Refunding paid value added tax to foreign persons who are not established on the territory of the Community

Legislation:

Value Added Tax Law (VATL) – Art.81, Para.1, Item 2

- Ordinance №Н-10 of 24 August 2006 for reimbursement of value added tax paid to foreign persons who are not settled on the territory of the Community

The Ordinance specifies the procedure and the documents for reimbursement of the VAT legally charged to foreign persons who are not settled on the territory of the Community and are settled in third countries which reimburse VAT or similar tax to Bulgarian persons for goods purchased by them, services received and import realized on the territory of Bulgaria.

Persons who are entitled to VAT reimbursement (conditions determining a person as a “foreign person”):

Right to request VAT reimbursement has every taxable person (person who carries out independent economic activity regardless of the objectives and the results of it), for whom the following conditions have been met simultaneously for the period which the reimbursement request refers to:

1. The person does not have seat and address of management, permanent site, permanent address, or habitual abode on the territory of the state;

2. The person has not carried out deliveries with a place of performance on the territory of the state pursuant to VATL, except for delivery of:

- Transport services and services related to international transport as described in Art.30 and 31 of VATL;

- Goods and services for which the tax is to be requested from the recipient of the delivery, pursuant to Art.82, Para.2 of VATL.

3. The state of establishment of the person is specified in the list of states which reimburse VAT or another similar tax to Bulgarian persons, approved by the Minister of Finance and the Minster of Foreign Affairs.

Conditions for arising of the right to reimbursement

1. The person is entitled to reimbursement of value added tax charged for goods and services received and import realized by them, which will subsequently be used for taxable deliveries carried out by the person in their state of establishment, provided that these deliveries would entitle them to tax credit had they been performed on the territory of the state.   

2. The amount of the tax for which the right to reimbursement has arisen during the calendar year or for the remaining part of the said year should not be less than BGN 50.

Exercising the right to reimbursement and necessary documents

  The right to VAT reimbursement arises when the tax due for reimbursement becomes collectable, and is exercised by means of an agent who is authorized by the foreign person and acts on behalf and on account of the person. Foreign legal persons exercise their right to VAT reimbursement by presenting to the agent the following documents, which the agent in turn presents to the competent revenue authority:

1.      VAT reimbursement request following a template, filled in by the agent in Bulgarian language, except for the information about the person’s name and the address which is filled in in the official language of the state where the person is settled;

2.      Declaration that the conditions for determining the person as a “foreign person’ have been met

3.      Original certificate following a template, issued by the competent tax authorities of the state where the person is settled, and a certified translation of the said certificate in Bulgarian language, proving that the person has carried out economic activity during the calendar year for which the right to reimbursement has arisen;        

4.      Original tax documents for received deliveries or documents for realized import, for which VAT reimbursement is requested;

5.      Written power-of attorney for authorization of the agent. The authorization is done in writing for each request.

Terms for claiming

The right to reimbursement should be exercised at the latest until 30 June of the year following the year when the right to tax reimbursement has arisen.

The reimbursement request may apply for period smaller than 1 calendar year but not smaller than 3 months. In such case tax reimbursement is allowed under the condition that the tax amount equals or exceeds BGN 400. The reimbursement request may apply also for period smaller than 3 months if the said period is a remaining part of the calendar year, and the tax amount is not less than BGN 50.

VAT is reimbursed by the competent revenue body (NRA’s Territorial Directorate in Sofia) in Bulgarian leva /BGN/, to a bank account specified in the reimbursement request, within 6 months from the request’s arrival, with the cost of the transfer of the reimbursement tax being at the expense of the foreign person.