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How will the new VAT rules in 2025 shake up small businesses in Bulgaria?

Ecovis | 27 February 2025

Did you know that from 2025 small businesses in Bulgaria can apply new VAT rules that could save them significant costs?

The change is part of a package of changes to tax laws that is part of the draft 2025 Budget.

The changes are linked to Directive (EU) 2020/285 and how it will change the way small businesses and enterprises operate across the European Union.

If you're a business owner, entrepreneur (or would-be one) or just want to keep 'up to date' with all the economic changes, the information in this article by Ecovis could save you heaps of headaches (and money).

Does it sound like something you can take advantage of? If your answer is yes, you're in the right place!

Stay tuned in the next few lines where we'll tell you everything you need to know about the new VAT rules and how to implement them to your advantage!

What are the new VAT rules for small businesses?

With the new year "came" many changes for small businesses in our country.

Owners now have a choice - 1) whether to stay on the old VAT regime or 2) to take advantage of a special regime that gives them the right not to charge VAT in the countries where they operate (as long as they meet specific conditions).

This choice in itself means lower prices for customers, more competition and less red tape.

We know it sounds very good. Unfortunately, there is always a catch behind such tempting offers.

In this case, it is that not every business can take advantage of this opportunity. In order to be among the privileged, you need to know all the details and submit the necessary documents within a specific deadline.

Well, let's take a look at what they are.

Which businesses can benefit from the new VAT rules?

As it became clear, not all small businesses will be able to benefit from the new VAT regime. To qualify, you must be subject to the following criteria:

• Yearly turnover of your business in the whole of the EU must be less than €100,000. This means that if you earn more than this, you will not be able to take advantage of the opportunity.
• If you want to use this scheme in other countries (outside Bulgaria), you must make a special declaration.
• IMPORTANT!!! Not all activities and sectors can apply the new VAT regime. It is imperative that you check and find out if your business is one of them

If you still meet these requirements, you can "step into" 2025 with a new, more favorable tax regime.

What are the benefits for small businesses?

Let's imagine that you run a small online shop selling goods (clothes, accessories, etc.) in Bulgaria and several other European countries. Under the current regime, you have to charge VAT in each country where you exceed the local threshold.

With the new VAT regime:

• You will not charge VAT to your EU customers. The good news is that you will be able to offer more affordable prices to consumers and remain competitive.
• ** Less administrative burden.** With the new rules, you don't need to register for VAT in every country you operate in.
• More revenue. The money you save on VAT for the state stays with your business.

Sounds great, doesn't it? But there are a few important details to watch out for.

What are the potential pitfalls and limitations for small businesses?

The new regime for small businesses in Bulgaria comes with many advantages as well as several conditions and limitations. To find out if this regime is right for you, you need to be fully aware of them.

1. Your turnover should not exceed €100,000. We recommend that you monitor it carefully. Of course, it is nice to have more revenue. This is the goal of any business, you will just lose the opportunity to benefit from this regime.
2. You cannot deduct VAT on your purchases. That is, if your business relies on large investments in goods and services, this regime will not be as advantageous.
3. As mentioned, some businesses cannot use it. For example, if you are in the digital services sector, you fall into a different category of taxation.

As experts in the world of tax services and audit services, we advise you to think this decision through and be fully informed before switching to the new regime.

Should we switch to the new regime?

The new VAT rules offer a huge opportunity for small businesses operating both in Bulgaria and in the EU.

They give you the chance to cut costs, simplify processes and be more competitive.

Look carefully at the details, consult a specialist and make an informed decision. Experts will be able to advise you, explain the new regime in greater detail and - accordingly - tell you whether it is right for your business or not.

We hope you found the information in this article useful. Don't forget to keep an eye on our blog for any news from the world of tax, accountancy services and online accounting etc.