Bulgaria: New VAT regulations

The European Council has adopted a regulation for the implementation of measures in order to ensure uniform application of the provisions of the VAT Directive 2006 in all Member States. The regulation enters into force on 1 July 2011 and has a direct effect in the Member States without having to be transposed into their national legislation.

New responsibilities of the supplier are introduced by the regulation. In the case of cross border services, the supplier has to determine if the customer is a taxable person or not. EU recipients, providing valid VAT identification numbers, will be deemed taxable persons with respect to reverse-charge services. Non-EU business customers will have to prove their tax status providing certificates, VAT or a similar number. Otherwise, suppliers will have to charge local VAT.

If the customer is established in more than one country, the service will be taxed at the place of the fixed establishment receiving the service. The supplier should determine this place based on economic criteria as well as based on the contractual and payment arrangements.

The regulation provides criteria for the determination of the place of establishment of the taxable person. According to the wording it is the place where the central business administration  is performed.

For the purpose of the application of the VAT reverse charge, the Regulation clarifies the criteria for determining whether the fixed establishment is involved in a supply. The fixed establishment is considered to be involved if its VAT number is provided, while it is not considered to be involved if it provides only administrative support.

Administrative cooperation in the tax field. The European Council has adopted a new directive which sets out the rules and procedures for the exchange of information between EU Member States in tax matters. It extends cooperation to direct taxes of any kind and establishes deadlines for providing information. Tax officials will be able to participate in administrative enquiries on the territory of another Member State. This directive should be implemented into the Bulgarian law by 1 January 2013.

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