The nature of VAT
Value added tax, or VAT (MwSt, BTW, etc.) is one of the least understood tax in the corporate world. In fact this is the tax that we all pay – no matter where we live or how much we earn. If you think that you are only paying taxes in your home country, think again. Each of your restaurant or hotel bills when you travel abroad are loaded with about one fifth of the amount in the form of VAT (with some very rare exceptions). Paying VAT is easy though. Managing it, as VAT liable person or company, is far more complicated.
VAT in Bulgaria – FAQ
How much is the VAT in Bulgaria?
Value Added Tax in Bulgaria is generally set at 20%, which is more or less an average in the EU and also Worldwide.
What is “registered entity for the purposes of VAT” in Bulgaria
From the taxation/VAT legal point of view, the entities in Bulgaria can be either VAT registered or non-registered. By default, everybody is not registered. Registered entities need to invoice VAT to their customers (unless the goods or services are free of VAT, ie Investment Gold), thereby adding 20% to each invoice and then paying these 20% to the government. Non registered entities will invoice net amounts (exclusive of 20% VAT) and will have no liability to pass anything to the government in form of VAT.
Who can become VAT registered entity? Are only companies required (or allowed) to registered for VAT?
Contrary to the popular belief, VAT regulations apply to both commercial entities (companies) and private individuals alike. So if you are private individual, chances are you still have to register for VAT in Bulgaria (please keep reading to understand more about),
What are the conditions for VAT registration in Bulgaria?
In Bulgaria, everybody can voluntarily apply for VAT registration. Apart from voluntary registration, there is a compulsory registration requirement. There are different scenario when one is required to apply for VAT registration, but the main one is when an entity exceeds the amount of 50 000 BGN (25 565 EUR) in VAT taxable income. In other words, if a new company (or an individual as a matter of fact) starts trading, at the moment when the company reaches 50 000 BGN in VAT taxable sales, it has to immediately apply for VAT registration.
Please be advised that the above is only for illustration purposes. The VAT legislation and conditions are far more complicated. We urge you to contact us for any information you might require on the topic or to visit our main site’s accountancy section at: http://www.euroformat.eu/
Is everyone guaranteed VAT registration in Bulgaria?
Absolutely NOT! VAT registration is subject to approval by the Bulgarian authorities and cases of refusal are on the rise in recent years. Although VAT is in most cases a compulsory process, its approval is in no way guaranteed.
What are the consequences if one has been obliged to, but has not registered for VAT?
The consequences can be disastrous. The entity that has failed to register for VAT in time will be not only subject to huge fines, but will also need to pay 20% VAT on all (non-VAT) invoices it has issued from the moment of when it should have registered for VAT. These amounts, in many cases, can be quite significant.
If you need any assistance with your VAT fillings or any other VAT-related issue, please don’t hesitate to contact us. We wish all of you Good Luck!