Tax amendments regarding the usage and the disclosure of assets with mixed business and private use

Tax amendments regarding the usage and the disclosure

KPMG's Tax News outline and highlight legislative changes and trends in the area of tax.


The ninth issue discusses the draft amendments to the Bulgarian VAT legislation regarding the mixed business and private use of company vehicles and immovable property, the challenges businesses will face as a result of the changes and the possible steps to prepare for them.


On 13 October 2015, a draft bill to amend several tax acts, including the VAT Act (VATA) was introduced for discussion in the National Assembly. Some of the changes regarding the mixed (business and private) use of company vehicles and immovable property have sparked great public interest and it is expected that the amendments will have significant effect on various businesses.

The discussed changes require companies to choose and disclose the method they will use to charge VAT according to the extent of the private use of given assets. An obligation to charge VAT on goods and services acquired by a company for private use of employees, managers and owners exists even now, but it is broadly defined without specifying a particular methodology and any disclosure requirements. Similar rules are introduced in most of the European Union Member States, and now such rules are being implemented in Bulgaria as well in relation to vehicles and immovable property. It could be expected that, in the future, these rules may also apply to other goods and services with mixed use.

What do the new rules provide for? 

The new rules to be introduced in the VATA from the beginning of the next year refer mainly to the purchases of vehicles and immovable property. The amendments proposed by the Ministry of Finance in relation to the mixed use of the said company assets envisage:

  • new limitations of the right to deduct VAT 
  • requirements to disclose the assets with mixed use 
  • a methodology for allocation of the direct costs related to private and business use (to be prepared by the Ministry of Finance), and 
  • sanctions for non-disclosing the assets and non-compliance with the set methodology.

What challenges will businesses face? 

The proposed amendments set many challenges before businesses and we expect that the changes will trigger additional costs for taxes and for administrating the process. To deal effectively with these challenges, companies will need to analyze certain critical issues which will finally lead to establishing a company’s policy for the mixed use of assets for business and private purposes and a strategy for disclosure before the revenue authorities. The issues to be analyzed include:

  • How can the private and the business use be monitored and what evidence can be gathered with reasonable administrative efforts?
  • How will the requirement for disclosure effective from 2016 affect the mixed use of vehicles and immovable property for previous years? 
  • What approach is to be adopted for the mixed use of goods and services which do not require disclosure, such as laptops, mobile appliances, telecommunication services, and others? 
  • How will the VATA amendments affect the other tax obligations such as tax deductibility of costs under the Corporate Income Tax Act and the tax base of individuals under the Personal Income Tax Act? 

How to prepare for the changes? 

The above changes in VATA are not final yet. They are to be discussed and voted for in the National Assembly. However, we believe that it is recommendable for companies to start preparing for these changes because the alignment of the company strategy requires an analysis of the current situation and reconsidering of the practices and internal procedures applied. This process may include for example:

  • Stocktaking of the vehicles and the immovable property used and classifying them as:
  1. acquired OR rented (special attention to be paid to financial lease agreements with option or without option to purchase the asset) 
  2. used partially for private purposes OR used entirely for business purposes 
  3. with OR without input VAT credit utilized (special attention to be paid to the year of acquisition)
  4. classified as “a car” OR as another vehicle under the VATA 
  • Calculating the potential VAT and other tax effects according to the extent of business use of the assets as well as determining the administrative effort and the available capacity to generate evidence
  • Assessing the potential risks for previous periods upon applying different approaches for disclosure of the private use 
  • Identifying other goods and services with mixed use apart from vehicles and immovable property and assessing the potential effects arising for them 
  • Reconsidering the set practices and policies applied for mixed use of goods and services having in mind the expected obligations for disclosure and the increased control by the authorities. 

How can KPMG help?

If you:

  • have questions and uncertainties regarding the mixed use of goods and services 
  • want to be aware of the possible tax effects these changes may trigger 
  • are in doubt which the applicable practical options are 
  • would like to prepare in advance the company policy and strategy for disclosure, 

we would be glad to schedule a meeting and discuss the effects of the changes on your company as well as the relevant steps to be taken in your specific situation. You can also contact us via the following email:

© 2022 KPMG Bulgaria OOD, a Bulgarian limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

KPMG International Cooperative (“KPMG International”) is a Swiss entity.  Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.



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