2021 - Amendments to the VAT Act
09 February 2021
At the end of 2020, amendments to the Value Added Tax Act (VATA) were published in the State Gazette. The amendments transpose 2 European directives on e-commerce and distance selling of goods to consumers established on the territory of the EU. Important amendments to the act were made in connection with the expiry of the Brexit transitional period. Here are the changes in brief:
a) amendments to rules on cross-border e-commerce between taxable and non-taxable persons (the so-called B2C). These amendments will apply as of 01.07.2020.
b) refinement of the provisions concerning the exemption from VAT of insurance and reinsurance services;
c) repealing the obligation to use a Retail Management Software (in Bulgarian СУПТО) approved by the NRA and introducing reliefs for those who use it voluntarily.
d) inclusion of Covid-19 vaccine supply and Covid-19 tests in the zero-rate taxable supply range;
e) special provisions regarding Northern Ireland in relation to the UK’s withdrawal from the EU (Brexit).
In view of the volume of changes, below we have made a brief summary thereof.
1.1. Extending the scope of the One Stop Shop scheme
Prior to the amendments, the Mini One Stop Shop or MOSS scheme was applicable only to the supply of telecommunications, radio and television broadcasting services or electronically supplied services to which recipients are non-taxable persons established in another Member State.
These amendments extend the scope of the scheme to all B2C services with a place of performance in another Member State (e.g. accommodation services, transport services, vehicle rental, etc.) where the supplier is not established in that country. The purpose of the amendment is to facilitate suppliers by avoiding the need for multiple VAT registrations in different Member States, as well as the declaration and payment of the VAT due separately in each of them.
The scheme will apply as of 01.07.2021 and entities will be able to submit registration documents starting 01.04.2021.
1.2. Amendments to the system of distance sales of goods to non-taxable persons established in the EU
The amendments change the threshold which, if exceeded, will be deemed to constitute the distance selling point of performance in the Member State of arrival of the goods. Prior to the amendments, the threshold was set individually by each Member State, and for Bulgaria it was BGN 70,000 per year. The new threshold for all Member States is EUR 10,000 excluding VAT per year. The amendment enters into force on 01.07.2020.
In order to facilitate suppliers who would need to register for VAT in two or more Member States, the distance sales of goods are included in the Mini One Stop Shop scheme. That is, a supplier making intra-Community distance sales of goods to consumers in different Member States will be able to register and declare the deliveries made only in one of them. However, we highlight the fact that the tax due on deliveries in the territory of other Member States, regardless of the registration for the MOSS scheme, is in the amount determined by the Member State concerned.
1.3. Entities who manage an electronic interface with which they mediate between the supplier of goods and the end recipient
Special rules are also introduced for entities who manage an electronic interface by which they mediate between the supplier of goods and the end recipient. This amendment would cover some popular electronic retail platforms to consumers. In short, these entities will be considered as the recipient and subsequently supplier of the goods for which they mediate if:
- goods worth less than EUR 150 which are imported into the EU and delivered to end consumers;
- goods are sold in the EU from suppliers not established in the EU to end consumers.
It is provided that these entities will also be able to benefit from the One Stop Shop scheme.
1.4. New scheme for imports of goods up to EUR 150
The scheme waives the provision for VAT-exempt imports in the case of goods worth up to BGN 30. In addition, 2 new schemes are introduced for imports of goods with a value not exceeding EUR 150.
- special scheme for distance sales of goods from third countries at a value not exceeding EUR 150, whereby imports of the goods will be exempt from VAT if the subsequent sale of the goods is recorded through the Mini One Stop Shop (MOSS);
- simplified scheme for the declaration and payment of import tax on goods worth up to EUR 150. If the conditions for the application of the procedure are fulfilled, the customs authorities will release the goods without the tax being effectively paid into the budget. The consignee will have to pay the tax when the shipment is received. This scheme is likely to affect, in particular, postal operators and couriers who normally declare imports of low-value goods intended for end-consumers.
1.5. Repeal of the obligation to use the RMS approved by the NRA
The amendments permanently removed the regime providing for the use of retail management software (RMS) approved by the NRA. The corresponding obligation of the producers of the RMS for its declaration in the NRA is also waived.
It is envisaged that traders could, at their own discretion, use software approved by the NRA. In such cases, the law provides for the following reliefs:
- these traders will not be subject to a coercive administrative measure “sealing of a commercial establishment” in the case of a first infringement;
- accelerated VAT refund for up to 30 days;
- accelerated depreciation of an approved RMS for corporate tax purposes.
1.6. Amendments on the taxation of Covid-19 vaccines and tests
Earlier in 2020, an EU-level decision was adopted to exempt the following supplies by applying a zero rate:
- vaccines against Covid-19 and services directly related to these vaccines;
- the supply of in-vitro diagnostic medical devices intended for the diagnosis of COVID-19 and services directly related to those devices;
As a condition for applying the zero rate, it is stated that the medical devices in question should comply with the requirements of the Medicinal Products in Human Medicine Act and the Medical Devices Act.
1.7. Special rules for Northern Ireland after Brexit
After expiration of the transitional period (December 31, 2020), the United Kingdom and Northern Ireland shall be considered as third countries as regards the taxation of supplies and services with VAT.
Тhe adoption of Art. 168a of the VATA introduced an option that under certain conditions, supplies of goods from/to Northern Ireland could be treated as supplies from/to a Member State. In other words, if the conditions laid down in the law are met, supplies from/to Northern Ireland could be treated as an intra-Community acquisition (ICA) or an intra-Community supply (ICS) respectively. The amendment does not affect the supply of services or the supply of goods to the United Kingdom, which will be treated as non-Community supplies.
The special conditions for application are:
- the supplier of the goods is a taxable person who is identified for VAT purposes in Northern Ireland by a VAT identification number containing the prefix “XI”, or
- the recipient of an intra-Community acquisition of goods is a taxable person or a non-taxable legal person identified for VAT purposes in Northern Ireland with a VAT identification number containing the prefix “XI”.