site.btaMPs Adopt First-Reading Revisions to VAT Act Introducing Special Schemes for Small Enterprises

Parliament Thursday adopted at first reading amendments to the Value Added Tax (VAT) Act with 95 votes in favor, no votes against, and 57 abstentions. The bill was submitted by the Council of Ministers to regulate the conditions for applying special schemes for small enterprises established in Bulgaria and in another EU Member State.

The special scheme for small enterprises in the country may be applied by any taxable person established in Bulgaria who supplies goods and services with a place of performance in the country and whose annual turnover here does not exceed the national threshold during the calendar year. In accordance with Directive (EU) 2020/285, the bill provides that the annual turnover in the country, up to which exemption will be granted in Bulgaria, shall not exceed the national threshold of EUR 51,130. The proposed provisions ensure that no distinction is made between taxable persons established and not established in the country when applying the national threshold, as stated in the Council of Ministers' reasoning for the bill.

The proposed provisions allow taxable persons established in Bulgaria not to charge VAT on supplies of goods and services made in Member States where they are not established and to benefit from simplified VAT obligations, provided that their annual turnover in any of those Member States does not exceed the national threshold in that Member State and provided that their annual turnover in the EU does not exceed EUR 100,000. The draft amendments also stipulate that taxable persons established in other Member States must not charge VAT on supplies of goods and services with a place of performance within Bulgaria, where their annual turnover in the EU does not exceed the threshold of EUR 100,000 and their annual turnover in Bulgaria does not exceed the national threshold of EUR 51,130.

The special schemes are not mandatory for taxable persons. The proposed provisions give taxable persons the right to choose between the general VAT scheme and the special scheme for small enterprises. To this end, it is envisaged that a taxable person established Bulgaria with an annual turnover in the country that does not exceed the national threshold will have the right to choose between applying the general VAT scheme or the small business scheme in the country, regardless of whether the EU threshold has been exceeded. It is envisaged that when a taxable person established in the country is registered under the VAT Act, they may choose to apply the small business scheme in the EU only in other Member States.

Martin Dimitrov MP of Continue the Change - Democratic Bulgaria (CC-DB) noted that his parliamentary group have been insisting for quite some time on the implementation of Directive (EU) 2020/285, which allows small and medium-sized enterprises operating in several EU countries to use a cumulative VAT registration threshold of EUR 100,000. This is a positive development that will encourage small businesses to operate in more than one EU Member State, he said. Unfortunately, there are provisions in the bill that raise concerns, Dimitrov commented, adding that they were probably created to combat tax fraud, but in practice they introduce an additional requirement for the use of tax credits when making deliveries abroad. The CC-DB once again called for a return of the national threshold for mandatory VAT registration from BGN 166,000. 

Alexander Koychev MP of Vazrazhdane commented that the idea behind these special schemes is to develop small businesses, but whether they will work is a matter of time. He said that both thresholds - the EU and the Bulgarian ones - are a cause for concern.