VAT registration and OSS mode
VAT registration of foreign companies in bulgaria and OSS mode
Changes after 01.07.2021
After 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 for 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 submit a VAT declaration for these sales to the Bulgarian NRA and accordingly will pay its tax liability again to the Bulgarian NRA, regardless of the fact that it does not apply the Bulgarian tax rate of 20%.
The VAT return declaration as well as the payment of the tax liability will be made quarterly.
The VAT declaration itself will summarize sales to each country and indicate the tax due against the tax rate applicable to each country.
It is important to note that the entities can register under the OSS regime and apply foreign tax rates accordingly even before they have reached the turnover of EUR 10,000. This would make sense if the person sells goods in a country where the VAT is lower than in Bulgaria.
The other important thing we want to pay attention to is that the threshold of BGN 10,000 is applicable only if the goods are transported from Bulgaria to an EU Member State.
This means that if, for example, a person buys goods from Germany and sends them for sale to individuals in Italy, he should either immediately apply for registration under the OSS or register for VAT in Germany.
Another important particularity that we want to draw attention to is that even persons who are already registered for VAT on any of the other grounds are subject to registration under the OSS regime – mandatory registration, optional registration, etc. However, if a person is not registered for VAT and decides to register under the OSS regime, he is not obliged to register on any of the general grounds.
Application of the “OSS” mode in the sale of services
The “OSS” regime is also applicable in cases when services are provided to individuals from abroad. It can be applied to all services whose place of performance is in the territory of another EU Member State – such services for example for renting a property located abroad, construction services and others.
What is specific here, however, is that the threshold of EUR 10,000 applies only to the supply of telecommunications services, radio and television broadcasting services and electronically supplied services.
What is IOSS mode?
Import One Stop Shop is another type of regime, which also came into force on 01.07.2021. It applies to persons who sell goods to individuals in the EU, but these goods are up to 150 euros and are imported from third countries.
The regime is also selective and relieves the administrative burden on companies. Its essence is related to the fact that when importing goods from a third country, the company will no longer be obliged to pay VAT to customs in order to release the goods. It will be obliged to pay VAT only when the goods are sold and the VAT is collected by the end customer.
In order to be able to apply this regime, several important conditions need to be met:
The goods must be up to 150 euros and be imported from a third country.
The goods must be intended for a specific customer who is known at the time of release of the goods from customs. That is, if the company simply buys goods with the idea of still looking for buyers and selling them, then the regime is not applicable.
The company must have a valid IOSS number. Such a number is issued after registration under the NRA regime and this number should be provided to the customs authorities.
If there’s anything else we can be of help to you, don’t hesitate to contact us here