Tax Refund: Bulgaria - Recovery of Value Added Tax

This article will look into the right to VAT refund in Bulgaria, as well as the relevant procedures and terms. If you have further questions or need assistance, do not hesitate to contact our local legal experts.

Right to tax refund in Bulgaria

Value added tax (VAT) recovery procedure is established in the Value Added Tax Act, Art.92, and Art.68 of the Regulations for Application of VATA.

A VAT-registered person/ company has the right to a VAT refund if the total amount of tax credit in his monthly VAT return declaration exceeds the total tax charged for the latest tax period. The recoverable tax can be set off, deducted or refunded.

VAT declaration

All VAT registered persons are required to submit VAT declarations by the 14-th of the following month. Thus the tax period for VAT calculation is 1 calendar month.

Declarations must be submitted on a monthly basis even if no taxable supplies of goods have been made for the month.

Suppliers to other European Union Member states submit a VIES declaration. This is only due for the months when supplies have actually been made.

Companies have the right to set off the paid VAT to a supplier from the VAT due (the so called tax credit). In case the tax they have paid to suppliers exceeds the tax due, the VAT registered person has the right to a VAT refund.

Read more about VAT rates and VAT numbers in Bulgaria in our article.

TAX refund

Refund of VAT

A tax refund procedure is initiated in the following two cases:

• When a VAT registered person declares supplies liable to zero rate tax for the 12 months preceding the current month. The total value of these supplies must exceed 30% of the total value of taxable supplies. This rule applies mostly to intra-EU transport, handling and transport related services, and courier and postal services.
• When the tax paid exceeds the tax due for 3 consecutive months as stated in the VAT declaration. The revenue authority shall refund the tax within 30 days of submitting the most recent VAT declaration.

Note that any social insurance liabilities are offset first, and within these 3 months recoverable tax is deducted from tax due for the following 2 months.

Set off of tax

If the person who has declared paid tax exceeding tax due, and they have unpaid liabilities for social insurance collected by the National Revenue Agency (NRA) for the calendar month when the VAT declaration is submitted, the revenue authority sets off these liabilities against the claimable tax.

If there is still some recoverable tax left, VAT is deducted.

Deduction of VAT

The recoverable tax or the balance after set-off is subject to deduction under Art.92 of VATA. This mechanism allows for the reduction of payable tax by the refundable tax for 2 consecutive 1-month tax periods.

Tax refund procedure

Once a VAT refund is claimed by submitting the regular monthly VAT declaration, the revenue authority initiates:

• a procedure to verify the right to tax refund. The authorities may require additional information and supporting documentation. In case the right to tax refund is confirmed, tax is refunded within 30 days.
• A tax revision procedure. This may take 3 months and is applied with larger tax refund amounts or first time tax refunds.

Once the right to a tax refund has been established, the relevant amount is wired to the bank account provided by the VAT registered person.

VAT refund rules and procedures are specific in Bulgaria and the tax system differs considerably from the one in the USA.

If you need to consult a good tax lawyer in Bulgaria, contact us. We can help you with all kinds of legal matters..