall be remitted to Executive Budget Revenue before the release of the goods. The customs authorities shall release the goods after payment of the tax charged or after provision of security in respect of the said tax according to the procedure established for the customs debt, save in the cases where the tax is charged by the importer (Art. 60-61 VAT Act).

Exemption of Tax within Customs procedure 42

Exempt from tax are goods, whose imports are followed by an Intra-European Union supply. In terms of procedure 42 "Simultaneous release for free circulation and end-use of goods, which are the subject of an exempt supply of VAT for another member state Art. 58, para. 1, it. 6 of the VAT Act finds application. According to it tax exemption applies to import, which meets the following conditions:

• the importer is a VAT registered person;
• the transport documents accompanying the goods indicate that the goods are destined for another member state;
• their importation is followed by intra-community supply.

The importer must provide the following data:

• his identity number referred;
• the VAT identity number of the client to whom the goods are destined, issued in another member state, or their own VAT identity number, issued in the member state of the final supply or transportation of the goods;
• evidence that the imported goods are destined for transportation or supply to another member state as set out in the regulations on the implementation of the VAT Act;

When the importer of the goods does not obtain the documents till the expiration of the calendar month, following the month of occurrence of the tax event, the import tax shall become exigible from the importer (Art. 58, para 2-3, VAT).

Import in Bulgaria through another member state

When a Bulgarian company imports goods from a third country through another EU member state, the imported goods on Bulgarian territory from the member state are considered as intra-community acquisition. In accordance with Art. 13, para. 3 and para. 6 of the VAT Act as intra-community acquisition shall also be considered the receiving of goods on the territory of the state by a tax liable person, which will be used for the purposes of his/her economic activity, when the goods have been sent or transported by or at his/her expense from the territory of another member state, in which the person is registered for the purposes of VAT and where the goods are produced, derived, processed, purchased, acquired or imported by him/her in the frameworks of his/her economic activity. The taxable person does not have to be registered for VAT purposes in the other member states.

(The chargeable event at intra-community acquisition under art. 13, par. 3 shall occur on the date, on which the transportation of the goods on the territory of the country ends (Art. 63, par. 2, VAT Act). VAT on intra-community acquisitions becomes due on the 15th day of the month following the month in which the tax event occurred (Art. 63, para. 3, VAT Act). The tax base with intra-community acquisition under art. 13, par. 3 shall be equal to the tax base formed for the purposes of the intra-community supply in the member state, from which the goods are sent or transported (Art. 64, para.2 VAT Act).

Exempt intra-community acquisitions on goods are those that would be released if they were made on the territory of Bulgaria (Article 65 of the VAT Act).