Value-added tax exempt supplies in Bulgaria
This article will examine those supplies and acquisitions exempt from VAT taxation. There are such supplies of goods and services that meet the taxation criteria, but are exempt for social and economic reasons. All of them are covered in Chapter Four of the Value Added Tax Act (VATA). The main groups of exempt supplies and acquisitions are presented below.
The exempt supplies, carried out in Bulgaria are divided into ten main groups.
The first group is supplies related to healthcare. They are provided for in Art. 39 VATA. Examples of such supplies are the supply of prostheses as well as the services providing the same to people with disabilities; the supply of technical aids for people with disabilities; the supply of implantable medical devices where the supply forms part of health services, and others.
They are governed by Art. 40 VATA and are exempt if provided under the Social Assistance Act and under a special Act related to mandatory and voluntary social, pension and health insurance.
Supplies related to education, sport and physical education form the third group of exempt supplies. According to Art. 41 VATA, this group includes the supply of institutions under the Vocational Education and Training Act; higher education facilities under the Higher Education Act (HEA), private lessons, substituting school or university education, the supply of textbooks, i.e. supplies will be exempt if the goods are delivered from kindergartens, secondary schools and universities.
The next, fourth group is supplies related to culture. Art. 42 VATA binds the sale of tickets to the Protection and Development of Culture Act. Here is further stated that exempt supplies are also the activities of the Bulgarian National Radio, Bulgarian National Television and the Bulgarian Telegraph Agency, as such activities are paid for by the State budget.
The scope of exemptions includes the supply of goods and provision of services by the Bulgarian Orthodox Church and other religious denominations registered under the Denominations Act, where the supply is connected with the implementation of religious, social, educational and health activities thereof (Art. 43 VATA).
Supplies of non-profit nature form the sixth group of exempt supplies. Art. 44 VATA shows which deliveries, from which organisations and in what conditions are included in this group. The legislator has inserted the caveat that these supplies will be exempt if they do not lead to distortions of competition.
The next group of exemptions is formed by supplies related to land and buildings. Art. 45 of the Act introduces a new tax treatement of these supplies.
Supplies of financial services, insurance and reinsurance services and gambling fall within the eighth group. These services are exempt pursuant to Arts. 46-48 VATA.
The ninth group concerns the supplies of postage stamps and postal services.
The final group is supplies of goods and services to which no tax credit was applied.
According to Art. 50 VATA, within this group fall supplies of goods or services that are used entirely for carrying out exempt supplies and for that reason the right of deduction was not exercised in respect of the tax incurred in the course of production, acquisition or import, as well as those supplies, whose the production, acquisition or import are not eligible for tax credit deduction under Art. 70 of the Act. According to Art. 73 (3), item 5, for the purpose of calculating the coefficient of partial tax credit such supplies are treated as taxable
The Intra-European Union acquisitions of goods whose supply within the territory of Bulgaria is exempt from tax include all intra-European Union acquisitions, which have as their object the supplies listed above, as well as intra-European Union acquisitions of goods, whose recipients are several diplomatic missions, consulates, EU institutions, representative offices of international organisations, etc., listed in detail in Art. 65 VATA.
There are some special cases in VATA. One of them relates to supplies whose place of transaction is outside the country, which have been carried out within the economic activity of the person in question. These supplies are no longer exempt, however, they are not taxable (Art. 25 (6), item 2 of the Act). Nevertheless, according to Art. 69 (2), item 1, if such supplies would be taxable in the country, they are to be treated as taxable for purposes of entitlement to tax credit. This means that the goods and services used to perform such supplies will be entitled to the tax credit deduction.