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August 12, 2020

Amendments to the Local Taxes and Charges Act and the Value Added Tax Act

In State Gazette No 71 from 11 August 2020 the Law on Amendment of the Local Taxes and Charges Act was promulgated. By means of the Transitional and Conclusive Provisions of the mentioned Act some important amendments to the Value Added Tax Act has been adopted concerning supplies to which a reduced tax rate of VAT shall be applied.

The adopted amendments to tax laws are aiming mainly to support the enterprises which activities have been directly affected by the state of emergency declared by Decision dated 13 March 2020 of the National Assembly. At the same time, by means of the amendments the application of some of the legal provisions of the Local Taxes and Charges Act has been facilitated.

The most important amendments to legal provisions could be summarized as follows:

1. In the Local Taxes and Charges Act (LTCA)

By means of the new § 3 of the Transitional and Conclusive Provisions of the Law on Amendment of LTCA, an opportunity is provided based on decision issued by the Municipal Councils, some of the enterprises which have ceased business activities performed in real estate situated on the territory of the respective municipality (as a result of the state of emergency declared with Decision dated
13 March 2020 of the National Assembly) to be exempted from the payment of garbage charges due for garbage collection and transportation. The exemption will be valid for a certain period of time of year 2020.

The enterprises which would like to avail of the mentioned exemption shall evidence the ceased activities for the respective period by financial and other documents ensured under the terms and conditions determined by the Municipal Council of the respective municipality.

With the amendment of Art. 61r, para 5 of LTCA is regulated that the deadline for filing of a standard form declaration for taxation with tourist tax is 31st January of the year following the year for which the tax is due (before the amendment the deadline for declaring was 30th January which led to some omissions by the tax liable persons).

The amendments to the LTCA become effective on 11 August 2020.

2. In the Value Added Tax Act (VATA)

Art. 66, para 2 of VATA has been amended as a result of which the scope of the supplies to which a reduced tax rate of VAT is applied has been extended. By 9% VAT will also be taxed:

  • The supplies of beer and wine which are part of restaurant and catering services including supplies of cooked food and not cooked food. The change is achieved by amendment to 66, para 2, point 3 of VATA and by excluding the particular supplies from the scope of the supplies to which the reduced tax rate is not applicable. The spirit drinks which are supplied as part of restaurant and catering services remain taxable by 20% VAT. Respectively, the provisions containing definitions for beer and wine have been repealed (§ 1, points 98 and 99 of the Additional Provisions of VATA).
  • The supplies of general tour operators’ services under Art. 136 VATA, including the organization of excursions by tour operators and travel agents with occasional bus transportation (new point 6 of Art. 66, para 2 of VATA). A definition for “occasional bus transportation under Art. 66, para 2, point 6” has been added in the new point 101 of the Additional Provisions of VATA which makes a reference to 1, point 24 of the Additional Provisions of the Law on Road Transportation defining “occasional bus transportation” as a transportation under preliminary ordered conditions of a preliminary determined group of passengers without change in the group from the starting point to the end point.
  • The supplies of services including the use of sports facilities (new point 7 of art. 66, para 2 of VATA. There is no definition for “sports facilities” included in VATA which may lead to difficulties in the correct application of the amended legal provisions by the tax liable persons and the revenue authorities.

The amendments to VATA become effective on 1 August 2020 and will be applicable until
31 December 2021.

It remains unclear how the provisions of VATA shall be applied in respect of the supplies performed between 1 August 2020 (the date of entering into force of the amendments to VATA) and
11 August 2020 (the date of promulgation of the law amendments in State Gazette) for which tax documents have already been issued with 20% VAT charged therein and whether, and how corrections shall be made in the charged VAT for these supplies.

By means of the Law on Amendment of the LTCA some amendments to the Law on the Road Traffic, the Law on Road Transportations and the Law on the Measures and Actions During the State of Emergency Declared with Decision Dated 13 March 2020 of the National Assembly have been adopted.

This material is not exhaustive, but rather has general information nature and does not constitute specific advice or consultation. Should you have questions, do not hesitate to contact us at tel. + 359 2 9433700, fax + 359 2 9433707, e-mail: office@afa.bg or at the following address: 1504 Sofia, 38, Oborishte Street.

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