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Amendments to the Value Added Tax Act

January 5, 2023

Amendments to the Value Added Tax Act


In State Gazette, issue 102 of 23 December 2022 a Law on Amendment and Supplementation of the Value Added Tax Act (LAS VATA) was published. The most important changes are related to:

1. Reduction of the tax base and the VAT charged in case of bad debts

The issues related to correction of VAT charged by supplier when the receivable is uncollectible have been subject to discussion and disputes in the recent years. Bulgaria availed from the possibility for derogation provided by Art. 90, para 2 of Directive 2006/112 (the Directive) and until now the Bulgarian legislation did not provide an option for making such adjustment. In several decisions, including the decision under case С-242/18 UniCredit Leasing EAD, the European Court of Justice (ECJ) proclaims that the member-states shall not deny completely the possibility for making adjustment in case of permanent non-payment under supply using the possibility for derogation under Art. 90, para 2 of the Directive but shall arrange the conditions under which adjustment can be made in case of bad debts. The practice of the Bulgarian court on cases in this respect is inconsistent and controversy because of the lack of express legal provisions.

The LAS VATA and the provisions of the new Chapter Thirteen “a” determine the conditions and the way of making the adjustment to the VAT charged in case of non-payment by the recipient under the supply. The conditions which shall be available in order adjustment of the tax base and of the VAT charged by the supplier to be made are: (1) an invoice to be issued for the supply; (2) the recipient and the supplier shall not be related parties as at the time the receivable becomes uncollectible; (3) the receivable is not transferred for consideration; (4) the supplier can prove that actions have been undertaken for collection of the receivable; (5) the supplier has notified the recipient in writing that he will consider the receivable uncollectible and keeps evidence for that.

The cases when the receivable shall be deemed uncollectible are expressly enumerated. In general, the hypothesis enumerated in the law are similar to those mentioned in Art. 37, para 1 of the Corporate Income Taxation Act (CITA) – expiry of 3/5 years from receivable maturity or 365 days for receivables up to BGN 600; court decision issued by means of which the receivable is completely or partly proclaimed undue; the receivable is settled by law; the receivable has not been collected after completion of execution proceedings; reduction of the amount of receivable by a recovery plan; the debtor has been deleted after insolvency or liquidation proceedings.

The way of making the adjustment depends on the status of the recipient under the supply – VAT registered or non-registered person:

  • When the recipient is VAT registered at the time of supply the adjustment shall be made by a credit note issued by supplier.
  • When the recipient is VAT non-registered as at the time of supply or its registration was cancelled because of insolvency or liquidation, or there is no right of input VAT deduction for the supply, the adjustment shall be made with a protocol under procedure to be determined in the Regulations for Application of VATA. In such case the reduction of the VAT charged shall be calculated as the difference between the VAT charged for the supply and the input VAT deducted by the supplier for goods and services directly related to the supply.

The document for adjustment shall be issued within 3 months after the expiry of the tax period of occurrence of the circumstances giving right to adjustment. The document issued shall be stated in the Sales Ledger with a minus. In case the supplier receives subsequent payment for the supply he shall make a reverse adjustment and issue a debit note/protocol for charging VAT.

There is no need to notify NRA for the adjustment unless the tax base of supply is more than
BGN 100,000.

Adjustment of the tax base and the VAT charged is not allowed when the supplier knew or should have known that he will not receive payment for the supply. It is deemed that the supplier should have known that no payment will be received under the supply in case the supply is fictitious, evades the law or is at a price that differs significantly from market price.

On the other hand, with the amendments or Art. 78, para 2 and 3 VATA an obligation is created for the recipient under the supply to make an adjustment of the input VAT deducted in the tax period of receipt of the credit note issued by the supplier by including it in the Purchases Ledger and in the VAT return for the respective period. Adjustment of the input VAT deducted shall be made also by persons whose VAT registration has been cancelled under the procedure in the new provision of Art. 126,
para 9 VATA. They shall notify the NRA and submit ledgers and VAT return for the period when the credit note was received, within 14 days of obtaining permission from NRA.

The new provision of Art. 126, para 10 VATA provides for possibility credit note to be issued also by suppliers with cancelled VAT registration but only in case an invoice with VAT charged has been issued before the supplier’s registration is canceled and the recipient has deducted input VAT thereunder.

2. New obligations for payment services suppliers

The newly introduced Chapter Twelve “a” creates an obligation for payment services suppliers to keep registers for international payments where:

  • The payment services supplier of the recipient shall keep and provide information regarding recipients and payments when the payment services supplier of the payer and the payment services supplier of the recipient are in different member states and more than 25 international payments to one and the same recipient are made during the period;
  • The payment services supplier of the payer shall keep and provide information for recipients and payments where payment services supplier of the recipient is in a third country.

The information shall be kept in electronic registers and shall be provided for each calendar quarter until the end of the month following the quarter. The penalty for breach of this obligation for keeping register is at an amount from BGN 500 to BGN 10,000, and in case of repeated violation – up to
BGN 20,000.

These provisions enter into force on 1 January 2024. 

3. Prolongation of the term of application of the reduced rate of 9% for certain goods and services

The changes made enlarge the scope of the goods for which the reduced tax rate of 9% will be applied permanently by including the supplies of books and similar products, foods for babies and infants, and baby diapers and similar hygiene products for babies.

The term for applying the reduced VAT rate for the other goods and services for which the rate reduction was a temporary measure (restaurant and catering services, services for use of sports facilities, supplies of general tourist services and organisation of excursions) the term for application of the 9% rate is prolonged until 31 December 2023.

The term for application of the 0% rate for supplies, import and intra-Community acquisitions of bread and flour is prolonged until 31 December 2023.

4. Reverse charge of VAT by recipient under supplies of goods and services in Appendix No 2 to VATA

The supplement of Art. 163а VATA creates an exception from the general rule VAT for supplies in Appendix No 2 to VATA to be charged by the recipient of the supply. Where recipient under supplies of waste or services for waste origination, processing and treatment is the State or state and municipal bodies, the supplier shall be liable to charge VAT. The change in Art. 82, para 5 VATA is in the same direction.

5. Right to input VAT deduction after adjustment in case of incorrect tax treatment of supply

The new Art. 78а VATA expressly arranges the right to deduct input VAT after an adjustment of incorrect tax treatment, including after tax control. This right arises based on the newly issued tax document and shall be exercised in the period when this new document is issued or in any of the following 12 tax periods. In case the adjustment is made after tax control the liability determined with the act issued shall be paid to the state budget.           

6. Obligation for adjustment of input VAT deducted in case of scrap of goods due to expiry of shelf life

By the amendment of Art. 80, para 2, s. 5 VATA the conditions for not making adjustment of input VAT  in case of scrap of goods due to expiry of shelf life were made consistent with those for tax deductibility of the related expense for corporate income taxation purposes – the shelf life term shall be determined by law, or in case no legal term is determined, by a company standard and the scrap shall be in the usual volume for the activity.

7. Provision of guarantee for transactions with fuel

The changes made in Art. 176c VATA are related to:

  • Shortening of the deadline for providing guarantee and for notifying NRA for changes in circumstances of importance for determining the amount of the guarantee. The new deadline is 3 days before the respective event.
  • Introduction of a possibility for reduction of the amount of guarantee to 10% of the tax base of taxable supplies, intra-Community acquisitions or received fuel in the previous tax period, if during the last 3 consecutive years no violation was found and there are no other unsettled public payables.


8. Export of goods by persons established in third countries

The following changes were made with respect to exports of goods by persons established in third countries and identified for VAT purposes in Bulgaria:

  • For the purposes of VAT registration these persons shall appoint a tax representative;
  • The export customs declaration shall contain the VAT identification number of the person and the number of the invoice for the performed supply. An obligation is imposed to the customs bodies to check the validity of the VAT number before allowing the export.


The provisions of LAS VATA enter into force on 1 January 2023 г. with the exception mentioned above regarding the new obligations of the payment services suppliers. 


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: or at the following address: 1504 Sofia, 38, Oborishte Street.

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