Bulgaria: Changes in VAT, excise tax (duties), and fuel relief (compensation) legislation

Tax legislation changes were enacted with the State Budget Act for 2022, promulgated in the official gazette on 5 July 2022. 

The changes—summarized below—are generally effective from 1 July 2022 (with certain exceptions).

• The supply of bread and flour, including their importation and intra-Community acquisitions, will be taxed at a value added tax (VAT) rate of zero (0%) until 1 July 2023. Definitions of the terms “bread” and “flour” are provided for VAT purposes. 
• The supply of central heating and natural gas, including their importation and intra-Community acquisition, will be subject to a reduced VAT rate of 9% until 1 July 2023. 
• The deadline for application of the reverse-charge scheme for local supplies, such as scrap and cereals, is extended through 31 December 2026.

• An excise tax (duty) rate of zero (0%) is introduced through 20 June 2025 for the following products: 
  • Natural gas and liquified petroleum gas used as motor fuels 
  • Heat energy 
  • Energy products used for the combined production of heat energy and electricity 
  • Electricity produced from: (1) solar, wind, wave, tidal or geothermal energy; (2) hydraulic or in hydroelectric installations; (3) biomass or from products produced from biomass; (4) methane released in abandoned coal mines; and (5) fuel cells
• The deadline and procedure for requesting reimbursement of excise tax paid for electricity used by railway carriers and transport operators is provided. 
• The information maintained in the Customs agency register of authorized warehouse keepers and the tax warehouses is specified.

• The amount that can be deducted from the annual tax bases in relation to the child tax relief under the individual income tax law for 2022 is increased as follows: 
  • For one child—from BGN 4,500 to BGN 6,000
  • For two children—from BGN 9,000 to BGN 12,000
  • For three and more children—from BGN 13,500 to BGN 18,000
  • For children with disabilities—from BGN 9,000 BGN to BGN 12,000 yearly
• A possibility and approach for advance use of the tax relief during year 2022 is introduced. 
• The amount of the statutory deduction concerning lawyers is increased from 25% to 40%, and the change will be effective from 1 January 2023.

• The procedure for granting relief (compensation) of BGN 0.25 per liter or kilogram of fuel to individuals is introduced, specifying the types of fuels and the types of motor vehicles to which the compensation applies. 
• The relief is granted in the form of a discount from the sales price of the fuel. 
• Final distributors providing the compensation must document, report, and declare the provided subsidy under special rules.
   

Read a July 2022 report prepared by the KPMG member firm in Bulgaria