Refund of Charged VAT on Uncollectible Receivables
From 1 January 2023, suppliers whose customers fail to pay their invoices will be able to recover the VAT charged on the unpaid amount.
The law sets clear conditions under which a receivable is considered uncollectible and lists the requirements a supplier must meet.
VAT recovery will be carried out by issuing:
- a credit note, if the debtor was VAT registered at the time of supply;
- a protocol, if the debtor was not VAT registered.
When a protocol is issued, the supplier may recover VAT only up to the difference between the VAT initially charged and the input tax credit already claimed for goods or services directly related to that supply.
If the debtor later pays part of the debt, the supplier must charge VAT again on the recovered portion, through a debit note or protocol.
Obligation to Correct Input VAT by the Debtor
If a supplier issues a credit note to reverse VAT on an uncollectible receivable, the debtor who has previously claimed input VAT must reverse that credit accordingly.
Reduced VAT Rates
A permanent 9% VAT rate now applies to:
- baby food and hygiene products,
- printed and electronic books,
- newspapers, magazines, and other periodicals.
Until 31 December 2023 (temporary measures), the 9% rate remains for:
- restaurant and catering services,
- use of sports facilities,
- package tourism services.
The 0% VAT rate for bread and flour is also extended until the end of 2023.
Other Key VAT Amendments
- Clear rules are introduced allowing non-EU businesses to apply a 0% VAT rate on exports from Bulgaria to third countries.
- Explicit guidance is provided on VAT correction in cases of wrongly treated supplies, including those corrected following an audit report.
- Management services for alternative investment funds that qualify under EU law are VAT exempt.
- No VAT adjustment will be required when goods are written off due to expiry of shelf life, even when the expiry date is set through internal company standards.
- Provisions are refined related to the “one-stop shop” VAT regimes for suppliers selling goods and specific services to final consumers.
- Companies required to provide security for liquid fuel trading may reduce the amount of the guarantee by half under certain conditions.
- From 1 January 2024, payment service providers involved in cross-border payments will need to:
- maintain an electronic register of transactions, and
- submit reports to the National Revenue Agency every calendar quarter.