Amendments of the VAT Act in connection with the implementation of the EU distance sales rules

Amendments of the VAT Act were introduced by State Gazette, issue 104 of 2020, for the purpose of implementing the EU rules concerning the distance sales of goods and services, introduced for the EU-member states by Council Directive (EU) 2017/ 2455 and Council Directive (EU) 2019/ 1995 which are part of the VAT e-commerce package.

The changes comprise the following:

i) MOSS becomes OSS

The Mini One Stop Shop regime (MOSS) was extended to One stop Shop (OSS). This change leads to implementation of taxation of all services supplies by one taxable person to non-taxable persons, established in other EU-member states, in one EU-member state.

Prior to promulgating the changes, our national legislation provided such an opportunity only to taxable persons supplying telecommunications services, radio and television broadcasting services or electronic services, the recipients of which are non-taxable persons established in another EU-member state.

The practical application of these changes is the taxation of all B2C services, where the place of supply is another EU-member state, which should facilitate the business operations significantly.

Under the new one-stop shop rules the supplier – a taxable person who carries out intra-community distance sales of goods to non-taxable consumers, established in other EU-member states, will be able to register and declare the supplies in one of them only.

Besides taxable persons established in the EU, this regime will also be available to persons who operate electronic interface which facilitates intra-community distance sales of goods or certain domestic distance sales of goods, as well as to persons established outside of the EU.

For the purpose of fulfilling the above objectives, the VAT Act introduces also a legal definition for intra-community and for domestic distance sales of goods.

According to the Act Amending and Supplementing the VAT Act the regime shall be applied as of 01.07.2021.

ii) The threshold for distance sales of goods and certain services is reduced
Other changes introduced by the amendment of the VAT Act are linked to a reduction of the defined limit, which, if exceeded, will lead to the distance sale being deemed to have its place of delivery in the EU-member state where the goods have arrived (art. 20, par 1 of the VAT Act), respectively, if supplies of telecommunication, radio and television broadcasting or electronic services to non-taxable persons as recipients are concerned, the distance sale will be deemed to have its place of delivery in the EU-member state where the recipient is established, has its permanent address or habitual residence (art. 21, par 6 of the VAT Act.

By 30.06.2021 the current provisions of our national legislation shall apply, according to which the threshold amount is BGN 70,000 per year. As of 01.07.2021, by the new art. 20b of the VAT Act, our country introduces the threshold of EUR 10,000 on a yearly basis (approx. BGN 20,000), excluding the value of the tax, which threshold is valid for all EU-member states. The object of this change is to harmonize the threshold amounts in all EU-members, which is another step of the EU towards implementation of its tax policy, namely – harmonization of tax legislation in the EU.

According to art. 20b of the VAT Act, if the defined limit is exceeded, the place of delivery shall be deemed to be in the EU-member state where the supplier is established.

iii) Concerning the low-cost import

The special regime for declaring and deferred payment of import tax, introduced by the new art. 57b of the VAT Act shall be applied to the distance sale of goods, the cost price of which does not exceed the BGN equivalent of EUR 150,00 (approx. BGN 300), imported from third countries. This possibility shall be available for persons which have not registered for application of the special regime for distance sale of goods (please see below). The simplification measure is intended for postal operators, express carriers or customs agents in the EU, who usually declare goods with low cost price.

The Act Amending and Supplementing the VAT Act creates a new regime special registration regime for the application of a regime for distance sale of goods imported from third countries or territories, which grants taxable persons, including those who operate an electronic interface, the right to register for the application of a regime for distance sale of goods imported from third countries or territories.

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