Amendments to the Value Added Tax Act (VATA) were adopted at first reading in the National Assembly of Bulgaria in mid-November. Some of the proposals concern ensuring the proper collection of VAT and preventing tax evasion.
The purpose of the legislative changes is to facilitate the process of charging and paying the due tax by the persons who have made taxable supplies of goods or services but have not registered for VAT or have done so late. According to the proposal, these persons will be able to issue a tax document (invoice) for the supplies they have made during the late registration period and thereby collect the tax due. This will give them the right to benefit from a tax credit, i.e. to deduct from the tax due the amount of the relevant tax they have paid for their expenses. At the same time it will enable them to render tax credit to the consignees on the supply who will also be able to make the same deductions from their tax amount payable. This will avoid the double taxation on the same value.
In addition to the above, this will reduce the administrative burden for persons who have not registered on time, as well as for the tax administration, since it will not be necessary to issue protocols for determining obligations under the Tax-Insurance Procedure Code. Protocols are complex, time-consuming and, moreover, provoke a tax revision that can be appealed. In case the persons who have not registered for VAT purposes on time do not use the opportunity to charge the tax due through an invoice, they will be obliged to do so through a protocol, thereby losing the right to a tax credit and exposing themselves to a higher risk of sanctions. In addition, they will owe interest on the tax due, which will be charged from the date on which the tax should have been paid if the person was registered for VAT on time. The proposed change will apply to all taxable persons who were obliged to register for VAT, but have not done so, regardless of the amount of their turnover or the type of their activity.
Legislative changes in VATA, on the other hand, affect the supply of bread and flour, as well as restaurant services. The proposed legal provisions, which have been approved in the first vote in Parliament, aim to help households and businesses cope with high food prices. In particular, it is proposed to continue the application of the zero rate of VAT on bread and flour in order to reduce the financial burden on the citizens in need who in general spend a large part of their income on the referred to products.
The continuation of the measure to apply a reduced rate of VAT to restaurant services will contribute to the general support of the sector, which has been severely affected by the pandemic and competition. These measures will help the prevention of VAT evasion and will save job positions.
Finally, the proposed changes in the VATA, provide for the right of customers not to pay for goods or services in case the seller has not issued a proper payment receipt.