KPMG Tax News presents the main points of a recent NRA ruling on the application of the reduced 9% VAT rate for certain goods and services
The current issue of Tax News for 2020 presents a summary of some of the clarifications provided by the revenue authorities in their ruling published on the official website of the NRA on 29 June 2020 (the "Ruling"), with regards to the application of the reduced 9% VAT rate for certain goods and services, effective from 1 July 2020 to 31 December 2021.
Restaurant and catering services
In the Ruling the revenue authorities analyse the new legislative texts and definitions for restaurant and catering services. Further, they provide practical explanations on the factors which should be analyzed to determine whether or not a supply falls within the scope of the reduced VAT rate and also give examples of business cases inside and outside the scope of restaurant and catering services. To this end, the authorities make an overview of the applicable case law of the Court of Justice of the European Union1.
Essential factors for analysis
The revenue authorities note that, in order to determine whether the reduced VAT rate is applicable for a particular delivery, a distinction should be made between (i) restaurant/ catering services (9%) and (ii) supply of goods – food for consumption (20%). For the first hypothesis to be in place, the supply of the food must be accompanied by a sufficient level of ancillary services allowing its immediate consumption on site and playing a dominant role (from the point of view of the average consumer). The revenue authorities provide a number of examples of such ancillary services.
The type and categorization of the eating place are not decisive. Among others, the revenue authorities explicitly mention inhouse canteens as possible places where restaurant services subject to the reduced 9%VAT rate may be provided.
The term "restaurant and catering services" may include:
The term "restaurant and catering services" generally does not include:
In view of the above, a restaurant can happen to perform both supplies subject to the reduced 9% rate and such subject to the standard 20% rate (often for one and the same item). This leads to new requirements towards the software systems and the personnel of the restaurants, who should be trained to distinguish the situations where one and the same item may need different VAT treatment.
Books and textbooks
Regarding the taxation of books and textbooks at the reduced rate, the most important points made in the Ruling are as follows:
Delivery of food and hygiene products suitable for babies or young children
The reduced VAT rate covers also supplies of baby food, diapers and similar hygiene products. The Ruling specifies the following criteria which must be met in order for the 9% VAT to apply:
The Ruling also addresses issues such as place of supply of the affected transactions, rules for determining the status of the recipient of the supply (where relevant), rules for determining the taxable amount and the taxable event, document requirements and transitional regime. Important notes with this regards are as follows:
How may we help you?
The KPMG team remains at your disposal where you have questions or need assistance in the interpretation and application of the new rules for applying the reduced 9% VAT rate.
1 ECJ Judgements in Case C-231/94, Faaborg-Gelting Linien, and Joined Cases C-497/09, C-499/09, C-501/09 and C-502/09.
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