Tax Alert – Changes to VAT Act 2015 (EN)
CHANGES TO THE VAT ACT
(IN FORCE AS OF 1 JANUARY 2015)
The Act for the amendment of the Value Added Tax Act (VAT Act) was promulgated in State Gazette No. 105/19.12.2012. The Act enters into force on 01.01.2015.
The main changes concern the supply of telecommunication, broadcasting services and electronically supplied services, provided by companies from the European Union (EU) and non-EU companies to their end customers – non-taxable persons.
1. Place of supply of services
As of 01.01.2015 the supply of telecommunication services, radio- and television broadcasting services, and electronically supplied services, rendered to private individuals (non-taxable persons), established in another EU Member State, shall be taxable in the country where the recipient is established, has his permanent address or usually resides. Before the amendment the place of supply of this type of services to non-taxable persons in the EU was the state where the supplier is established. This change aims at allocation of the VAT income to the EU Member State of consumption of the respective services.
To insure the correct charging of VAT on these services the EU companies and non-EU companies suppliers should determine the status of the recipient of the services (i.e. a taxable or a non-taxable person) and the place where the recipient is established (i.e. in a EU or a non-EU Member State).
2. Scope of the services subject to the new rules
Among the services affected by the new rules are:
− Fixed and mobile telephone services;
− Access to the Internet;
− Supply of games of mobile phones;
− Radio and television programmes distributed via a radio or television network, or via the Internet;
− Supply of software, software applications and actualizations;
− Access to and downloading ring tones, screensaver, music, films, pictures, text and information;
− Remote maintenance of software applications;
− Website hosting services;
− Supply of on-line courses;
− Facsimile, telegraph and telex;
− Voice mail, call waiting, call forwarding;
− Electronic auction services
Definitions of the above listed services could be found in the Supplementary provisions of the VAT Act1.
3. Special tax regime and VAT reporting obligations
In practice the changes to the VAT Act shall oblige the companies suppliers of the mentioned services to register for VAT purposes in any of the EU Member State where they perform supplies of such services to non-taxable persons.
To eliminate the administrative burden of having a VAT registration in each EU Member State the suppliers are allowed to apply a special scheme of taxation with VAT – the scheme denoted as “mini One-Stop Shop” (MOSS).
The MOSS scheme shall allow the taxable persons to determine only one EU Member State, called a “Member State of identification”, which shall be used for a sole place of VAT registration, reporting and payment of the due VAT on the telecommunication, radio- and television broadcasting services and electronically supplied services, provided to end customers (non-taxable persons). The MOSS scheme is not obligatory, but in case the supplier has not chosen to apply the MOS scheme, then he shall be obliged to register for VAT in each EU Member State where he provides services to end customers non-taxable persons.
4. Scope of the special MOSS scheme
The special regime of taxation of the supply of services under the MOSS scheme shall be applicable under the following conditions:
− The supplier is a taxable person not established in the EU Member State оф services consumption;
− The supplier has chosen to register for applying one of the MOSS schemes in Bulgaria or in another EU Member State.
5. Types of special regimes for registration under the MOSS scheme
Two types of applying the MOSS scheme are possible dependent on supplier’s place of establishment.
(i) „Union Scheme”
The Union Scheme shall be applicable by services providers, established and registered for that scheme in the EU Member State other than the place of services consumption. In this case the EU companies shall be allowed to register and report the charged VAT on the services in their own Member State as per registration for the telecommunication, radio- and television broadcasting services, and the electronically supplied services, provided to nontaxable persons.
Right to register in Bulgaria under the special “Union Scheme” has the supplier of the abovelisted services provided to non-taxable persons who:
− provides services to non-taxable persons established or having its permanent address or habitual residence in other EU Member State;
− has its seat and registered address in Bulgaria, or if does not has its seat and registered office in the EU, has its permanent object in Bulgaria.
− is not registered for applying the “Union Scheme” in other EU Member State, if it is established as per its permanent object in Bulgaria.