A situation is possible in which a person registered in Bulgaria under the Value Added Tax Act (VATA) owns real estate, purchased with a tax credit, with which the person wants to register a new company. Several important questions arise in this hypothesis. First of all, is it possible to contribute with real estate purchased with a tax credit to a new company that is not a VAT registered person. The second important question that should be answered is what would happen to the tax credit for the real estate in the event that the new company is a registered or non-registered person for VAT purposes.
In its essence, the contribution represents a non-monetary contribution to the capital of a commercial company registered under the Commercial Law, which has as its object rights over objects and/or objects.
In relation to the first question, according to the VATA, the company in which real estate is contributed must be registered according to the law (this is a specific case of VAT registration), since it acquires goods (property) by a non-monetary contribution by a VAT registered person.
The VAT registration in this specific case is carried out by submitting an application for registration within 7 days of entering the circumstance of the non-monetary contribution in the commercial register. The date of entry of the non-monetary contribution in the commercial register is taken as the date of VAT registration of the person.
Regarding the second question, it should be borne in mind that according to the VATA, the supply of goods to the acquirer by the contributor as a result of making a non-monetary contribution to the acquirer (a commercial company) is not a supply of goods. In this case, the person who receives the goods is the legal successor of all rights and obligations under the law in relation to the goods, including the right to deduct a tax credit and the obligations to make a correction of the used tax credit.
In view of the above, for the company in which immovable property is contributed, obligations for taxation arise, correspondingly for charging a value added tax when there is a reason for correction – making an exempt delivery.
No obligation for correction arises for the company that has contributed with the immovable property and has deducted a tax credit for it.
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