The Council of Ministers has approved a draft of amendments and supplements to the Value Added Tax Act

The draft act on amendments and supplements (ЗИД ЗДДС) was drawn up in connection with the need to change legislation due to the implementation of the provisions of Council Directives 2017/2455 and 2019/1995. These provisions, in turn, are being introduced to improve the functioning of the VAT regime used within the EU in the context of the supply of services and distance sales of goods, as well as imports of low-value consignments. EU countries must introduce these provisions by the end of June 2021.

The draft amendments propose the introduction of new provisions relating to distance sales of goods within the EU; distance sales of goods brought in from countries outside the European Union, domestic distance sales and supplies made by a person operating an electronic interface. The changes concern the threshold value for determining the place of supply for distance sales within the EU and for supplies of telecommunications and electronic services, radio and television broadcasting. Provision is also made for the introduction of new rules relating to the application of the regime inside and outside the EU and to the creation of new special mechanisms for distance sales of goods brought in from countries outside the EU (third countries), as well as for declaring and deferring payment of tax on small consignments of goods.

It is also proposed to repeal the provisions of Art. 118 of the VAT Act concerning the declaration and use of sales management software (СУПТО). This is being done because of the public response caused by the introduction of requirements to report sales through СУПТО, as well as because of numerous reports of an increase in the administrative burden and costs for business that have arisen from the need to comply with the requirements, especially in the conditions of the COVID-19 pandemic, which has made doing business more difficult.

Changes to other laws

The draft act also proposes amendments to other tax laws.

It is proposed to make a change to the Excise Duties and Tax Warehouses Act relating to bringing national legislation into line with the practice of the EU Court. It will concern the conditions under which excise duty paid on ethyl alcohol invested in the production of medicines in accordance with the Medicinal Products in Human Medicine Act is refunded.

The amendments to the Corporate Income Tax Act provide for an extension of the term of the tax relief constituting de minimis aid until 31.12.2023, and of the tax relief constituting regional development aid until 31.12.2021.

A change is proposed to the tax relief that constitutes state aid for farmers, consisting in an extension of the period for carrying out the investment under Art. 1896, para. 2, item 1 of the Corporate Income Tax Act, according to which the corporate tax carried over for 2019 and 2020 must be invested within two years of the year in which the carry-over was made. The measure will be applied after authorisation by the European Commission.

The deadline for declaring and paying annual taxes in accordance with the ЗКПО is extended to 30 June, with 1 March considered the starting date. In this connection, and in order to synchronise the provisions of the law, amendments are also proposed to the advance taxation with corporate tax, so that the provisions correspond to the new deadlines for declaring and paying annual corporate tax.

The provisions governing tax reliefs relating to income from bonds and other securities, as well as to income from managing financial instruments traded on a regulated market, are supplemented with the growth market over a period of 5 years.

The scope of the definition of the disposal of financial instruments is extended to transactions on a regulated market under the legislation of a country outside the EU and the Agreement on the European Economic Area.

Changes to the Personal Income Tax Act

The rules concerning the obligation of individuals to issue documents when carrying out commercial activity or receiving rental income have been clarified. The provisions on the taxation of interest on bonds and other debt securities, as well as of income from the sale of financial instruments traded on a regulated market, are supplemented with instruments traded on a growth market over a period of 5 years.

The date for declaring and paying the annual tax and the tax on expenses is changed to the period from 1 March to 30 June for persons carrying out commercial activity, including sole traders and individuals registered as farmers, whose income from their activity is taxed on the basis of the annual tax base.

It is proposed to introduce new relief for the use of repair services for individuals who have carried out repairs to their own homes during the year. They may reduce the total amount of the annual tax base by the sums paid for repair work to individuals or legal entities.

Changes to the Local Taxes and Fees Act

To reduce the administrative burden, the requirement provided for by law to submit, for the calculation of property tax, not only the certificate of commissioning or the permit for use issued in accordance with the Spatial Planning Act, but also a certificate issued by the Geodesy, Cartography and Cadastre Agency, is repealed.

The list of cases in which vehicle tax is not levied is being expanded. It now includes cases of deregistration on the grounds of export or total loss, only if there is no subsequent registration of the vehicle by a new user on the territory of Bulgaria.

Changes to the Accountancy Act

The amendments to the deadlines for declaring tax, and accordingly for publishing annual financial statements by 30 September of the following year, also change the corresponding deadlines in the Commerce Act, the Non-Profit Legal Entities Act, the Tax and Social Insurance Procedure Code, and the transitional and final provisions of the Act amending the Corporate Income Tax Act.

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