This issue of Tax News presents a summary of the most important changes in the Excise Duties and Tax Warehouses Act (EDTWA) introduced through the Act to Amend and Supplement the Value Added Tax Act, promulgated in the State Gazette, issue 97 dated 5 December 2017. The changes in the EDTWA are effective as of 1 January 2018.
Amendment to the definition of “energy product used for heating purposes”
The amendment has two major aspects: (i) explicit clarification that the concept of “energy product used for heating purposes” is not limited to a product used solely for heating of premises and (ii) inclusion of specific examples for energy products to be considered as used for heating purposes such as ones used in greenhouses, dryers and facilities for scrap materials.
The amendment will limit the possibility for excise exemption in terms of energy products falling under the amended definition by means of granting certificates for exempt final consumers (EFC). The said exemption is currently possible based on the practice of the Supreme Administrative Court (SAC) whereby the concept “energy product used for heating purposes” is narrowly interpreted as applicable only to products used for heating of premises (e.g. judgments No. 10352 and No. 10361 of 7 August 2017). This interpretation enabled the issue of EFC certificates to persons who, during the course of their activity, burn the products in question and practically use the generated heat throughout a production process(i). (Article 4, paragraph 37 of the EDTWA)
Exemption from excise duty in case of waste in the normal course of business
The changes introduce an amendment in the procedure under which, until release for consumption, natural losses incurred during storage or transportation of excise goods are exempt from excise duty. The exemption will continue to be applied but only provided that the waste losses are recorded in the Inventory Ledger. (Article 25, paragraph 1, item 3 of the EDTWA)
Shortages identified upon completion of movements under the Excise Duty Suspension Regime (EDSR)
The hypothesis of Article 55k from the Regulation for Application of the EDTWA is transferred in the EDTWA. The said provision is related to the judgment of the Court of Justice of the European Union in Case C-64/15 (BP Europa SE) and covers situations of shortages identified upon receipt of excise goods transported under EDSR (including goods received from another Member State). In this regard, if a shortage is identified in the country, the Bulgarian excise duty is payable by the consignor even when the latter is from another Member State. Likewise, an excise duty obligation for Bulgarian consignors may arise in another Member State where shortages are identified upon receipt. (Article 75b of the EDTWA) (ii)
Provisions related to registered taxpayers under Article 57a, paragraph 1, items 1-3 of the EDTWA
The requirement for electronic transmission of data from the control and measuring devices in the automated reporting systems is waived for taxpayers registered under Article 57a, paragraph 1, items 1 - 3 of the EDTWA(iii). The relief in question does not apply to persons effecting sales from gas compression stations to final consumers for household or business purposes and for motor fuel. (Article 103c, paragraph 2 of the EDTWA)
The operators of gas transmission and distribution networks have a monthly reporting obligation to the Customs Agency based on the data from the commercial measuring devices in regard to the measured, distributed and transferred quantity of natural gas to recipients. (Article 57a, paragraph 11 of the EDTWA)
Some of the changes concern the registration procedure for persons selling natural gas for household or business purposes and for motor fuel. In the future, these persons will submit a request for registration under Article 57a of the EDTWA only to the head of the customs office in accordance with the location of their headquarters or management address (until now, such a request had to be submitted to each customs office in accordance with the location of the site or network from which the sale of natural gas took place). In this regard, by 31 March 2018, the customs authorities will themselves perform a re-registration under Article 57a, paragraph 1, item 2 of the EDTWA of these persons in accordance with their headquarters / management address. The provisions in question are not applicable to persons selling natural gas to final consumers for household or business purposes and for motor fuel from natural gas compression stations, i.e. they remain covered by the provisions existing so far. (Article 57b, paragraph 1 and 2 of the EDTWA and § 9b of the Transitional and Final Provisions)
Amendments relevant to tobacco products
The legal definition of “tobacco for smoking” is extended to hookah products (water pipe tobacco) which, in addition to tobacco or its substitutes, also contain flavorings. (Article 12, paragraph 2 of the EDTWA)
The amendments introduce exemption from excise duty on cigarettes and tobacco products used, up to specified limits, for scientific purposes or for studies related to quality control. (Article 21, paragraph 1, item 16 of the EDTWA)
The new provisions related to excise stamps on tobacco products provide only for an option (instead of the existing obligation) for placing them in a way that ensures that they cannot be removed from the commercial packages without being damaged. The change is related to the fact that, from 2019 onwards, a unique identification code will be placed on each cigarette box. (Article 64, paragraph 4 of the EDTWA)
Prohibitions and restrictions
New restrictions and prohibitions are introduced for:
The changes introduce new obligations in relation to the control exercised over the movement and receipt of excise goods by placing technical devices on the means of transport. The new provisions are in fact similar to the rules for control of goods with a high fiscal risk as provided for in the Tax and Social Security Procedure Code. The new obligations under the EDTWA concern the persons driving the means of transport as well as the persons receiving excise goods on the territory of the country. (Article 102b of the EDTWA)
Responsibility for excise goods of unknown origin
The new provisions introduce a possibility to impose a sanction on a supplier or recipient when the person is aware or should have been aware that the respective excise goods are of unknown origin and this is proven by the customs or the revenue authorities. The amendments include specific hypotheses whereby a person should have been aware about the uncertainty of the origin: supplies between related parties, an evasive transaction or one circumventing the law, a sale at a price different from the market price or in case of missing documents for quality or compliance. (Article 126, paragraphs 2 - 4 of the EDTWA)
Other amendments to the EDTWA include:
i Amendments to the definition of “energy product used for heating purposes” were already made with the Act to Amend and Supplement the EDTWA in the State Gazette No 92 dated 27 November 2015 and the Act to Amend and Supplement the Customs Act in the State Gazette No 58 dated 26 July 2016. In this regard, the possible practical effects of the amendments to the definition of “energy product used for heating purposes” have already been subject to our analysis of 3 December 2015. It should be noted, however, that the cited amendments to the definition have not changed so far the narrow interpretation adopted by the Bulgarian SAC of the concept “energy product used for heating purposes” (i.e. as a product solely used for heating of premises).
ii With reference to the provisions of the EDTWA regarding waste in the normal course of business, it should be taken into account that, under Article 25, paragraph 1, item 3 and Article 25, paragraph 2 of the EDTWA, the allowed figures for waste of excise goods are laid down in Ordinance No. 4 dated 28 June 2006 on the limit values of waste for excise goods. In this respect, differences exceeding those as per Ordinance No. 4 dated 28 June 2006 should be treated as shortages for which excise duty is due in principle.
iii Such persons, inter alia, include those registered for activities with coke and coal, selling electricity and natural gas to household and business consumers as well as persons who use for their own needs the electricity (from power plants with capacity over 5 MW) or natural gas produced/extracted by them, etc.