In accordance with the 2006/112 EC directive from 28.12 2016 issued by the EC for the adoption of a common VAT taxation system among member states, there are set rules for issuing invoices and for the harmonization of the tax laws related to VAT including the specific requirements for their contents and conditions for issuing in Bulgaria. Any tax registered supplier is obligated to issue an invoice for the supply of services or goods for an advance payment received except for the cases when the supplies are documented otherwise.
A person who is registered under VATA for taxable supplies can take advantage of the right for tax deduction only when the services and goods provided are used for the purposes said by the registered person.
In order to apply for tax credit deduction a tax document with all required requisites and information issued by a VATA registered recipient of the supply is needed. In order for a tax credit to be deductible, the VAT needs to be added and charged via the invoice of the supplier and it needs to name the recipient of the supply. The invoice must include all prerequisite elements in accordance with the requirements of VATA and RAVATA. The VAT amount needs to be indicated on a separate line.
The documentation for supplies for Bulgaria needs to be in accordance with the requirements of Chapter 11 of VATA.
The documentation for a supply made to another member country of the EU also needs to comply with the provisions in Chapter 11 of VATA in the cases when the VAT for a supply is chargeable by the recipient and the supplier of the goods and services and when the person in charge of issuing the VAT tax document is a person who satisfies all of the following conditions:
- Has an established economic activity or a permanent established on the territory of the country from which the supply is dispatched, or in case there is no such establishment – a usual residence or permanent address on the territory of that country.
- Is not established in the EU country where the supply is made, and its permanent establishment in the country of the supply does not participate in the transaction.
VAT liable people need to record their acquisitions and supplies in accordance to the documents required by Art. 112 (1) of VATA including:
- An invoice;
- The advice to the invoice;
- The protocol (Memorandum).
In case of any of the tax documents are damaged, lost, stolen or otherwise destroyed, the VAT registered person should send written notification to the National Revenue agency in charge no later than 24 hours after finding out about the missing documents.
The Invoice (Art. 113 of VATA)
Invoices must be issued both by taxable persons who are registered under VATA and those who are not.
The invoice and the advice to the invoice need should be issued by a taxable person in any of the following cases:
- When supplying goods or services
- When an advance payment for a supply has been made
- In the cases when there is no tax obligation for the supplies as listed in Art.79 of RAVATA
An invoice or notification to an invoice by or to the account of the taxable person who is the recipient of a supply can also be issued in case this is the prior agreement between them and provided that there is a proper procedure for the acceptance of the invoice or notification by the person supplying the goods or services – Art. 113 (11) of VATA.
An invoice needs to be issued up to 5 days from the date of the payment for the supply or when an advance payment is made (art.113 (4) and (5) of VATA).
Electronic invoices as well as electronic notifications to invoices will be considered issued on the date on which the supplier or a person acting on their behalf sends these invoices or notifications to the client in a way allowing him/her to receive them.
The invoice needs to be issued with at least one duplicate copy (one for each side of the transaction), but in case the supplier wishes, more copies of the invoice can be made. The first copy is marked as “original” and given to the recipient. The invoice has to include the tax rate. In case the rate is zero, the grounds for such application need to be specified in the tax document. In case no additional reasons for not charging a VAT tax for a transaction are stated in the invoice, it is assumed than the price in the invoice and the agreed upon price includes the VAT tax.
An issuance of an invoice is not required in the following cases:
- When the supply is documented via a protocol
- When the beneficiary of a supply is a natural person (non-taxable)
- In case the supply is for financial services as listed in Art.46 of VATA
- For insurance services – Art.47 of VATA
- Air ticket sales
- For free of charge supplies
- For goods and services provided electronically by people outside of the EU
- For any public sales under CPC or TIPC in accordance with the Registered Pledges Act or the Credit Institution Act (Art.60) where specialized procedures for VATA documentation is required
- For supplies by non-registered persons who are not sole proprietors in the cases when their deliveries are done via a document issued by a special act procedure or a receipt is issued under the Income Taxes on Natural Persons Act (Art.9), or when the issuance of a document is not required under the same act
Advice to invoices in compliance with Art.115 of VATA
According to the Bulgarian VAT Act, an advice is issued in case of changes in the taxation basis or in case a supply for which an invoice has already been issued is annulled.
A debit advice should be issued when there is an increase of the taxation basis, and a credit advice is issued when there is a decrease of this basis or when there is an annulment of the supplies.
The same rules which regulate the issuance of an invoice are used for the advice issuance.
Apart from all items listed in Art.114 of VATA, the advice must also contain the invoice number and date for the invoice in question, as well as the reasons for the issuance of the document.
An advice must be issued within 5 days of the tax event occurance.
In case a tax is charged for an invoice or advice when it shouldn’t have been charged – the tax documents are considered erroneous, and a cancellation protocol must be issues by both parties involved if these documents have been added to the accounting records (Art.116 (4) of VATA). All cancelled tax documents must be kept by the person who issued them, and the protocols for their cancellation should be kept by the issuer and recipient.
Protocol issuance under Art.117 of VATA
The protocol is considered a tax document which has to be issued in all cases included in Art.117 of VATA and in Art. 81 of RAVATA.
Such a protocol for charged tax should be supplied by both the seller and the recipient in the cases when they are obliged to charge a VAT tax.
A protocol is issued also in case the recipient of a supply falls under the regulation of Art. 82 (2, 4 and 5) of VATA, or when the person is a buyer in accordance to the requirements of Art.82 (3) and Art.83 of VATA.
The protocols must be compiled as required by Art.117 (2) of VATA and must also contain the following requisites:
- The suppliers’ VAT ID number issued by another EU country
- The date and number of the invoice in case it has already been issued prior to the protocol (Art. 81 (3) of RAVATA).
When erroneously issued or corrected tax documents have already been entered in the accounting records of the recipient or the supplier a protocol for their cancellations needs to be drawn out for each side involved. Such a protocol is not mandatory in case the date of the cancelled document is the same as that of the newly issued corrected one. (Art.81 (4) of RAVATA).
Since the protocol is considered a tax document, it has to be issued within 15 days from the date when the tax has become chargeable, or from the date when the changes in the taxation basis for the supply have occurred.
In case there has been a change in the taxable amount for a supply or in case of an annulment of a supply for which a protocol has been issued, the issuer needs to produce a new protocol in accordance with Art. 117 of VATA which needs to include the following requisites:
- The date and number of the initial protocol
- The reasons for the issuance of the new protocol
- The change in the taxation basis
- The change of the tax itself
The new protocol has to be issued within 15 days after the date of the circumstances relevant to it have occurred.
Sales reports for the supplies in accordance to Art.119 and 120 of VATA
Each taxable person is obliged to issue a sales report regarding the supplies for which an issuance of an invoice or memorandum are not mandatory under Art. 119 of VATA. The sales report has to be prepared by the last day of the actual taxable period, or separate reports can be prepared for each day of this period or for each of the commercial outlets.
Such reports also need to be compiled by taxable persons who are subject to special tax procedures for providing: tourist services, supplies of work of art, second-hand products, antiques, collectables or investment gold.
The sales for which a protocol with the charged tax has already been issued should not be included in the sales report.
Suppliers must declare their sales report in their sales ledgers in accordance with Art.112 of RAVATA.
People who are not established in the EU and who provide supplies or services electronically need to prepare an electronic ledger by the last day of the tax period.
VAT return under Art. 125 of VATA
Registered people need to submit a VAT return which is prepared on the basis of their sales and purchase ledgers for each tax period.
This requirement is not applicable in the cases when the services are done electronically by people who are not established in the EU.
Registered persons who provide intra-EU supplies, or supplies in a triangular operation (as an intermediary), or supplies of service which fall under Art. 21 (2) of VATA for supplies to other EU countries for the tax period should submit a VIES return for these supplies for the tax period along with the VAT return (Art.125 (1 and 2) of VATA).
The registered person needs to submit their purchase and sales ledgers along with the Vat return for the tax period. VAT returns should be submitted even when there is no payable or refundable tax for the tax period, as well as in the cases when no supplies or acquisitions have been made for the period. All VAT returns along with the ledgers need to be submitted by the 14th of the following month.
The latest amendments in the VATA include a requirement that when the sales and purchase ledgers include more than five entries for the last tax period – the VAT return should be submitted electronically with a qualified electronic signature in accordance to the Tax Insurance Procedure Code of Bulgaria. Companies which do not have such certified signatures can authorize another company to submit the VAT return documents electronically on their behalf.
In case a tax document lacks any of the required requisites and details, an assessment of the effect of this absence of data needs to be done.
When a compulsory requisite is missing form a tax document, an in-depth investigation must be carried out regarding the factual circumstances, the accuracy and fairness of the coverage and the compliance with the principles of content over form plus document support is done.
According to Art.7 (3), document support can be used even in cases when invoices for a transaction are missing some of the mandatory information if the documents can certify the information which is missing.
TIPC allows local revenue authorities to require a translation done by a sworn translator in case the documents presented are in a foreign language under Art. 55 (1) of VATA.
VATA includes the administrative penalties for any non-compliance with the legal provisions for supplying proper tax documentation.
A registered person who fails to issue a tax document or to supply such a document either issued or received according to the sales and purchases ledgers for the tax period which can lead to a lowered tax assessment, is subject to a fine or a penalty in accordance with Art. 182 of VATA.
Nonregistered people who issue tax documents including charged taxes are also subject to fines.