Introduction of Special VAT Regimes for Small Enterprises

Draft Law for Amendments and Supplements to the Value Added Tax Act

Summary:

• Objective: The primary goal is to amend and supplement the existing VAT Act in Bulgaria to ensure compliance with European Union (EU) regulations and to streamline processes for small enterprises.
• Approval: The draft law was approved by the Bulgarian Council of Ministers under Decision No. 739 on October 31, 2025.
• Key Changes Proposed:
  • Introduction of Special VAT Regimes for Small Enterprises:
    • Establishes two regimes: one for small enterprises operating within Bulgaria and another for those operating within the EU.
    • Allows eligible small enterprises to exempt certain sales from VAT, reducing their tax burden and compliance costs.
  • Eligibility Criteria:
    • Small enterprises can apply the VAT exemption if their annual turnover does not exceed a national threshold of 51,130 euros.
    • In the EU context, small enterprises must not exceed a combined turnover of 100,000 euros across all member states.
  • Registration Requirements:
    • Mandatory registration for any taxable person whose turnover exceeds the national threshold.
    • Simplified registration process for small enterprises, with a 7-day timeframe to register after exceeding the threshold.
  • Reporting and Compliance:
    • Introduction of a simplified reporting process for small enterprises, requiring them to submit quarterly reports detailing their turnover.
    • Specific provisions for the correction of invoices and reports to ensure compliance with new VAT regulations.
  • Provisions for Cross-Border Transactions:
    • Allows small enterprises established in one EU member state to benefit from VAT exemptions in other member states, provided they meet local thresholds.
    • Clarifies that no intra-community acquisition occurs when the supplier is eligible for VAT exemption under specific EU rules.
• Administrative Improvements:
  • Streamlined procedures to reduce administrative burdens on businesses, making it easier to start and close businesses, and manage VAT-related compliance.
  • Regulations introduced for electronic invoicing and the use of digital platforms for VAT reporting.
• Impact on Revenue:
  • It is expected that the proposed changes will not adversely affect VAT revenue but will enhance compliance and reduce the risk of tax evasion among small enterprises.
• Implementation Timeline:
  • The law is set to take effect on January 1, 2026, contingent on its passage through the National Assembly.
• Compliance with EU Directives:
  • The amendments are aimed at aligning Bulgarian VAT legislation with the following key EU directives:
    • Directive (EU) 2020/285: Concerns the special regime for small enterprises.
    • Directive (EU) 2022/542: Related to VAT rates and exemptions.
    • Regulation (EU) 2023/2831: Concerns the application of “de minimis” aid for small enterprises.
• Public Consultation:
  • The draft law underwent public consultation, allowing stakeholders to provide input before final approval.

Source Parliament.bg