Special scheme for small businesses; new fixed asset and stocks reporting; place of supply live streaming events
On 18 September 2024, the Bulgarian Ministry of Finance (MOF) published a proposal for amendments to the Value Added Tax (VAT) Act, aimed at introducing special VAT regimes for small enterprises and making other significant updates to VAT regulations.
The proposed changes are designed to ensure compliance with European Union (EU) laws and to improve the administration of VAT in Bulgaria. A public consultation on the amendments will be open until 18 October 2024.
Key Aspects of the Proposed Amendments:
Small Enterprises Special VAT Regimes:
A central feature of the amendments is the introduction of special VAT regimes for small enterprises. This change is in line with EU Directive 2020/285 and Regulation 904/2010, which seek to harmonize VAT rules across Member States and provide exemptions for small businesses. Under the proposed changes, small enterprises operating both domestically and within the EU would benefit from VAT exemptions up to a certain registration threshold. The aim is to ease the VAT burden on small businesses, allowing them to grow without being hindered by complex VAT obligations.The introduction of these special regimes is part of Bulgaria’s efforts to align its VAT regulations with broader EU laws. By allowing small enterprises established in different EU Member States to benefit from VAT exemptions up to the registration threshold, the amendment seeks to create a more level playing field for small businesses across the EU. These changes are expected to simplify VAT compliance for smaller enterprises and make it easier for them to engage in cross-border trade within the EU.
New Reporting Obligations for Fixed Assets and Material Stocks:
Another key proposal is the introduction of new reporting requirements for VAT-registered persons. The amendment would require registered businesses to provide data on their available long-term assets and material stocks at the end of each calendar quarter. This change is intended to improve transparency and ensure more accurate VAT reporting. By mandating quarterly reporting on fixed assets and stocks, the Bulgarian tax authorities will have better oversight of the inventory and capital assets of registered entities, allowing for more precise VAT assessments. Plans for Bulgarian SAF-T implementation are still pending.
Clarifications on the Place of Supply for Virtual streaming event:
The proposal also aims to clarify VAT rules for electronically supplied broadcasts, specifically regarding the place of supply. Under the amendments, VAT will be charged in the Member State where consumption occurs, ensuring that the tax is applied in the correct jurisdiction. This change applies particularly to live internet broadcasts and other virtual access services, which have become increasingly common in the digital economy. By ensuring that VAT is applied where the consumer is established, the proposal aligns with the EU’s broader efforts to modernize VAT rules for the digital age.
Amendments to VAT on Imports for Investment Projects:
In line with EU Regulation 2023/2831, the proposal includes amendments to the special procedure for charging VAT on imports related to investment projects. This change is expected to streamline VAT procedures for businesses involved in investment projects, making it easier for them to manage VAT on imports. The proposed changes are part of Bulgaria’s ongoing efforts to improve the VAT system for businesses, particularly those engaged in large-scale investment projects.
Updates to VAT Exemptions for Financial Services:
The amendments also propose updates to VAT provisions related to financial services. The goal is to align these provisions with the 2021-2027 EU programming period and clarify the role of fund managers of financial instruments in Bulgaria, specifically those acting as a “holding fund.” These updates reflect the evolving role of financial services within the Bulgarian economy and are intended to ensure that VAT rules remain relevant and up-to-date.
Changes to the Calculation of Taxable Turnover for Second-Hand Goods and Travel Services:
Lastly, the proposed amendments include changes to the way taxable turnover is calculated for second-hand goods and travel services. Under the new rules, taxable persons will no longer be able to calculate taxable turnover using the margin scheme. Instead, the total remuneration will be used as the basis for calculating turnover, in line with current tax practices. This change is expected to standardise VAT calculations and reduce potential discrepancies in the way VAT is applied to these services.
EU reforms being implemented in Bulgaria
The proposed amendments to Bulgaria’s VAT Act represent a significant step toward aligning the country’s VAT regulations with EU directives and modernizing its tax system. By introducing special VAT regimes for small enterprises, updating reporting obligations, clarifying rules for digital services, and improving VAT procedures for financial services and investment projects, the Bulgarian Ministry of Finance aims to create a more efficient and transparent VAT system. The public consultation on these proposals will run until 18 October 2024, providing stakeholders an opportunity to offer feedback before the amendments are finalized.
