VAT Taxation Changes

With the last changes in legislation manifested in State Journal at the end of 2009 Bulgaria introduced changes in VAT legislation which most briefly comprise of:

• More comfortable administration of VAT taxation on cross-border services which in general will be liable to reversal charge; obligation /taxation at recipient/ especially when speaking about business-to-business services;
• Bulgaria has new special registration requirement according to which recipients and providers of cross-border services ought to make special VAT registration before the service is rendered;
• The new legislation provides the companies with the right to deduct VAT from their purchase invoices in a longer period - from 3 months according to the old legislation to 12 months now;
• The deadlines for VAT reimbursement have been deducted from 45 days to 30 days ;
• The period for reimbursement of VAT have been reduced from 3 to 2 months after the occurrence of the VAT for reimbursement;
• After the alterations in legislation legal services will also be subject to VAT taxation and lawyers will have to register for VAT purposes. This change was followed by lots of disputes because it will lead to increase of lawyers services more than 20%.

Corporate Taxation Changes

Foreign companies have the right to file declarations in which they determine tax result /income minus expenses/ and reimburse taxes which have been withheld from Bulgarian entities.

Forecasts

• Bulgarian Finance Minister Diankov promises that by 2011 VAT will be deducted from the present 20% to 18% and by 2013 to 16%. The Finance Minister promises that Bulgaria will have the lowest tax rates in whole Europe by 2013.
• Forecast for 2010 is the GDP rise by 3-4 billion BGN, that is increase of 0.30 %.
• Minister Diankov hopes that Bulgaria will have balanced state budget by the end of 2010 which will be a sure step towards the entrance to the EU zone. The ratio between BGN and euro will remain stable.
• By the end of 2010 unemployment will reach to 20%.

General