Bulgarian legislators have ensured that this year starts well for Bulgarian taxpayers. Medium-sized enterprises which incurred significant compliance costs and which were less competitive due to the additional VAT on their goods and services, have now a new tax relief. Also the period of the reduced VAT rates on certain goods and services have been extended and some of the temporarily reduced VAT rates have been transformed into a permanent measure.
Change in VAT registration turnover
One of the most important elements of the VAT changes in Bulgaria for 2023 is the change in VAT registration turnover. As of 1 January 2023, taxable persons established in Bulgaria will be subject to a mandatory VAT registration when they reach a taxable turnover of BGN 100,000 for a period encompassing the current month and 12 consecutive months prior to the current month.
The VAT registration turnover doubles compared to the previous BGN 50,000 threshold. The significant increase in the turnover requiring a VAT registration is designed as a tax relief measure for small and medium-sized enterprises which now incur significant compliance costs and which are less competitive due to the additional VAT on their goods and services.
The VAT registration turnover is meant to be further increased as of 2025 after EU Directive 2020/285 is transposed in the Bulgarian VAT Act. The new measure will, however, not affect not-established taxable persons who are subject to a VAT registration before they make any supplies taxable in Bulgaria.
New permanently reduced VAT rates
At the end of 2022 the Bulgarian Parliament transformed some of the temporarily reduced and last year already extended VAT rates into a permanent measure. The amendments to the Value Added Tax Act were published in the Bulgarian State Gazette No. 102 on 23 December 2021 and came into force on 1 January 2023.
The permanent VAT rate reduction applies to the following supplies:
- Books: 9% reduced VAT rate applies to books on a physical medium or by electronic means or both, including textbooks, learning books and learning sets, children’s picture, drawing or colouring books and music printed or in manuscript form with the exception of publications wholly or predominantly devoted to advertising and publications wholly or predominantly consisting of video content or audible music.
- Newspapers and magazines: Newspapers and magazines were initially left outside the scope of the reduced VAT rate and were subject to the standard rate of 20%. However, as of 1 January 2023 the supply of newspapers and periodicals will be taxable at the rate of 9% on a permanent basis.
- Baby food and diapers: The baby foodstuffs falling within the scope of the permanent 9% reduced VAT rate include adapted milk formula, baby porridges and cereals, vegetable, fruit and/or meat purees in jars not exceeding 250g. Baby diapers are also subject to a reduced 9% VAT rate.
Extended reduced VAT rates
The extended period of application of the reduced 9% VAT rate on the supplies listed below started on of 1 January 2023 and shall be in force until 31 December 2023:
- Restaurant and catering services: Restaurant and catering services consist of the supply of prepared or unprepared food, including take-away and delivery of food. The reduced rate does not apply to services consisting of the supply of wine, beer and alcoholic spirits. Take-away food from supermarkets and the like are excluded from the reduced rate.
- Supplies under the special travel-agent VAT scheme: The reduced VAT rate also applies to supplies falling within the scope of the special travel-agent VAT scheme, as well as to the excursions organised by tour operators and travel agents with occasional passenger transport by bus. However, the overall application of the reduced VAT rate to these services may be called into question by the European Commission in the framework of an infringement procedure, as they already fall within the scope of a special margin scheme.
- Supply of services for the use of sports facilities: The use of various sports facilities is also taxable under the reduced 9% VAT rate.
The super-reduced VAT rate of 0% which was introduced in the middle of 2022 and was initially designed to apply until 1 July 2023 shall now be in force for further six months until 31 December 2023. The 0% VAT rate applies to the following:
- Bread: “Bread” shall be understood as the product which is produced from the baking of dough as a mixture of wheat flour or another cereal, alone or in combination, and water, with or without adding salt, which rises using bread yeast or leaven, and technological additives (if necessary).
- Flour: “Flour” shall be understood as the product which is a result of grinding bread wheat and which may be used for making bread and bread products.
If you would like to know more about the VAT changes in Bulgaria for 2023 or other tax rules in the country, please visit the homepage of Delchev & Partners Law Firm, the exclusive representative of WTS Global in Bulgaria.