QUESTIONS ABOUT VAT- PART 2
I will try to answer a question regarding purchases and sales of goods outside the EU, and the VAT questions related to it. The VAT deals (according to the Bulgarian VAT Act) are of two types: taxable and untaxable. The taxable deals under VAT could be with a 0% rate, a 20% rate, or a different percentage rate (for example in tourism). For a deal related to the delivery of goods to be taxable, the seller has to be under VAT registration according to Bulgarian legal order, and the place of fulfillment of the deal has to be on the territory of Bulgaria. These conditions have to be fulfilled together. It is clear that it is very important where exactly the place of fulfillment of the delivery of goods is (according to the Bulgarian VAT Act). In our VAT Act, the place of fulfillment of the deal is described in Chapter 1, Articles 17 to 24 of the Law on VAT Act. In Article 17, paragraph 2, it is written that the place of fulfillment of the delivery of the goods (which are sent or transported) is the place of the goods where they are at the moment when the transportation to the receiver starts. In this case, if the transportation of the goods starts from a country outside the EU (let’s say it’s a third country) and finishes in a country outside the EU (let’s say it’s a fourth country), then the transport of the goods starts outside Bulgaria and this deal is not taxable under VAT because it is with a place of fulfillment of the delivery outside the territory of Bulgaria.
I. PURCHASE OF GOODS
Regarding the purchase of your goods from the third country, it is important when the right of ownership is transferred from the seller to the buyer. Here we have two options:
a) If the ownership transfer is concluded on the territory of the third country, the buyer will be obligated to fulfill the export of the goods. When the export is fulfilled, in the buyer’s capacity as the exporter, he will have to cover all legal demands according to the export from this third country (preparation of customs declaration and attachments, payments of customs taxes, fees, etc., if any according to the legislation of this third country).
b) If the supplier fulfills the export and transfers the buyer the ownership of the goods outside the territory of this third country, the customs declaration for export and all customs documents will be prepared by your supplier according to the local legal order of this third country.
It is obligatory according to the current legal order in Bulgaria to fill out a written statement for the sending and acceptance of the goods, which shows on which date, in which place, by whom the goods are received physically, on whose behalf and on whose account, and who is the receiver. No matter which option you are in, all documents related to the purchase of the goods and the export, together with the written statement, will be accounted for in Bulgaria and they have to be described in the VAT ledgers for purchases.
II. SALE OF GOODS
Here I would like to describe the sales of the goods to your customers in the fourth country. Here as well, there are two options:
a) To transfer the ownership of the goods to your customer before the goods reach the territory of the fourth country. In this case, your client will make the import in the fourth country.
b) To transfer the ownership of the goods to your client on the territory of the fourth country. In this case, you will release the import on the territory of the fourth country. You will need a customs declaration for import, all attachments to it, and documents for payments of customs fees, taxes, etc.
No matter if you choose option a) or b), there has to be a written statement for the sending and acceptance of the goods which shows the date, the place, and the physical persons who have given or who have received the goods, on whose behalf and on whose account.
