Import VAT in Bulgaria
Importing goods from outside the European Union is a routine part of business for many Bulgarian companies. Once goods enter Bulgaria and are released for free circulation, VAT may become due as part of the customs clearance process.
For a VAT-registered business, however, the key question is not simply whether VAT has been charged. The more important issue is whether the company has the right to deduct import VAT as input VAT.
In many situations, the answer is yes. However, the deduction depends on the purpose of the goods, the identity of the importer and the supporting customs documentation. 📑
When can import VAT be deducted?
A Bulgarian business may generally exercise the right to deduct import VAT in Bulgaria when the statutory conditions for input VAT deduction are met.
One of the central requirements is that the imported goods are used for transactions that give the company a right to deduct VAT.
For example, if a company imports inventory that will subsequently be sold through taxable supplies, the VAT charged on import may normally qualify for deduction, provided the other requirements are satisfied.
The position may be different where the goods are used for VAT-exempt activities without a right of deduction, for private purposes or for activities that do not qualify for input VAT deduction. Where goods are used for both qualifying and non-qualifying purposes, restrictions or proportional deduction rules may also become relevant.
The correct company must be identified as importer
A frequent practical issue arises before the accounting team even receives the documents: who is actually named as the importer?
For the company claiming the input VAT deduction, the customs documentation is particularly important. The business should be correctly identified as the importer or consignee where required, and its company information should be consistent throughout the customs file.
This usually means checking details such as the company name, VAT identification number and EORI number.
The issue deserves particular attention when customs clearance is arranged by a courier, freight forwarder, supplier or customs representative. ⚠️
Paying the supplier invoice does not automatically establish a right to deduct the import VAT if another entity is identified as the importer in the relevant documentation. EU VAT rules require an import document identifying the taxable person as consignee or importer and stating, or allowing the calculation of, the VAT due.
Which documents should the company keep?
A clear audit trail is essential when claiming input VAT related to imported goods.
The customs declaration is one of the core documents, but businesses should not treat it as the only relevant record. The complete documentation should demonstrate both the import itself and its connection with the company’s taxable economic activity. ✅
How is import VAT treated in the VAT return?
Where the requirements are satisfied, eligible import VAT can be included as deductible input VAT in the company’s Bulgarian VAT reporting.
This should not be confused with receiving an immediate VAT refund into the company’s bank account.
Input VAT deduction first affects the VAT result for the relevant tax period. If deductible VAT exceeds VAT due, a VAT refund position may arise and the applicable Bulgarian carry-forward and refund procedure must then be followed. The Bulgarian National Revenue Agency expressly distinguishes the use of tax credit from the subsequent VAT refund procedure.
Common mistakes businesses should avoid
Many problems with import VAT in Bulgaria result from documentation rather than from the commercial transaction itself.
Typical issues include incorrect importer details, inconsistent company information, missing customs declarations, errors in VAT or EORI identification and insufficient evidence that the imported goods are connected with activities giving a right to deduct VAT.
Businesses should therefore review the customs arrangements before the goods arrive rather than trying to correct the documentation afterwards. 🙂
If your company regularly imports goods into Bulgaria or is preparing a new supply chain, T&G Consulting can assist with reviewing the VAT treatment, customs documentation and accounting implications before they create reporting difficulties.
Correct treatment of import VAT depends on more than simply paying VAT at customs. The company must establish its right to deduct, be properly identified in the import documentation and maintain a clear connection between the imported goods and its qualifying business activity. A well-organised customs file and timely coordination between the logistics and accounting teams can substantially reduce the risk of problems during VAT reporting or a subsequent tax review.
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This article provides general information and does not constitute individual tax, accounting or legal advice. The correct treatment depends on the facts and circumstances of each business.