Intra-European Union supply of goods
Concept of intra-European Union supplies
For the purposes of VAT taxation on trade between Member States the term "export" is replaced with the term "intra-European Union supply". The principle of taxation has been preserved - the goods are taxed where they are used or consumed, i.e. for an intra-European Union supply from Bulgaria to a Member State of the EU, they are taxed at a zero rate.
The legal definition of an intra-European Union supply can be found in Art. 7 VATA - any supply of goods, transported by or for the account of the supplier who is a person registered under this Act, or of the recipient from the territory of the country to the territory of another Member State, where the recipient is a taxable person or a non-taxable legal entity registered for VAT purposes in another Member State of the EU.
That is, under the system of intra-European Union supplies, there is in effect a supply between two persons registered for the purposes of VAT in two different Member States.
Conditions for the application of the intra-European Union supply of goods regime under Art. 7 (1) VATA
In order for the regime to apply, the following conditions must be cumulatively/simultaneously fulfilled for a given supply of goods:
- The supplier is a person registered under VATA on the territory of the country.
- The recipient is a person registered for VAT purposes in another Member State.
- Subject of the supply are goods.
- Consideration in return for the supply.
- Transport of the goods from the territory of the country to the territory of another Member State.
The following are not considered intra-European Union supplies:
- the supplies of any goods in respect of which the supplier applies the special procedure for taxation of second-hand goods, works of art, items for collection and antiquities;
- the supplies of any goods which are assembled or installed by or for the account of the supplier;
- the supplies of any goods delivered on board of vessels, aircraft and trains;
- the supplies of any goods related to the international transportation of gold for Central Banks;
- the supplies of natural gas through a natural gas system situated within the EU or through a network connected to such a system, the supply of electricity or of heating or cooling energy;
- the supplies by a person registered under this Act who is an intermediary in a triangular operation, registered under VATA in Bulgaria, to the acquirer in a triangular operation;
- the distance selling of goods effected under the identification number issued by the Member State whereto the goods have been dispatched or transported;
- the dispatch and transport of any goods from the territory of the country to the territory of another Member State for the purpose of valuation or work on the said goods, which is carried out in that other Member State, provided that the said goods, after being valued or worked upon, are re-dispatched to the sender within the territory of Bulgaria;
- the dispatch and transport of any goods from the territory of the country to the territory of another Member State, if the following conditions are simultaneously fulfilled:
a) the import of the same goods from a third country or territory to the territory of that other Member State would be eligible for the arrangements for temporary importation with total exemption from import duty; b) the goods are re-dispatched to the sender within the territory of the country within a period not exceeding 24 months after their dispatch.
VAT taxation regime for intra-European Union supplies
The chargeable event for intra-European Union supplies occurs on the date on which ownership of the goods is transferred or the service is performed, or the date on which the product is actually made available. Special situations are covered in Art. 25 (3) et al. VATA.
According to Art. 26 VATA, the basis of taxation for intra-European Union supplies is detеrmined on the basis of everything which constitutes the consideration which has been obtained by or is due to the supplier from the recipient or another person in connection with the supply, exclusive of the tax under this Act. The basis of taxation should also include:
- all other taxes and fees, including excise duty, where such are payable on the supply;
- all subsidies and investment grants directly linked to the supply;
- the incidental expenses charged by the supplier to the recipient, such as commission, packing, transport, insurance costs etc., directly linked to the supply;
- the cost of the usual or customary packing materials or containers, unless returnable or if the recipient is not a taxable person; if such packing materials or containers are returned by the recipient, the taxable amount is debited with the value of the said materials or containers upon return.
Any payments of damages and interest of compensatory nature are not considered remuneration for the supply. Interest and penalties of punitive nature are included in the taxable amount of the supply.
Tax rate and tax charge
Intra-European Union supplies are taxed at a zero rate. Exceptions are made only for intra-European Union supplies which could be exempt if carried out on the territory of the country, pursuant to Art. 38 (2) VATA.
The registered person is obliged to indicate the tax documents issued in connection with the intra-European Union supplies in the book of sales for the tax period in which the tax became chargeable.
The tax of intra-European Union supplies is chargeable on the 15th day of the month following the month of occurrence of the chargeable event (Art. 51 (3) VATA).
If an invoice has been issued prior to the 15th day of the month following the month of occurrence of the chargeable event, the tax becomes chargeable on the date on which the invoice was issued. For supplies of goods with continuous implementation under Art. 7, (1) - (4) VATA, which have lasted longer than one calendar month, the chargeable event occurs at the end of each calendar month.
Submission of VIES declarations
VIES declarations are submitted by persons registered under VATA, supplying goods or services to Member States of the EU, whose recipient is registered for VAT purposes.
They should not include Bulgarian contracting parties as recipients of goods or services, only those contracting parties registered for VAT purposes in another Member State.
Upon completing the VIES declaration and spelling the VAT numbers of the contracting parties, it should be borne in mind that any VAT number of a trader operating in the EU begins with a prefix - the code of the Member State - and consists of two letters that must be written in latin characters.
Documenting intra-European Union supplies
If the supplier of the service does not obtain the documents under Art. 45 by the end of the calendar month following the calendar month in which the tax for the supply became chargeable, it is considered that the supply is subject to a 20% rate of tax (Art. 46 (1) RAVATA).
According to Art. 45 RAVATA, for the purposes of proving an intra-European Union supply of goods, the supplier shall be in possession of the following documents:
- Document on the supply:
a) an invoice on the supply stating, where the recipient is registered for VAT purposes in another Member State, the VAT identification number of the recipient issued by a Member State under which the service was effected thereto;
b) a memorandum under Article 117 (2) of the Act - in the cases of intra-European Union supply under Article 7 (4) of the Act;
c) a document under Article 168 (8) of the Act - where the supplier is a natural person other than a sole trader and is not registered under the Act;
2. Documents proving dispatch or transport of the goods from the territory of the country to the territory of another Member State:
a) a transport document or written confirmation by the recipient or a person authorized thereby, certifying the receipt of the goods on the territory of another Member State - where the transport is effected by the supplier or at the expense of the supplier or the recipient but is effected by a third party, or
b) a written confirmation by the recipient, certifying the receipt of the goods on the territory of another Member State - where the transport is effected by the recipient.
In relation to the evidence of the good faith of the supplier in the performance of intra-European Union supplies, the NRA has issued Guideline № 20-00-53 of 21.02.2011.