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AMENDMENTS TO THE VALUE ADDED TAX ACT – 2022

Act on amendment and supplement (AAS) of the Value Added Tax Act (hereinafter the VATA or the Act) was promulgated in State Gazette, No.14 dated 18.02.2022.

The AAS of the VATA introduces the provisions of Council Directive (EU) 2020/2020 of 7 December 2020 for amendment of Directive 2006/112/EC in regard to temporary measures relating to value added tax applicable to vaccines against COVID-19 and medical devices for invitro diagnostics of COVID-19 in response to the COVID-19 pandemic (OJ, L 419/1 of 11 December 2020), Council Directive (EU) 2019/2235 of 16 December 2019 for amendment of Directive 2006/112/EC on the common system of value added tax and Directive 2008/118/EC on the common system of excise duty on defense activities within the Union (OJ, L 336/10 of 30 December 2019) and Council Directive (EU) 2021/1159 of 13 July 2021 for amendment of Directive 2006/112/EC in regard to temporary exemptions on import and certain supplies in response to the COVID-19 pandemic (OJ, L 250/1 of 15 July 2021).

The amendments and supplements include:

1. Expanding the scope of goods to which the tax rate of 9 percent applies

With the amendments the scope of foods for babies or young children to which a rate of 9 percent is applicable, is expanded, and they include also specialized milk formulas (with partially hydrolyzed protein and those for children with allergies) and dietary foods for special medical purposes intended for infants.

2. Repeal of the provision whereby the food vouchers are excluded from the scope of the specific purpose vouchers and the multi-purpose vouchers

In respect of an established discrepancy between the provisions of the VATA and Art. 30a and 30b of the VAT Directive, the AAS of the Act repeals the provision by which food vouchers are excluded from the scope of the specific purpose vouchers and the multi-purpose vouchers.

3. Introduction of the possibility to correct invoices and protocols under Art. 117 of the VATA, including in the case of an effective act issued by the revenue authorities

Pursuant to the VATA the invoice is incorrectly drawn up when no tax has been charged even though it should have been charged, as well as when tax has been charged even though it should not have been charged. A new provision of the Act stipulates that the invoice is incorrectly drawn up also when incorrect tax rate has been applied for the supply.

Similar to the invoices, an explicit provision is introduced, which prohibits corrections and additions to the protocols under Art. 117 of the VATA. It is envisaged that incorrectly drawn up or corrected protocols shall be annulled and new ones shall be issued. Copies of the annulled protocols shall be kept at the issuer, and their reporting shall be carried out in accordance with the procedure established by the regulations for application of the VATА.

A possibility for correction of invoices and protocols is introduced also in the presence of an effective act issued by the revenue authorities.

4. Amendments related to the application of the Union scheme, non-Union scheme and scheme for distance sales of goods imported from third countries or territories

According to the VATA, in case of distance sales of goods (within the meaning of Art. 14a, para 5, items 1 – 3 of the VATA), which are facilitated by an electronic interface, it is considered that two supplies exist: 1. Supply between main supplier and recipient – taxable person who manages the electronic interface and 2. supply between taxable person who manages the electronic interface and recipient – the non-taxable person. In these cases, it is considered that the tax event for distance sales of goods that are facilitated through an electronic interface arises and the tax becomes due at the time of acceptance of the payment. The amendments to the Act introduce provisions according to which this rule does not apply to distance sales of goods imported from third countries or territories for the delivery between the main supplier and taxable person who manages the electronic interface, regardless of whether the scheme under Art. 157a of the VATA has been applied. When the scheme under Art. 157a of the VATA has not been applied, the rule does not apply to the supply between a taxable person who manages the electronic interface and the recipient – the non-taxable person.

AAS of the VATA introduces a clarification on the right to choose the place of performance for supplies of intra-community distance sales of goods and supplies of telecommunications services, of radio and television broadcasting services and services provided electronically below the threshold of 10 000 euros, made by a supplier who is established, has a permanent address or habitual residence only in the country. In such cases, it is provided that in the case of supplies of telecommunications services, radio and television broadcasting services, the right to choose is exercised under the VAT registration procedure in the Member State where the recipient is established, has a permanent address or habitual residence. In the case of intra-community distance sale of goods, the right to choose shall be exercised in accordance with the VAT registration procedure in the Member State in which the dispatch or transport of the goods ends.

An explicit provision is introduced, according to which the persons not established on the territory of the country, performing only supplies for which they are registered for application of the non-Union scheme or the Union scheme, do not have an obligation for registration by the order of Art. 96, para 9 of the VATA.

With regard to the conditions for registration for the application of the Union scheme, another amendment to the Act provides that the right to register for the application of the non-Union scheme belongs to taxable person who provides supplies of services to recipients that are non-taxable persons and with a place of performance on the territory of another Member State in which the taxable person is not established, including at a permanent establishment. Until now, the only requirement was for the taxable person not to have a permanent establishment. The other conditions for registration for application of the Union scheme under Art. 156, para 1 remain unaltered.

A restriction is introduced on registration for the application of the special schemes in case of termination of registration due to systematic non-compliance with the obligations under the schemes in any Member State. In this regard, the registration for the application of the Union scheme and of scheme for distance sales of goods imported from third countries or territories shall be terminated when revenue authority terminates the registration of a person for application of the non-Union scheme due to systematic non-compliance with the provisions of the scheme. Similar amendments are introduced in the cases where the registration is terminated due to systematic non-compliance with the provisions of the Union scheme, respectively of scheme for distance sales of goods imported from third countries or territories, in which cases the registration for the application of the other two schemes is also terminated.

Furthermore, where a person moves his place of establishment to his registered seat and management address or moves his permanent establishment to the territory of another Member State, the date of termination of the registration for application of the Union scheme shall be the date of the change. This rule applies if the person submits application for deregistration no later than the 10th day of the month following the change and submits in the other Member State within the same term an application for registration for application of the scheme.

According to the amendments to the VATA, when a taxable person who is not established on the territory of the country, registered on the grounds of Art. 96, para 9 of the VATA, starts to make only supplies to which a the non-Union scheme, the Union scheme or the scheme for distance sales of goods imported from third countries or territories apply and registers in another Member State for the application of these schemes, the taxable person may terminate its registration under Art. 96, para 9 of the VATA. A taxable person who starts making supplies for which the non-Union and the Union scheme apply, when it registers in the country for application of these schemes, has the right to terminate its registration under the Act. In such cases the date of deregistration is considered to be the date of registration of the person in the other Member State for the application of the non-Union scheme, the Union scheme or the scheme for distance sales of goods imported from third countries or territories or the date of registration in the country for application of the non-Union scheme or the Union scheme.

Where a person registered in another Member State for the application of the non-Union scheme is willing to register for the application of that scheme in the territory of the country, the date of registration is considered to be the first day of the quarter following the calendar quarter of the submission of the application for registration electronically. Similarly, in cases where a person registered for the application of the non-Union scheme registers for that scheme in another Member State, the date of termination of registration is considered to be the first day of the quarter following the calendar quarter of the submission of the application for termination of the registration electronically.

As a condition for registration for application of the scheme for distance sales of goods imported from third countries or territories, the requirement taxable persons to be registered on the grounds of Art. 96 or Art. 100, para 1 of the VATA is introduced.

The amendments to the VATA explicitly provide that the submission of an application for registration and for termination of registration for the application of the Union scheme and for termination of registration for the application of the scheme for distance sales of goods imported from third countries or territories shall be made with a qualified electronic signature. A reference-declaration for application of the scheme for distance sales of goods imported from third countries or territories shall be submitted with qualified electronic signature (QES).

According to the amendments to the VATA, the reference-declaration under the Act shall be submitted for each tax period by the persons, subject to obligatory registration, the persons, registered under Art. 97, Art. 97a, Art. 99 and Art. 100, para 1 and 2 of the VATA. When these persons are registered for application of the non-Union scheme, the Union scheme and the scheme for distance sales of goods imported from third countries or territories, they shall submit reference-declarations under Art. 159, para 4 and / or Art. 159a, para 2 of the VATA. Where persons are registered only for the application of the Union scheme or the non-Union scheme, they shall submit a reference-declaration only in respect of those schemes.

A provision is introduced according to which a person established in the territory of the country, registered only for the application of the Union scheme, is not entitled to deduct tax credit.

Amendments are introduced regarding the representative for the application of the scheme for distance sales of goods imported from third countries or territories.

The amendments to the VATA listed under this statement enter into force as of 18.02.2022.

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.