VAT Registration in Bulgaria

VAT Registration in Bulgaria

When it comes to VAT registration we often receive two questions - ‘Is my company obligated to have VAT registration?’ and ‘Is it better to have VAT registration even if I am not obligated to?’ In this article we will try to answer those questions and help you decide how to proceed.

When is my company obligated to be VAT registered? 

The Bulgarian VAT Act outlines few situations in which you are obligated to have such registration and some of them have very tight deadlines so it is advisable you as a owner of Bulgarian business to be aware of your legal obligations.

I.  Revenue related registrations

1. The most common reason for VAT registration in Bulgaria is reaching the taxable turnover of 100 000 BGN (166 000 BGN from 01.01.2025). This turnover includes your sales and the advance payments you received from your clients over 12 consecutive* months. Once you reach the threshold your deadline for filing for VAT registration is until the 7th of the following months. For example, if your accumulated turnover reaches 100 000 BGN on 04.03.2024 you have until 07.04.2024 to file for your registration. There is one major exception to this rule - if it took you only 2 months to reach the threshold then you have only 7 days to file for registration. For example, you have a sale of 45 000 BGN on 01.02.2024 and a second sale of 60 000 BGN on 04.03.2034, in this case you reached 100 000 BGN on 04.03.2024 and you have until 11.03.2024 to file for your registration. This scenario exists mostly because of seasonal business. *It is important to note that the turnover is tracked over 12 consecutive months and not over a calendar year.
2. When you provide services to companies in the EU you are obligated to have VAT registration regardless of the turnover. And it is very important to know that you need to file for registration 7 days before you provide your service.

II. Expense related registrations:

1. When you buy goods delivered from the EU over 20 000 BGN for one calendar year you are obligated to have VAT registration regardless of you sales turnover.  And it is very important to know that you need to file for registration 7 days before you reach the turnover.
2. When you receive services from the EU or any other country you are obligated to have VAT registration regardless of the turnover. And it is very important to know that you need to file for registration 7 days before you receive the service. This is one of the most commonly missed mandatory registrations. Nowadays many businesses receive services from other counties but don't realize this is a reason for VAT registration. Common examples are buying software and platforms fees like - Microsoft 365, Google Suite, Booking.com fees, Upwork fees, Stripe fees and many more. 

What if I am not obligated to file for VAT registration?

Then you should decide whether it is more beneficial to have one anyway. There are some common scenarios which you should consider: 

I. The start of your business needs a large investment - at the beginning of your business you might not have any revenue but depending of the nature of your business you might need to make a big investment. A good example for this is the need to buy an equipment or a building, or you need to renovate a commercial establishment or equip an office. Most of the time you will be charged VAT on those expenses and if you have VAT registration you will be able to recover this VAT. In some cases, you will be able to recover the initial investment VAT even with later VAT registration but most probably you will lose some of it if you wait. If your business is investment-heavy, it's advisable to consult with accountant before you start accumulating cost - together you can choose the most reasonable way to proceed. It is also important to know that if you choose to be VAT registered when it is not mandatory you won't be able to cancel your registration for the next 2 years. 

II. If you mostly sell services outside of Bulgaria but you accumulate significant cost with VAT in Bulgaria you might want to consider a full VAT registration instead of only the mandatory one. Let’s look into this example: Every month you sell to your EU client 5000 BGN worth of services, you have the mandatory partial VAT registration because of that and you charge him 0% VAT. This is completely legal and is the standard situation. If to generate this revenue of 5000 BGN every month you have expenses for rent, accounting, a subcontractor, internet, etc. total of 1000 BGN + 200 BGN VAT, you will pay 1200 BGN to your vendors over the month and that's it. But if you have a VAT registration you will be able to recover the 200 BGN VAT and you will pay 20 BGN more corporate tax at the same time. So, net you will save 180 BGN. Your accountant will start charging you more for filing VAT but as long as the 180 BGN is more than you accountant's fee increase you will be better off.

This article outlines only the most common VAT registration scenarios. Certainly, there are more details to the topic, and it is important to talk to an accountant before you make a decision. A good accounting professional will be able to help you navigate the legislation and will optimize your costs.