Value Added Tax (VAT) is an important and integral part of Bulgaria’s taxation system and it applies to numerous individuals and business entities carrying out economic activities in the country. As a foreigner who is conducting business in Bulgaria, it’s critical to examine some of the important elements related to a VAT refund in Bulgaria to not only ensure your accounts are up to date but also that any payments due to you by the National Revenue Agency (referred to as “NAP” in Bulgaria) are paid out accurately and on time. With this in mind, this article explores who is entitled to a tax refund in Bulgaria as well as some other important features related to VAT refunds in the country.
Who is entitled to a VAT refund?
Foreign business entities or individuals carrying out business in Bulgaria that are entitled to a VAT refund include:
- Individuals who are not established within the EU territory, but are however, registered for VAT purposes in another country on a reciprocal basis;
- Non-taxable natural persons who are not established within the EU territory, who have purchased goods for personal consumption, and have subsequently left the country; and
- Taxable individuals who are not deemed to be established within the territory of Bulgaria, but who are established and registered for VAT in another EU member state.
It should be borne in mind that the right to a VAT refund does not include goods such as alcoholic drinks, tobacco and tobacco products as well as liquid fuels.
VAT refund conditions
Whether a private individual or a legal entity, the VAT refund conditions differ for each type of person. In addition, certain documents will be required for VAT refund purposes to ensure that you remain on the right side of the law.
For persons in category a) mentioned above, the requirements and conditions include the submission of a VAT refund application form, a declaration of the fulfilment of prerequisites, an original certificate-form issued by the competent authority in their home country and a legalised, translated form of this document in Bulgarian, original tax documents related to which the VAT refund is being sought and a written power of attorney.
For persons in category b) above, the criteria and conditions require the following documentation to be submitted: a copy of a request for a VAT refund that is personally signed by the person and certified by customs authorities and original invoice or similar document for goods to be exported from the EU also certified by custom authorities. With regard to the former documentation, it must contain the full name, passport number and full address of the foreign natural person, the identification number of the VAT and name and address of the supplier, the date on which the invoice was issued, an accurate description of the type and quantity of goods exported, the value of the exported goods, the total value and total tax imposed on these goods and the signature of the responsible person.
Regarding entity type c), the requirements include the submission of the following documents: a description of their business activity, the nature of the acquired goods and services, the refund application form and invoices or import documents.
How to apply for a VAT refund
When the right category of persons or legal entities have been identified, the relevant documentation has been gathered and accurately prepared and the right to a VAT refund is established, it is time to apply for a VAT refund. According to the Bulgarian NAP, the refunded VAT “becomes payable and is exercised through an agent authorised by the non-resident, acting on behalf of and at the expense of the person.”
Documentation that is required by NAP from the foreign national includes:
- A VAT refund application form completed by the agent of the person in Bulgarian (one exception arises here and that is that the name and address of the person must be completed in the official language of the country in which the person is established);
- A declaration that the conditions for identifying the person as “a non-resident” are met;
- Original certificate form issued by the competent tax authorities of the country where the person is established. Here, a legalised translation of this certificate in Bulgarian will be required. This certificate must prove that the person is engaged in economic activity in the calendar year for which the right to refund has arisen;
- Originals of tax documents for services received. Alternatively, import documents for which the VAT refund is requested; and
- The written authorisation of the agent.
Deadline for submission
Regarding deadlines for submission, which must be strictly adhered to in order to avoid penalties and deductions, we return to the three types of entities mentioned above.
In terms of persons in category a), they are entitled to exercise their right to a VAT refund by 30 June of the year after the calendar year when the right to a refund arose.
Persons in category b) can exercise their right to a VAT refund six months from the date of the invoice of the received supply.
Finally, regarding persons in category c), it must be borne in mind that the VAT refund request must be exercised by no later than 30 September of the calendar year after the year in which the right to a tax refund arose.
The documentation required for the submission and processing of a VAT return application in Bulgaria for foreign citizens and legal entities can appear to be lengthy and daunting. The entire process requires thorough and deep knowledge of the country’s taxation system as well as knowledge of the agencies and institutions involved, the time frames for submission and the documentation required in order for the process to be accurate, timely and beneficial for the business or natural person.
Because Motion Advice offers both legal, tax and accounting and customs support to our clients in a cohesive and comprehensive package, you will never need to worry about the paperwork or deadlines that loom in the VAT refund application process when conducting your business in Bulgaria. Reach out to us to help answer any questions you may have and ensure a smooth and hassle-free VAT refund process to ensure your business in Bulgaria runs as seamlessly as possible.