Amendments in the Value Added Tax Act in 2021

Below we present to your attention a brief of the amendments in the Value Added Tax Act (in force, as indicated below), adopted by the Act on amendment and supplement of the Value Added Tax Act, State Gazette- Issue 104 dated 08/12/2020, which introduce new rules as follows:

1.   Introduction of rules for deliveries of goods facilitated by an electronic interface;
2.   Expanding the scope of the One-Stop Shop / OSS;
3.   Elimination of the obligation for traders to use Commercial Establishment Sales Management Software (CESMS), included in the list of the NRA;
4.   Amendments related to Brexit.

1. Rules for supplies of goods facilitated through an electronic interface – in force as of 01.07.2021.

Provisions are introduced for certain distance sales facilitated by an electronic interface.

According to VATA, an “Electronic interface” is a device or program which allows communication between two independent systems or a system and an end recipient. The electronic interface may be a website, a portal, a platform, an application interface, and other similar means.

The taxable person who operates  electronic interface (in short – the electronic interface operator) facilitates the supply of goods when the use of the electronic interface allows the supplier offering goods for sale and the recipient to make contact, which leads to supply of goods through the electronic interface.

In the cases of sale of goods through electronic interface specified in the VATA, it shall be deemed that two supplies exist:

– a supply between the main supplier and a recipient – the electronic interface operator. This delivery shall be taxed at a zero rate;
– a supply of the goods, between the  electronic interface operator and the recipient – the non-taxable person;

The electronic interface operator shall keep detailed records of the supplies of goods, for which the operator is not considered to be a supplier, as well as the supplies of telecommunication services, radio- and television broadcasting services or electronically provided services (hereinafter referred to as “TBE services”) in which it does not participate and is not considered to be acting on its own behalf.

A new threshold of EUR 10 000 is introduced, up to which the place of performance in intra-Community distance sales of goods, including those facilitated by electronic interface, and supply of TBE services, is considered to be in the Member State where the supplier is established. The threshold is calculated on the basis of the total value of cross-border supplies of TBE services and intra-Community distance sales of goods.

2. Extension of the scope of One-Stop-Shop (OSS) – in force as of 01.07.2021

As of 01.07.2021 amendments in the VAT Act come into force, which are related to the One-stop-shop (OSS). Supplements are introduced to the special non-Union and Union schemes and new special scheme for the distance sale of goods imported from third states or territories. Simplified rules for declaration and deferred payment of VAT are also provided for imports of consignments of up to EUR 150.

Persons registered for the special schemes who are obligated to pay taxes in more than one Member State shall be entitled to declare and pay the VAT due by them in one Member State.

The possibility for registration for the special regimes shall be available from 01.04.2021.

2.1. Amendments related to the non-Union scheme

The non-Union scheme shall now cover all supplies of services with a place of performance within the EU, where:

a.   recipients are non-taxable persons who are established or have their permanent address or usual residence in the EU and which  
b.   are carried out by taxable persons who are not established on the territory of the EU

2.2. Amendments related to the Union scheme

The special regime in the Union scheme shall now cover all B2C supplies of services with a place of performance on the territory of  the EU, where the supplier and the customer are established in different Member States.

The Union scheme may apply to B2C intra-Community distance sales of goods and/or domestic distance sales of goods. The Union regime shall also apply to certain supplies made by taxable persons who operate an electronic interface when facilitating the sale of goods.

For B2C supplies of services, distance sales of goods or certain domestic distance sales of goods, the supplier may choose to be registered in the country or in another Member State for the application of one of the special non-Union or Union schemes.

2.3. Special regime for distance sales of goods imported from third states or territories – in force as of  01.07.2021.

A new scheme for distance sales of goods imported from third states or territories may apply to the distance sales of goods imported in the form of consignments with a cost of up to EUR 150, if intended for non-taxable persons (B2C).

For these deliveries, the supplier shall charge VAT to the customer at the time of delivery, and the goods are considered to be delivered at the time the payment is accepted. The supplier has an obligation to declare and pay in the due VAT in the state budget to the account of the NRA, on the basis of a monthly reference-declaration. The NRA transfers the VAT due to the respective Member States of consumption.

2.4. Simplified rules for declaration and deferred payment of VAT on imports up to EUR 150 – effective from 01.07.2021.

Special simplified rules are introduced for declaring and deferred payment of VAT on imports of consignments with a cost of up to EUR 150, when OSS is not used.

In these cases, the customs authorities may permit the release of the goods without effective payment in the budget of the due tax. Instead, upon acceptance of the consignment, the recipient for whom it is intended, shall pay the tax under the customs import declaration to the person applying the simplified rules.

The person applying the simplified rules shall, in addition to paying the collected VAT, submit monthly declarations to the Customs Agency, in which the total amount of VAT collected during the respective reporting period shall be indicated.

3. Changes related to the use of Commercial Establishment Sales Management Software (CESMS)

As of 12.12.2020 the requirement for persons who use Commercial Establishment Sales Management Software (CESMS) to use only software included in the list of the NRA was repealed. Nonetheless, the persons who choose to use software, included in the list, are entitled to VAT refund within shorter terms. Furthermore, if the person has selected and uses for the management of sales only software included in the NRA list for the  management of sales, the coercive administrative measure of sealing the commercial establishment shall not apply to a person who did not issue a relevant sales document for the first time.

In addition, CESMS, included in the list of NRA, and the computers, peripheral devices  for them or mobile phones on which the software is installed, shall be depreciated with a higher annual tax depreciation rate (up to 100%).

4. Changes related to Brexit – in force as of 01.01.2021

As of 1 January 2021, the United Kingdom of Great Britain and Northern Ireland is a third state within the meaning of the VATA. However, under certain conditions, the supply of goods which are dispatched or transported to or from Northern Ireland may be considered as supplies from or to a Member State. For this purpose it is necessary:

a.     the supplier of the goods to be  a taxable person who is identified for VAT purposes in Northern Ireland by a VAT identification number containing the symbol/prefix “XI”, or
b.     the recipient of an intra-Community acquisition of goods to be a taxable person or a non-taxable legal entity who is identified for VAT purposes in Northern Ireland by a VAT identification number containing the “XI” symbol/prefix.

In addition, some registered taxable persons established in the United Kingdom are considered registered under Bulgarian VATA if they appoint an accredited representative and notify in writing the competent territorial directorate of the NRA within the period provided for in the VATA.

Thе present statement does not constitute legal advice or consultation, but rather our own interpretation and analysis of the issues outlined above.

If you have any questions or need clarification, please contact  Dyulgerova&Penkova Law Firm team.