Key points in the bill for amendment of the VAT Act

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A new reform of the VAT legislation is expected this year. The new Parliament is expected to adopt the changes proposed to align Bulgarian legislation with European directives, the latest case law of the EU Court of Justice, as well as to refine certain provisions related to the application of the “in Union” and “outside Union” schemes for distance sales of goods imported from third countries or territories.

  • Firstly – changes are proposed to implement the requirements of Directive (EU) 2021/1159. They are aimed at ensuring VAT exemption for imports carried out by the European Commission (EC) or by an agency or body established under EU legislation, respectively applying a zero-rate tax to supplies of goods and services with a place of performance in the territory of the country, for which the recipients are the same bodies, when carrying out tasks to deal with the consequences of the COVID-19 pandemic. The Bill also proposes to implement the requirements of Directive (EU) 2019/2235 to introduce an exemption from VAT covering the supply of goods or services intended either for the use of the armed forces of an EU Member State, or of the civilian personnel accompanying them, or for the supply of their messes or canteens.

Exemption is provided for imports of goods by the European Commission or by an agency or body established under EU law where the EC or such agency or body imports those goods in the performance of tasks assigned to it by EU law in response to the COVID-19 pandemic, except where the imported goods are used immediately or at a later date for the purpose of further supply for consideration by the EC or such agency or body. A zero-rating is also envisaged for supplies of goods and services with a place of performance in the territory of the country where the recipients are again the EC or one of the above, again on the assumption that the supply is to address the effects of COVID-19.

  • In view of judgments of the ECJ in the cases – C-314/17 Geocycle Bulgaria Ltd, C-111/14 GST-Service AG Germany, C-835/18 SC Terracult SRL, C-138/12 Rusedespred Ltd, etc., in which the CJEU held that, in order to ensure the neutrality of VAT, Member States should provide in their domestic legislation the possibility of correcting invoiced tax which should not have been charged, provided that the issuer of the invoice proves its good faith, including in the event of a final audit decision. It is proposed that the correction of tax documents in the presence of a final revision act can be carried out in accordance with the procedure laid down in the law, with regard to the correction of invoices, notices and reports, in cases where tax has not been charged although it should have been charged, and in cases where tax has been charged although it should not have been charged, and where the wrong rate of tax has been applied to the supply.
  • Changes are also expected in view of the discrepancies identified with the provisions of the VAT Directive (Directive 2006/112/EC). The EC has identified an inconsistency with regard to food vouchers under Article 131, para. 2, p. 3 of the VAT Act, which meet the necessary conditions to be considered as ‘vouchers’ within the meaning of Article 30a, para. 1 of the VAT Directive. In this context, it is proposed to remove the provision of Article 131, para. 2, p. 3 which excludes food vouchers from the scope of special purpose vouchers and multi-purpose vouchers.
  • The following changes are also proposed relating to the need of clarification of provisions relating to the application of the non-Union scheme, the Union scheme and the regime for distance selling of goods imported from third countries or territories:
  1. Clarification of the procedure for exercising the right to choose the place of performance for supplies of intra-Community distance sales of goods and supplies of telecommunications services, radio and television broadcasting services and services performed by electronic means, specifying that the right to choose the place of performance below a threshold of EUR 10 000 is in the country of the recipient in the case of supplies of electronic services or in the country where the transport of the goods ends, in the case of intra-Community distance sales of goods;
  2. It is specified that a taxable person who has not exceeded the threshold for determining the place of performance for supplies of intra-Community distance sales of goods and supplies of telecommunication services, radio and television broadcasting services and services performed by electronic means, therefore the supplies carried out by him have a place of performance in the territory of the country, shall also have the right to register for the application of the Union scheme. In that case, the person shall, by the application for registration for the application of the scheme in the Union, notify that he wishes to opt for the place of supply to be where the taxable person to whom the supply is made is established, has his permanent address or has his usual residence;
  3. It is specified that the taxable persons established in the territory of the country, who are registered only for the application of the Union scheme in the territory of the country, shall not be entitled to indicate tax in the invoices and notices to invoices issued by them for supplies with place of performance in the territory of the country, to which the scheme is not applied;
  4. It is provided that a taxable person, including one who operates an electronic interface, shall issue an invoice for the supply of intra-Community distance sales of goods or domestic distance sales of goods with a place of performance in the territory of the country, where the person is not registered for the application of a regime in the Union under this law or in another Member State;
  5. With regard to taxable persons who have opted to apply the distance selling regime for goods imported from third countries or territories, in order to avoid the risk of non-taxation of imports, it is proposed that as a condition for registration under the import regime they should be registered under the general rules of the law;
  6. It is proposed that the representative who represents the taxable person for the application of the distance selling regime for goods imported from third countries or territories shall be deemed to be the person’s accredited representative for all his tax relations under that regime and shall be jointly and severally liable for the obligations under that regime;
  7. A clarifying provision is proposed with regard to supplies to which the special regimes apply – the tax is due for the Member State of consumption where the place of supply is.

Changes are also expected in relation to the redrafting of provisions which were found difficult in their practical application:

  • it is proposed that the reduced rate of 9 per cent for certain goods and services be applied until the end of the declared emergency epidemic situation in the country,
  • it is proposed to extend the range of food suitable for infants or young children to which the 9 % VAT rate applies,
  • it is proposed to clarify that the acquisition of goods dispatched or transported from the territory of another Member State for the purpose of intra-Community distance selling of goods with a place of performance in the territory of the country is not an intra-Community acquisition.
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