VAT Refund in Bulgaria: How It Works and What the Deadlines Are

In the context of company formation in Bulgaria, understanding the rules for VAT refunds is essential to ensure proper tax management and optimize business cash flow. Bulgarian legislation outlines clear procedures and deadlines that every VAT-registered entity must follow to reclaim deductible input tax.

Monthly VAT Returns and Credit Calculation

In Bulgaria, all entities registered under the VAT Act are required to file monthly VAT returns. The VAT balance for the period is calculated as the difference between VAT due on sales and deductible VAT on purchases. If input VAT exceeds output VAT, the difference may be claimed as a refund. The taxpayer is responsible for determining the monthly result—either a payable amount or a refundable credit.

Conditions for Starting the VAT Refund Procedure

The right to a VAT refund is regulated by Article 92 of the VAT Act. It may be exercised when, for three consecutive months, the deductible VAT exceeds the VAT due. In this case, the refund amount must be declared in the VAT return by the 14th day of the month following the quarter. The procedure starts automatically but may involve either a document review or a full tax audit.

Read also: Trademark registration in Bulgaria: process, duration, and legal protection

VAT Refund Through Offsetting and Special Cases

When VAT is payable in the following two months, any outstanding credit can be offset automatically. If part of the credit remains after the offset, it may be refunded directly upon request.

In the case of a tax audit, the maximum refund period is three months. This deadline may be extended if the tax authority requires additional documentation or clarifications.

Accelerated VAT Refund: Requirements

There is also a fast-track monthly refund procedure available under specific conditions. According to Article 92(3) of the VAT Act, VAT credit must be refunded within 30 days from the VAT return submission if:

• In the 12 months preceding the current month, the taxpayer carried out zero-rated taxable supplies accounting for more than 30% of all taxable supplies, including zero-rated ones. These include:
  
  • Intra-EU transport of goods and related courier, logistics, and postal services;
    
  • Handling and processing of transported goods;
    
  • Transport-related services provided by agents or intermediaries;
    
• The taxpayer is an agricultural producer who, in the past 12 months, made standard-rated supplies of self-produced goods worth more than 60% of all taxable supplies.
  

VAT Refund: Required Documentation

To prove entitlement to the VAT refund, the following documentation is required:

• Explanatory note detailing the company’s core activities and funding sources;
  
• Primary accounting records in Bulgarian (invoices, bank statements, payment confirmations);
  
• Financial reports, turnover records, and inventory books;
  
• Contracts, permits, licenses, and any relevant supporting documents;
  
• A notarized power of attorney if a third party is representing the company.
  

VAT Return: Deadlines and Procedures

Once the right to a refund is verified, the National Revenue Agency (NRA) issues a collection and refund act (CRA). The refund is processed within 30 days from the final VAT return, provided the taxpayer has no outstanding public liabilities.

If the refundable VAT was not declared in the monthly return, a written application can still be submitted within five years. The request must specify the amount and include the beneficiary’s bank details. The tax authority will then initiate a verification or audit. The refund act must be issued within 30 days, unless a tax audit is launched in the meantime.

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Late Interest and Appeals

If the VAT is not refunded in due time or is only partially refunded, the taxpayer may lodge an appeal. The appeal must be submitted within seven days of the notification. The competent authority must issue a reasoned decision within fourteen days. Failure to do so implies tacit approval, which may be challenged in the administrative court within another 14 days.

The NRA must pay statutory interest on any unjustifiably delayed VAT refund confirmed after a tax audit.

Deregistration and Procedure Closure

If the company is deregistered from the VAT register before the conclusion of the refund procedure, the remaining refundable amount must be declared in cell 80 of the final VAT return. The remaining credit will be offset or refunded according to the applicable rules.

Accountancy Bulgaria, your Tax advisor in Bulgaria, can support you with VAT procedures and tax optimization for your company.