One of the foundation principles of the European Union is the free movement of goods: custom controls were lifted in order to facilitate and accelerate intra-member state trade. Business relationships within the borders of the EU are easily arranged and tracked, and thus, investors often choose destinations with more favourable financial and tax conditions to launch their business ventures.
One of those destinations is Bulgaria, a member state since 2007, with fairly low VAT rate (20%), corporate tax rate (10%) and company registration fees. In comparison, the VAT rate in Hungary is 27% and in Sweden - 25%. What’s more, setting up a business in Bulgaria is a straight-forward and uncomplicated procedure, which can even be executed through power-of-attorney by a trusted local lawyer.
When companies from 2 different EU countries make a trade transaction, the buyer can purchase goods and services without a VAT charge, as it is the final consumer who pays the corresponding VAT rate in the country where the goods end up. In order for this principle to be applied, however, both companies need to be VAT-registered in their respective member states and have a valid VAT number.
This is where VIES, or the VAT Information Exchange System, becomes relevant. Essentially, this search engine contains the information of every single VAT-registered company in the European Union. Thus, anyone can quickly verify the validity of a given VAT number and the authenticity of any given enterprise, and consequently avoid any attempts for scams.
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Advantages of having your Bulgarian company registered in VIES
Entrepreneurs who have chosen to register a company in Bulgaria could strongly benefit from VIES registration. The format of a Bulgarian VAT number is BG123456789: BG, followed by 9 or 10 digits. Here are some of the advantages of having a VAT registration:
- Free access to the EU market: Having a valid VAT number allows companies registered in Bulgaria to freely trade goods and services with other EU enterprises without being charged a double VAT rate. As we explained earlier, intra-EU trade requires VAT to only be paid by the final consumer in the respective member state. Additionally, there is no need for administrative procedures and intra-EU trading is as simplified as can be.
- Trustworthy presentation: A legally registered VAT number that can easily be validated in VIES projects a good image for the company and shows potential business associates that it is an enterprise that is compliant with EU tax regulations and can be trusted.
- Minimum risk of fraud: Cross-border trading hides potential risks for fraud, and having VIES to verify the legal existence of your trade partners could be very useful to minimise the chance for scams.
- Efficient VAT refunds: If a VAT-registered company pays for a product or service with VAT included, it could request a refund of said tax and thus avoid double charges and improve its cash flow which is always good for business.
How to search in VIES
You can easily access the VIES page through the website of the European Commission. Verifying a VAT number requires you to only enter said number and select the Member state where the company you are checking is registered.
You can also select your VAT number and Member State, however it is not obligatory to fill in these fields since the VIES information is free for access by anyone.
The result from the verification is displayed immediately with a date and time stamp and can be saved and printed in case it is needed as proof in a legal matter. The verification could include the company’s legal address and additional information but it could also simply give a “YES” or “NO” answer - is this a valid VAT number or not.
It’s important to mention that VIES is simply a search engine, and not a database. This means that you cannot freely browse different legal entities registered in the European Union. VIES only allows users to verify a given VAT number and make sure a specific company truly exists and is legally registered within the European Union.
Company VIES registration: legal help
Registering a company’s VAT number can be done during the company’s registration process or later, and a local lawyer can assist foreign citizens for both administrative procedures. The legal specialists at “Danailova, Todorov, and Partners” provide tax law related services at the highest standard and can be a trusted associate in any legal matters.
In order for a Bulgaria-registered company to acquire a valid VAT number, it needs to present proof for a minimum of 100 000 BGN taxable turnover for the last 12 months. The application forms can be obtained at the local tax office or on the website of the National Revenue Agency. All necessary documents must be submitted minimum 7 days before the end of the period for which this taxable turnover was achieved.
If you are in need of a consultation, assistance with VAT registration or submitting a VIES declaration, do not hesitate to contact our experts. They will answer all your questions, possibly in your native language (English, German, French, or Russian), and will represent you before all institutions or in court if necessary.
