VAT registration | Everything you should and should NOT know
Ecovis | 11 July 2024
The VAT registration process is an important step for businesses in Bulgaria. Through it, companies comply with tax regulations set by the Bulgarian government.
VAT registration also offers benefits such as VAT refunds on business expenses and increased credibility with customers and suppliers. Registered businesses can reclaim VAT paid on purchases, improving cash flow and reducing the overall tax burden.
It is important that businesses are informed of the specific requirements and procedures for VAT registration to avoid potential problems. Proper registration helps businesses operate smoothly and maintain compliance with Bulgarian tax laws.
VAT, or value-added tax, is a charge on consumption that is added to the value of goods and services. This tax is collected at every stage of production and distribution. In the next lines of this article, we at Ecovis will look at what are the most important things to know about VAT registration.
What is VAT registration?
VAT registration is the process by which businesses in Bulgaria register for value added tax (VAT) purposes.
It is compulsory by law for businesses that reach certain turnover thresholds or carry out certain types of activities.
It is a tax applied to the value added of goods and services at each stage of their production and distribution.
The main purpose of registration is to enable businesses to charge VAT on their sales and recover a certain amount from their finances.
This ensures that the tax is collected and remitted to the NRA, which monitors compliance with tax legislation in Bulgaria. Businesses that fail to register for VAT , when required, can be subject to significant fines and penalties.
VAT registration is compulsory for businesses whose taxable turnover exceeds BGN 100 000 in a 12-month period. It is also compulsory for companies involved in specific activities such as cross-border transactions within the European Union. This threshold is expected to be changed to BGN 165 000 as of 01.01.2025. For a 12-month period.
Voluntary registration is possible for businesses below the threshold, which can be beneficial for recovering VAT on expenses and improving business confidence.
VAT registration is an important step for businesses in Bulgaria. It is needed to comply with VAT regulations and to avoid legal problems along with effective management of tax liabilities.
Compliance with these requirements helps businesses to operate smoothly within the legal framework.
Necessary documents for VAT registration
In order to register for VAT in Bulgaria, businesses must collect and submit a complete set of documents. This process ensures that the NRA has all the necessary information to assess the application accurately.
The main documents
The first necessary and obligatory document is a statement of taxable turnover 12 months before the current one. This document is necessary to prove the grounds for VAT registration. Another obligatory document is a turnover sheet showing the declared taxable turnover or lack thereof.
Identification documents must be presented. These include a passport or ID card of the owners or managers of the company.
If the registration is handled by a third party, for example a tax consultant, a notarised power of attorney is required. This document gives the representative permission to act on behalf of the company in the registration process.
Companies must also provide evidence of their activities. Documents such as contracts, invoices or business plans serve as proof of the company's activities.
Documents are also needed to verify the business address of the enterprise. If the business operates on a lease, a contract for the lease of the premises must be submitted.
Additional documents
A recent bank statement is also needed to prove the financial activity and stability of the company.
If the business is dealing in physical goods, a detailed inventory list is needed to describe the stock.An inventory list of fixed assets for which VAT will subsequently be claimed back is also needed.
VAT registration process
The VAT registration process involves several important steps to ensure compliance with tax regulations.
The initial step requires completing a VAT registration application, which is submitted to the NRA online or in person. The application form collects detailed information about the business, its activities and financial situation.
Once the application is submitted, the NRA carries out a thorough check of the documents provided. This stage includes a review of the company's registration certificates, tax registration details and evidence of business activity. The NRA determines whether all documentation is accurate and in compliance with Bulgarian tax laws and regulations.
In some cases, the NRA carries out a physical inspection of the business premises. The purpose of this check is to verify the authenticity of the business transactions and to ensure that the company is eligible for VAT registration.
Such inspections help prevent fraudulent activities and ensure that only legitimate businesses register.
After the verification process, the NRA makes a decision on the application. If the application meets all the requirements, the NRA issues a VAT registration number and certificate.
These documents confirm that the business is now officially registered for VAT in Bulgaria. If there are problems with the application, the NRA notifies the business of any deficiencies or necessary corrections.
Obligations after VAT registration
Once registered, the business is required to meet its ongoing VAT obligations, including filing quarterly VAT returns and making timely VAT payments.
Compliance with these requirements is crucial to avoid penalties and ensure that the business remains in good standing with the tax authorities. It is possible to carry out regular checks to ensure continued compliance with the requirements for VAT registration and the VAT regulations in Bulgaria.
Maintaining up-to-date records and meeting VAT reporting requirements are essential parts of the registration process. This ensures that businesses can effectively manage their VAT obligations and avoid any legal or financial problems associated with non-compliance with Bulgaria's VAT registration requirements.
This thorough documentation process ensures that businesses meet the legal requirements for VAT registration and are prepared for their VAT obligations in Bulgaria.
Who to contact for VAT registration
For VAT registration in Bulgaria, the main point of contact is the NRA. . The organisation is responsible for monitoring compliance with tax legislation, including VAT administration.
They provide the necessary forms, guidance and support for businesses going through VAT registration. Contacting the NRA ensures that you receive accurate and official information about your VAT obligations.
Contacting the NRA is possible through their official website. Detailed information about the registration process, documents required and online services are available there.
The local NRA offices throughout Bulgaria also offer direct assistance.They provide face-to-face assistance, accept the application and answer any questions available regarding VAT registration.
Apart from the NRA
In addition to the NRA, engaging tax professionals can greatly facilitate the registration process.
Tax accountants and legal advisers who specialise in Bulgarian tax law offer expert advice and can deal with the complexities of the registration process.
They assist in preparing the necessary documentation, ensure compliance with legal requirements and represent you during your interaction with the tax authorities. They also offer services such as online bookkeeping, which is particularly useful for online trading businesses.
Another useful source of information is a legal adviser with experience in business and tax services in Bulgaria. Legal advice provides comprehensive support, from understanding legal obligations to help with preparing and filing documents. Offers guidance on how to maintain compliance with current VAT obligations.
Some business associations and chambers of commerce offer support services to their members, including help with VAT registration.
These organisations provide valuable resources, networking opportunities and practical advice on navigating the VAT registration process in Bulgaria.
By contacting the appropriate authorities and professionals, you can ensure that your VAT registration will be carried out efficiently and in compliance with all relevant regulations.
This proactive approach helps to establish your business legally and avoid potential complications associated with VAT obligations in Bulgaria.
When to register for VAT
In Bulgaria, VAT registration is required in several circumstances to comply with VAT regulations. Businesses must register for VAT when their taxable turnover exceeds BGN 100,000 in a 12-month period. This threshold is key to compulsory registration and applies to most businesses. It ensures that companies contribute to the tax system accordingly as their revenue increases.
Businesses involved in cross-border transactions within the European Union must also register for VAT, regardless of their turnover.
This requirement applies to companies involved in the supply of goods or services to other EU Member States. VAT registration in these cases ensures compliance with the EU VAT rules and facilitates smoother cross-border trade transactions.For certain specific activities, immediate VAT registration is required, regardless of turnover.
These activities include activities related to excisable goods such as alcohol and tobacco, as well as certain financial and real estate transactions. Engaging in these activities without proper registration leads to legal problems and financial penalties.
Voluntary VAT registration
Voluntary VAT registration is an option for businesses below the mandatory threshold. Businesses can choose to register voluntarily to benefit from VAT recovery on purchases and to increase their credibility with suppliers and customers. This is particularly advantageous for businesses that foresee significant growth or those involved in sectors with high input VAT costs.
Start-ups should consider early VAT registration if they expect rapid expansion or significant start-up costs. Early registration helps manage cash flow. It allows VAT to be recovered on initial investment and operating costs.
It ensures compliance from the outset, avoiding potential complications as the business grows. From the beginning of 2023, businesses have the option to request VAT registration as soon as they register as a legal entity with the commercial register.
Import and export businesses are required to register for VAT in order to manage their VAT obligations effectively.
This applies to both physical goods and digital services. VAT registration simplifies the process of paying and recovering VAT on international transactions, ensuring compliance with global trade regulations