Bulgaria Proposes Zero VAT for Defence Products Financed under SAFE

Summary

• Bulgaria proposes applying a zero VAT rate to qualifying supplies, intra-Community acquisitions and imports of defence products financed under the EU SAFE instrument.
• The measure would apply retroactively from 29 May 2025, according to the draft Bulgarian legislation.
• The relief would be limited to transactions satisfying the conditions of the SAFE framework and should not be treated as a general zero rate for all defence-related supplies.

Extended article

Bulgaria proposes introducing a zero VAT rate for qualifying defence products financed under the EU’s Security Action for Europe, or SAFE, instrument.

The proposed treatment would cover:

• domestic supplies;
• intra-Community acquisitions; and
• imports of qualifying defence products.

The Bulgarian draft provides for retroactive application from 29 May 2025.

The relief is based on Council Regulation (EU) 2025/1106. The Regulation establishes SAFE as a temporary EU financial instrument supporting common defence procurement and expressly provides for VAT exemption for defence products acquired under procurements supported by SAFE. [eur-lex.europa.eu]

The Regulation explains that the relief is intended to avoid financing taxes upfront on qualifying defence expenditure. It is targeted and applies only to supplies made for contracts resulting from procurement under SAFE. [eur-lex.europa.eu]

Businesses should therefore establish a direct link between the supply and a qualifying SAFE-funded procurement. The identity of the parties, contractual documentation, funding arrangements and nature of the products will be critical to supporting the zero rate.

External links

• Access the Bulgarian Ministry of Finance consultation page [minfin.bg]
• Read Council Regulation (EU) 2025/1106 establishing SAFE [eur-lex.europa.eu]

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