In the previous article about the VAT in Bulgaria we introduced you the scope and rates of the VAT, registration under the Bulgarian Value Added Tax Act (VATA) and the filing of tax declarations. In this article we will present to you what are the conditions for VAT return to local and foreign persons, what is the treatment of international goods and services, and how they should be described in the invoices issued.
IV. Refund of VAT
When can we refund VAT to taxable persons registered for VAT purposes?
The VAT tax period is 1 calendar month, which means that individuals must determine their tax result for each month. The result can be either a tax payment (if the amount of VAT charged by the enterprise is greater than the amount of the tax credit used, in which case the tax shall be paid by the 14th of the next month), or a tax refund (if the amount of the tax credit used is greater than the amount of VAT charged on deliveries).
If the taxable person has the right to a VAT recovery for the results in the current month, the amount to be recovered shall be deducted over the next two months from the VAT due in this period.
The remaining VAT to be recovered has to be refunded within 30 days of the submission of the last VAT return declaration from the period of deduction and after offsetting procedure with any other chargeable and unpaid tax liabilities of the registered person. If a tax audit for the obligations of the person is appointed, the period for reimbursement shall be extended until the end of the tax audit.
Entitle to VAT refund is a taxable person (or company), that has generated more purchases /costs / than revenues for the period of three consecutive months. Then the company shall apply for a VAT refund procedure. For this purpose the tax authorities conduct a revision or audit of the applicant.
May VAT be refunded to a person that is not VAT registered?
Yes. According to Council Directive 2008/9/EC, VAT may be refunded to a taxable person by a Member State in which the person is not established, provided that the person is registered in another Member State. For this purpose, the person shall submit to the Member State of refund an application through an electronic portal created by the Member State in which the person is established. The refund application is presented to the Member State of establishment not later than 30 September of the calendar year following the period of refund. The Member State of refund shall notify the applicant of its decision to approve or reject the refund application within four months as of receipt of the application. If additional information is requested, the time limit is extended to eight months. If additional information is requested again, the time limit shall be extended by a further eight months.
Under what conditions does the right to VAT refund arise for foreign persons?
1. The foreign person does not have its seat and registered address, a fixed establishment, domicile or normal place of residence in the Member State of refund;
2. The person has not supplied any goods and/or services deemed to have been supplied in the Member State of refund pursuant to the VATA, with the exception of the following transactions:
a) supply of transport services and services related to international transport services within the meaning of Art. 30 and Art. 31 of VATA;
b) supply of goods and services to a person who is liable for payment of VAT in accordance with Art. 82, Para. 2 of VATA;
3. The country of establishment of the person is included in the list of countries which refund VAT.
V. International supplies of goods and services
How is the export of goods and services treated?
If a person supplies goods from one EU Member State to another, where both the supplier and the recipient are VAT registered in the respective Member States, intra-Community supply (ICS) is performed. In ICS the goods leave the territory of the country from which they are exported. Unlike export, where goods are supplied to states outside the EU, in ICS both the supplier and the recipient are VAT registered in two different Member States. What makes ICS similar to export is that the goods leave the territory of Bulgaria and VAT is not charged (as it is assessed at a zero rate), and the tax is payable by the recipient.
If a company supplies services to a non-taxable person, the place of performance of the transaction is where the supplier is established: its independent economic activity or its permanent establishment (if different from the place where the supplier has established its independent economic activity) or the supplier's permanent address or usual place of residence (if there is no place of establishment of the independent economic activity and no place of permanent establishment).
If a company supplies services to a taxable person, the place of performance of the transaction is where the recipient is established: its independent economic activity or its permanent establishment (if different from the place where the recipient has established its independent economic activity) or the permanent address or usual residence of the recipient (if there is no place of establishment of the independent economic activity and no permanent establishment).
This rule also applies to cases where the recipient – a non-taxable person – is established outside the EU, and the supplied services are of the so called intellectual nature, such as consultancy, advertising services, transfer of rights, patents, licenses, software development, data processing, etc. In such cases the place of supply is in the state of the recipient, i.e. the supplier shall not charge VAT, and the recipient will perform VAT self-assessment, if required by the local legislation.
The above rules for determining the place of supply, depending on the status of the recipient, shall not apply to the following groups of services:
- Supply of a service in relation to a real estate;
- Transport of passengers;
- Services related to cultural, artistic, sports, scientific and other similar events;
- Supply of restaurant services and catering services;
- Short-term renting of vehicles for not more 30 days.
How is the export of goods treated?
Intra-Community acquisition (ICA) concerns the acquisition of goods from another EU Member State, when the supplier is VAT registered in this Member State.
What makes ICA similar to export is that the goods are received in Bulgaria. However, unlike import, where customs control is exercised and VAT is paid to the Customs Agency, ICA is not subject to customs control and VAT payment is generally not effected. The recipient in ICA shall perform 20% VAT self-assessment, and if at the same time the recipient has the right to tax credit, no net tax effect would be present.
If the goods are supplied in a state outside the EU, they are released by the customs with a customs declaration, and VAT is payable to the customs. In such case, the tax amount is effectively paid to the customs authorities, and in case of tax credit, the paid amount of VAT will be deducted from the VAT liabilities of the enterprise or actually refunded.
Is there an obligation invoices to be issued?
Yes. Any VAT registered taxable person as a supplier is obliged to issue an invoice for the supply of goods or services performed by this person or upon receipt of advance payment for the supply (Art. 113 of VATA).
The invoice may not be issued in cases where the supply is documented by issuance of a protocol.
It is possible that an invoice is not issued in the following cases:
- Supplies where the recipient is not a taxable person;
- Supplies of financial services released from taxation by law;
- Supplies of insurance services released from taxation by law;
- Sale of airline tickets;
- Free supplies;
- In the case of deliveries under the distance-selling regime of goods imported from third countries or territories or from non-EU countries;
- In the case of services provided by natural persons who are not legally registered, with the exception of sole proprietors, if another type of document described in another law is issued for the services provided by them, or if the issuance of a document is not mandatory under the Value Added Tax Act
What are the mandatory requisites of the invoice?
The invoice should mandatorily contain the following requisites:
- Type of the document;
- Ten digits sequence number containing only Arabic numerals as a unique identification of the invoice;
- Inscription ‘original’ on the first copy;
- Date of issuance of the invoice;
- Name, address and identification number of the supplier;
- Name, address and identification number of the supply recipient;
- Quantity and kind of the goods and/or service;
- Date of occurrence of the tax event of the supply or date of receipt of the payment;
- The unit price without VAT and the tax base of the supply, as well as trade discounts and rebates, if not included in the unit price;
- The tax rate, or where the tax rate is zero – the grounds for non-assessment of the tax;
- Payable amount, if different from the amount of the tax base and the tax.
What is the term for issuance of an invoice?
The invoice shall be issued not later than 5 days as of the date of occurrence of the tax event of the supply. In case of advance payment effected for the expected supply, the invoice shall be issued not later than 5 days as of the date of receipt of the payment. In case of ICS, the invoice shall be issued not later than the 15th day of the month following the month of occurrence of the tax event of the performed supply. The invoice for the advance payment received in connection with this intra-Community supply shall be also issued not later than the 15th day of the month following the month of occurrence of the tax event of the performed supply.
May supplier issue electronic invoices?
Yes, this is subject to negotiations and acceptance on the part of customers.
Are there any specific requirements to electronic invoices?
- It is necessary the recipient to confirm receipt of the invoice;
- The authenticity of origin and the entirety of the content of the electronic invoice shall be guaranteed;
The issuance of an electronic invoice requires an electronic signature (within the meaning of the Electronic Document and Electronic Signature Act);
- The invoice shall contain all mandatory requisites;
- In the previous article about the VAT in Bulgaria we introduced you the scope and rates of the VAT, registration under the Bulgarian Value Added Tax Act (VATA) and the filing of tax declarations. In this article we will present to you what are the conditions for VAT return to local and foreign persons, what is the treatment of international supplies and services, and how they should be described in the invoices issued.
Is it possible that a company to issue an invoice for a supply in which the company itself is a recipient?
Yes. However, this is subject to certain conditions in case of a taxable supply performed by a taxable person.
Are there any specific requirements to self-billing?
- Preliminary agreement between the parties – the supplier and the recipient
- Existing procedure for receipt of each invoice or invoice notification by the tax liable person supplying the goods and services.
Is it possible for a company to issue a VAT invoice in another currency?
Yes, it is possible. The invoiced amounts may be specified in any currency, provided that the VAT amount due is converted in the national currency of the Member State. In case of converting currencies other than the euro, the exchange rate of the respective currency to the euro shall apply, as published by the European Central Bank at the time of the tax becoming payable.
How long should the invoices and records be stored?
Any taxable person, whether or not VAT registered, should store the issued and received tax documents for up to 5 years after expiry of the prescription term for public liabilities. (Art. 121, Para. 1 of VATA).
In case the taxable person stores data with the help of electronic means guaranteeing online access to electronic invoices and electronic invoice notifications issued or received by this person, the person shall ensure electronic access to the stored data for the competent revenue authorities. For the purpose of control, the revenue authorities shall have the right to withdraw and use the stored invoices.