In the case of supplies related to land or independent objects in buildings, the question arises of their taxability under the Value Added Tax Act (VAT Act).
Under the VAT Act, any supply of goods with a place of performance on the territory of Bulgaria is taxable when carried out by a person liable to pay tax under the law, except in cases where it is expressly provided otherwise.
According to one of the exceptions, an exempted supply is the transfer of ownership of land, the establishment or transfer of limited real rights over land, as well as its rental or lease. However, the transfer of ownership of adjacent land to new buildings, as well as the establishment and transfer of other property rights over these lands, is not exempted.
An exempted supply is also the supply of buildings or parts thereof that are not new, the supply of the land adjacent to them, as well as the establishment and transfer of other property rights over them.
A new building is available from the implementation of the “rough construction” stage of completion until 60 months from the issuance of a permit for use or certificate of commissioning. During this time period, the supply is treated as taxable. After the expiry of the specified period, the supply is treated as exempted, with the supplier being given the right to choose to treat it as taxable.
It should be borne in mind that new buildings are also those that meet the following specific conditions:
– represent parts, separated as independent objects from existing buildings as a result of an upgrade and/or additional construction, and these parts may be the subject of separate deliveries or represent buildings for which the direct costs incurred for carrying out reconstruction, major renovation and/or reconstruction are not less than one third of the market price of these buildings as of the date on which a new permit for use or certificate for commissioning has been issued under the Spatial Development Act, and
– as of the date on which the tax for their supply has become due, 60 months have not been elapsed, counting from the date on which a new permit for use or certificate for commissioning has been issued under the Spatial Development Act.
For consultation regarding the tax treatment of supplies related to land and independent units in buildings, you can contact our experts.