Foreign suppliers must VAT-register for “supply and install” contracts
From 1 January 2026, Bulgaria has changed how VAT applies to goods supplied with installation or assembly by foreign EU suppliers. Under amendments to the VAT Act published at the end of December 2025, these transactions will no longer fall under a domestic reverse-charge mechanism.
Instead, the foreign supplier becomes responsible for charging Bulgarian VAT and must register locally before carrying out the first taxable transaction.
Previously, Bulgarian customers could often self-account for VAT where the supplier was not established in Bulgaria, keeping transactions largely cash-flow neutral and avoiding local VAT registrations for project suppliers.
Read more in our Bulgaria VAT guide.
Why EU law allows this change
The reform aligns with the structure of the EU VAT Directive:
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Place of supply rule: Where goods are supplied with installation or assembly, the supply is taxed in the Member State where the installation takes place. If the equipment is installed in Bulgaria, Bulgarian VAT applies.
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Reverse charge is optional: While Member States are permitted to shift VAT liability to the customer for supplies made by non-established suppliers, this is a policy option, not a legal obligation. Bulgaria is therefore entitled to remove the reverse charge and require the foreign supplier to account for VAT directly.
In effect, Bulgaria is asserting its right to collect VAT through mandatory supplier registration rather than customer self-assessment for these transactions.
How this compares with other EU Member States
Many Member States still use reverse-charge mechanisms to limit VAT registrations for foreign suppliers. For example:
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Germany commonly applies reverse charge to certain installation and “works supply” scenarios involving non-established suppliers.
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Netherlands and Spain broadly shift VAT accounting to the local VAT-registered customer where the supplier is not established.
Bulgaria’s approach is therefore more registration-driven than many peers and increases the compliance footprint for EU suppliers delivering projects locally.
VAT obligations for suppliers and their customers
EU suppliers
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Must obtain a Bulgarian VAT registration before first supply.
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Need to update contracts, pricing assumptions, and invoicing processes.
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Must ensure ERP and tax engines correctly apply Bulgarian VAT.
Bulgarian customers
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Will receive VAT-charged invoices rather than applying reverse charge.
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Input VAT recovery timing and cash flow should be reviewed.
