Registration, deregistration and particularities:
We live in very dynamic times, in which the business is developing at a significant pace and every second counts. It is subject to continuous changes and tests from a legal point of view, both nationally and internationally, and must always be “up to date” in order to be able to develop in the most optimal and effective way.
VAT registrations remain significantly constant, as types, but are so numerous and cover so many different hypotheses, so it is good to closely monitor the changing legal world so that we can offer the most accurate and fast service on this issue:
Art. 96 of the VAT Act – this is any company (and in some cases even an individual) that sells goods or services in the country (and not only, but more information on the topic could be found below) and they exceed BGN 50,000 for 12 consecutive months, before the current one is subject to obligatory registration under art. 96, para 1. The registration is done by submitting an application for VAT registration.
After verification by the tax authorities, they issue a registration certificate. It is important to note that the person is considered to be registered and accordingly must start charging VAT on his sales from the date on which the registration act is served on him.The other thing we believe is important to pay attention to is that the income from the sale of fixed assets that the person uses in his activity is not included in the turnover for VAT registration.
This means that if, for example, a company sells a building for BGN 80,000 , which he has previously used in his production activity, the person will not have grounds for mandatory VAT registration.The third important thing that we want to add, albeit on a specific hypothesis, is related to the companies whose main activity is related to the provision of financial and insurance services.
For these companies, the law says that upon reaching a turnover of BGN 50,000, mandatory VAT registration should be carried out, although after this registration the supply of these services – financial and insurance, should be considered an exempt supply and does not give grounds for an accrual of VAT obligation.
In addition to mandatory VAT registration, it can also be voluntary. This means that any person for whom there are no grounds for mandatory registration can choose to register.
The registration procedure is done by submitting an application for registration of choice to the NRA. As a result, the tax administration issues a registration certificate and from the date of service the person should charge VAT on his sales.It is important to note that once registered for VAT, the person should charge VAT on all their sales.
In this sense, it is not possible to approach selectively, although VAT registration was optional.Usually such registration is initiated by companies whose contractors (customers and suppliers) are mainly VAT registered entities. This is because of the possibility of using a tax credit or the more popular name “VAT refund”.
The special VAT registration for services is regulated in Art. 97a of the VAT Act. According to this provision, any person/entity who intends to receive (purchase) a service from a contractor established outside Bulgaria. For example Google, Facebook, Booking, Airbnb, Instagram, LinkedIn.
Should register for VAT and for this purpose submit a notification for registration at – no later than 7 days before receiving the respective service. It is important to note here that it does not matter whether the counterparty is established in an EU Member State or in a third country or territory.
A third country is considered to be any non-EU country.The situation in which the person intends to provide services abroad is slightly different. In this case, grounds for mandatory registration under Art. 97a arises only in cases where the person provides these services to EU taxpayers.
This means that, on the one hand, it is important for the person/entity to be established only in the EU on the one hand and to be a taxable person on the other. A taxable person is any person who has provided us with a valid VAT number (called a VAT number).
What are the consequences, advantages and disadvantages of this special mandatory registration?
First of all, it is important to note that a person who is registered on the basis of Art. 97a is not entitled to a tax credit. This means that the person cannot refund VAT, as is the case with the general VAT registration.The next particularity is that the company has to pay VAT for the services received from abroad. This is done through the so-called self-assessment of VAT. This is actually the most unpleasant consequence of this registration, because for every service purchased from abroad, the person will have to effectively pay tax to the state treasury.
The third particularity we will pay attention to is that for all sales of services to EU taxpayers, the person will owe a tax of 20%, which must be paid to the state by the 14th of each month.Next, we can point out a positive consequence of this registration. It is related to the fact that no VAT should be charged for the other sales.
This means that all its sales, except for sales of services to the EU, the person/entity does not owe tax and is considered unregistered for VAT.Lastly, we will pay attention to the fact that the revenues from sales of services to taxable persons from the EU are excluded and do not participate in the formation of the turnover for mandatory registration under Art. 96 of the law.
Here it is important to note, however, that the existence of registration under Art. 97a does not release the person from his obligation to register under the general procedure upon reaching a taxable turnover of BGN 50,000. In this case, the general registration will overlap the special one and it will be canceled. The positive side in this situation will be that the ban on using a tax credit will be lifted.
The next special registration we would like to pay attention to is related to the purchase of goods from the European Union. An important condition here is that the physical movement of the goods shall be from a Member State to Bulgaria.In these transactions, the supplier is registered for VAT in his own country and therefore must provide his VAT number to the Bulgarian company, as he must indicate this in a special declaration called a VIES declaration.
All persons/entites who, within one calendar year, purchase goods worth or exceeding BGN 20,000 are obliged to carry out such registration.It is important to note that this provision does not apply to cases where new vehicles and goods are subject to excise duty. New vehicles are those for which 6 months have not elapsed since the date of initial registration and the mileage is not more than 6000 kilometers. Examples of excisable goods are alcohol, cigarettes and energy products, and electricity.
This registration is also prohibited from using a tax credit (VAT refund). The person must pay 20% VAT for each purchase of goods from the EU.Furthermore we can point out a positive consequence of this registration. It is related to the fact that for their sales, as long as they are not services to the EU, the person does not owe tax and is considered unregistered for VAT.
There are many foreign companies on the market that do business all over Europe, even overseas, thus reaching a wider range of services / goods they offer. With the rapid pace of globalization and the increasingly rapid development of IT technologies, the international aspect of business is no longer a “mere mirage”, but a fully achievable goal that could very quickly launch it into unfamiliar but also more profitable waters. process is a very very important part of its development and growth.For this purpose, some companies are subject to mandatory VAT registration in Bulgaria:Changes after 01.07.2021After 01.07.2021, the European Union made a serious reform of the VAT rules.
The changes will affect all those who sell goods and services in the European Union to non-taxable persons. All individuals, as well as companies that are not registered for VAT, are considered non-taxable persons.
After 01.07.2021, the companies that sell goods to individuals from the European Union upon reaching a turnover of 10,000 euros within one calendar year will have two options:
– One possibility is to register for VAT in each individual country in which they have sales. Our team does not recommend this option because it is extremely expensive and difficult for business.
– The second option is to register under a special mode, which is known as “One Stop Shop (OSS)”. Registration under this regime is generally optional, but if the person chooses not to register, the first option should be considered.
What is typical in the “OSS” mode?
If, however, the person chooses to register under the “OSS” regime, he will have to charge VAT at the rate valid for the respective country in which he sells. For example, for Germany it will charge 19% VAT, for Greece it will charge 24% VAT, and so on.The relief provided by this regime is that the administration of tax liabilities will be carried out before the Bulgarian NRA, and not before the foreign one.
This means that the company will have to file a VAT return for these sales with the Bulgarian NRA and will accordingly pay its tax liability again to the Bulgarian NRA, regardless of the fact that it does not apply the Bulgarian tax rate of 20%.
VAT deregistration is a procedure that should be initiated by the company. This is done by submitting an application for deregistration.After successful deregistration, the person will now be considered unregistered for VAT and should stop charging VAT on the sales. Respectively, the right to use a tax credit is terminated.
In order for a person to be deregistered for VAT, certain conditions should be in place, which are exhaustively listed in the law. First of all, they depend on the grounds on which the person is registered.If the person is registered on the grounds of mandatory registration under Art. 96. In order to be able to submit an application for deregistration, the turnover of the person for the last 12 months should be below BGN 50,000, ie the grounds for which the person has registered have disappeared.
If the person is registered on the basis of optional registration:
– Art. 100, therefore in order to be able to deregister at least 12 months must have passed from the date of registration. The specific thing here is that these 12 months start counting from the year following the year in which the person has registered.For special registrations, the grounds for deregistration follow the general rule which is:
– If the grounds on which basis the registration was made are dropped, then the person has the right to submit an application for deregistration.
We need to pay attention to another important particularity. In case of VAT deregistration, the person should return the used tax credit for all goods that are available as of the date of deregistration.