VAT compliance in Bulgaria

Legislation amending Bulgaria’s value added tax (VAT) law was published in the official state gazette on 16 December 2011, and the provision will be effective 1 January 2012.

The changes to the VAT law include:

• Adoption of provisions of VAT Directive 2006/112/EC for determining the tax base of supplies between related parties, allowing the tax base to be the fair market value only when either party does not have the right to a full input VAT deduction (designed to prevent related parties form arranging their VAT deductions by applying non-arm’s length prices)

• Mandatory electronic submissions of VAT returns

• Limitation of the VAT exemption of supplies for construction rights, limited up to the date of the building permit (currently, the supply of construction rights may be VAT exempt if the supply takes place before the completion of the rough construction of the building)

• Penalty provisions for non-compliance with storage of fiscal receipts

• Reduced VAT rate to 9% for hotel and camping accommodations

• Deduction for input VAT on import of second-hand goods.
• Repeal of a rule pertaining to the tax base of supplies of regulated plots of land and new buildings, currently providing that the tax base is not to be less than the acquisition costs of the assets; the change allows for the tax base to be determined according to the contract price (which may be less than the cost of acquisition), thus bringing the Bulgarian VAT law into line with EU VAT Directive 2006/112/EC.