A recent amendment to the Bulgarian Law on Value Added Tax (VAT) introduces a new obligation for traders of liquid fuels to provide security/collateral when making such supplies. The aim is to prevent VAT frauds when trading with liquid fuels.
The amendments to the VAT Act introduce a mechanism whereby the liquid fuel traders will be obliged to provide to the competent territorial directorate of the National Revenue Agency collateral in cash, government securities or unconditional and irrevocable bank guarantee, each of which valid for a period of one year. The types of liquid fuels for which such collateral is required include natural gas, gasoline, heavy fuel oil, kerosene, liquefied petroleum gas and other gaseous hydrocarbons.
According to Art. 176c, para. 1 of the VAT Act, the obligation to provide collateral arises when the taxable person has made in the current tax period taxable supplies of liquid fuels, as follows:
- supplied liquid fuels exceeding 25,000 BGN per month;
- has performed intra-community acquisition of liquid fuels, which are not intended for consumption by the person that has performed the acquisition, with a total value exceeding 25,000 BGN;
- has received liquid fuels, released for consumption under Art. 20, para. 2, pt. 1 of the Excise Duties and Tax Warehouses Act (EDTWA) worth over 25,000 BGN, if no basis has arisen for collateral on other grounds. In this case, it is irrelevant whether the received liquid fuels are intended for consumption by the receiver.
The collateral, which must equal 20% of the VAT base of the supplies but not less than BGN 50,000, can be provided by taxpayers as:
- collateral in cash;
- collateral in government securities;
- collateral in unconditional and irrevocable bank guarantee.
The collaterals are provided by filing an application in the respective tax office as per the registration of the company. The application, depending on the type of collateral, should be accompanied by various documents. Failure to provide the collateral will be sanctioned with penalties.
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