Exports to Non-EU Countries and Reverse Charge VAT on Foreign Services (2026)

Scope and definitions — EU, EEA and third countries

Correct VAT treatment starts with a clear geographic distinction. Rules for trade in goods and services differ substantially depending on where the counterparty is located.

• European Union (27 Member States): Austria, Belgium, Bulgaria, Croatia, Cyprus, Czechia, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden.
• European Economic Area (EEA): EU plus Iceland, Liechtenstein and Norway. These three are outside the EU VAT system and are treated as third countries under ZDDS.
• Third countries: all others — USA, United Kingdom (post-Brexit), Switzerland, Japan, China, Turkey, Serbia, Canada, Australia, UAE and more.

This article covers relationships with third countries only. For EU supplies (intra-Community, VIES, OSS) see our guide on VAT registration in Bulgaria.

Sale of goods to third countries — export

Legal basis: Art. 28 ZDDS provides a zero VAT rate for exports — supplies from Bulgarian territory to a destination outside the EU.

Conditions for applying the zero rate

• Goods physically leave the customs territory of the EU;
• The supplier is a taxable person VAT-registered in Bulgaria;
• Documentary evidence exists under the VAT Act Implementing Regulation.

Required documents

• Export customs declaration (EAD) with electronic exit confirmation through the ECS (Export Control System);
• Transport document — CMR (road), Bill of Lading (sea), AWB (air);
• Invoice to the client marked “zero-rated under Art. 28 ZDDS”;
• Contract or purchase order;
• Evidence of payment received.

Right to input VAT credit

Even at the zero rate, the taxable person retains full right to deduct input VAT on related expenses — transport, packaging, customs agents, advertising, consulting. Input VAT is recovered under the general procedure.

Practical risk

If the tax authority (NRA) determines during audit that documentary evidence of exit from the EU is missing, the supply is reclassified as domestic and 20 % VAT is charged on the price plus interest and penalty. Retain EAD and transport documents for at least 5 years.

Import of goods from third countries

Legal basis: Art. 16 ZDDS and Art. 56 et seq. define import as bringing non-Community goods onto national territory.

Customs value and VAT base

Import VAT is calculated on customs value increased by duty, excise and other payable levies, plus all costs up to the first destination on national territory (transport, insurance, commissions).

Payment and input VAT credit

• Import VAT is collected by the Customs Agency together with duty;
• VAT-registered persons have the right to credit the paid import VAT against the customs document;
• The right of credit arises in the tax period in which the document is issued.

Special regimes

• Deferred import VAT (Art. 164 ZDDS): for approved investors under the Investment Promotion Act — VAT is not paid at customs but posted simultaneously as charged and deducted in the VAT return;
• Reverse charge on specific goods (Art. 163a): cereals, technical crops and household waste — recipient self-charges;
• IOSS (Import One-Stop Shop): for distance sales of goods from third countries to EU consumers with value up to EUR 150.

Thresholds for individuals

Parcels up to EUR 150 are duty-free but VAT-taxable (except gifts between individuals up to EUR 45). Above EUR 150 both duty and VAT apply.

Sale of services to third-country clients

Legal basis: Art. 21 ZDDS determines the place of supply for services — and therefore whether Bulgarian VAT applies at all.

General rule for B2B services (Art. 21(2) ZDDS)

For supplies to a taxable person (B2B) the place of supply is the country of the recipient. If a Bulgarian IT agency sells software development to a US company, the place of supply is the USA — the service is outside the scope of Bulgarian VAT and no VAT is charged.

The invoice states “reverse charge — place of supply outside EU, Art. 21(2) VAT Act”. The US (or UK, Swiss, etc.) recipient decides independently how to treat the transaction under local law.

Exceptions to the general rule (Art. 21(4) ff.)

• Services connected with immovable property: place of supply is where the property is located;
• Cultural, educational, scientific and sporting events: where the event takes place;
• Passenger transport: in proportion to distance covered;
• Restaurant and catering services: where physically performed;
• Short-term vehicle rental: where the vehicle is placed at the customer’s disposal.

B2C services (to individuals outside the EU)

For supplies to non-business consumers the general rule is the place of the supplier (Art. 21(1)). An exception applies to digital services (TBE — telecommunications, broadcasting, electronic) under Art. 21(6) — the place of supply is the consumer. For non-EU consumers such services are outside the scope of ZDDS.

Right to input VAT credit

For costs related to service exports, the taxable person retains full right to input VAT credit under Art. 69(2) ZDDS — as if the supply were taxable domestically.

Receipt of services from third countries — reverse charge

Legal basis: Art. 82(2)(3) ZDDS — where the recipient of a service whose place of supply is Bulgaria is a taxable person and the supplier is not established in the country, VAT is payable by the recipient.

Mechanism in brief

• The Bulgarian recipient self-charges 20 % VAT on the value of the received service;
• Simultaneously deducts it as input VAT in the same tax period (if fully entitled);
• Net cash-flow effect is zero for most taxable businesses.

Procedure — self-invoice (protocol) under Art. 117 ZDDS

1. You receive a service from a supplier outside the EU (e.g., Google Ads, Meta, AWS);
2. You issue a self-invoice under Art. 117 within 15 days of the date VAT becomes chargeable (usually the invoice date);
3. The protocol states: supplier name and ID, service value, grounds for self-charge, VAT amount;
4. Record in the Sales Ledger (20 % output VAT);
5. Record in the Purchase Ledger (20 % input VAT);
6. Net effect in the VAT return: EUR 0.

Typical real-world cases

• Google Ads, Meta (Facebook/Instagram) advertising;
• AWS, Microsoft Azure, Google Cloud — hosting and cloud services;
• Software licences and SaaS subscriptions from US providers;
• Consulting services from the UK (post-Brexit);
• Freelance translators, designers, developers from USA, UK, India;
• Email marketing platforms (Mailchimp, SendGrid), CRM (HubSpot), analytics (Ahrefs).

Important: Even if the supplier issues an invoice without VAT, the Bulgarian recipient must apply reverse charge. Missing VAT on the incoming invoice does not excuse the protocol.

Art. 97a ZDDS — simplified registration for small businesses

Who must register? Every taxable person receiving services with place of supply in Bulgaria from a supplier not established in the country — regardless of turnover. This includes small businesses otherwise below the standard threshold of EUR 51,130.

Effect of Art. 97a registration

• Registration only for the purpose of receiving services from abroad;
• Obligation to reverse-charge VAT on received services;
• No VAT charged on the person’s own sales;
• No right to input VAT credit — reverse-charge VAT becomes a final cost;
• Monthly VAT return required.

Timing

Registration must be filed 7 days before the date VAT becomes chargeable (before receiving the service). After the first transaction the obligation to register has already arisen.

Practical example

An IT consultant with EUR 30,000 annual turnover uses Google Workspace, Notion and Slack (totalling EUR 2,000/year) from US providers. Turnover is below the standard threshold, but the consultant must register under Art. 97a and charge 20 % VAT on US expenses — EUR 400 VAT with no right to credit. In practice this is an additional 20 % cost on foreign services.

Tip from our practice: With active use of Google Ads and SaaS tools it is often more efficient to opt for voluntary standard registration under Art. 100 ZDDS — this grants full input VAT credit.

2026 changes — SME regime, eurozone, thresholds

New SME regime (Directive (EU) 2020/285)

From 01.01.2026 a new regime for small and medium-sized enterprises allows Bulgarian small businesses not to charge VAT in another EU Member State if conditions are met.

• EU-wide threshold: Union-wide turnover up to EUR 100,000 per year;
• National threshold: the threshold of each destination Member State must also be observed;
• Registration in Bulgaria as the Member State of establishment with an ID number bearing the suffix “-EX”;
• Application by the 7th day of the month following the quarter in which the regime is sought.

Eurozone (from 01.01.2026)

• All VAT documents — invoices, protocols, VAT returns — issued in EUR;
• Fixed rate: 1 EUR = 1.95583 BGN;
• Dual pricing transition period until 31.12.2026.

Mandatory VAT registration threshold

The threshold remains EUR 51,130 (BGN 100,000) over 12 consecutive months under Art. 96 ZDDS — unchanged from 2025. If you exceed it only through reverse-charged foreign services, you can remain on the Art. 97a regime.

Practical case studies

Case 1: IT agency invoices a US startup

A Bulgarian EOOD, VAT-registered, invoices EUR 50,000 for software development to a Delaware LLC. The transaction is B2B; the recipient is a taxable person outside the EU. Place of supply is the USA (Art. 21(2)) — 0 % VAT, marked “out of scope” on the invoice. Incoming costs (AWS, Figma, Cursor) undergo reverse charge under Art. 117 with net zero effect. The agency retains full input VAT credit on domestic costs (office rent, accounting). Result: clean EUR 50,000 revenue with no VAT.

Case 2: Machinery export to the UK

A Bulgarian OOD ships machinery worth EUR 100,000 to a UK company. Post-Brexit the UK is a third country. An EAD is filed, CMR signed, ECS exit confirmation received. Invoice at 0 % VAT under Art. 28 ZDDS. Input VAT on packaging, transport and customs agent is recoverable.

Case 3: Google Ads for a small EOOD

A Bulgarian EOOD pays EUR 5,000 for Google Ads in 2026. Google issues an invoice without VAT. The EOOD issues an Art. 117 self-invoice within 15 days:

• Output VAT: EUR 1,000 (20 % × 5,000);
• Input VAT: EUR 1,000 (with full credit entitlement);
• Net effect: EUR 0.

If the EOOD is registered only under Art. 97a — it owes EUR 1,000 VAT with no credit.

Common mistakes in practice

• Zero rate without documents: applying 0 % on exports without EAD or CMR → NRA reclassifies as a domestic supply with 20 % VAT, interest and penalty.
• Missing Art. 117 self-invoice: failure to issue within 15 days → penalty ranging EUR 256 to EUR 2,556, up to EUR 5,113 on repetition.
• Wrong B2C treatment outside EU: applying 0 % for digital services to non-EU individuals without checking local rules (US sales tax, UK VAT post-Brexit).
• Place of supply for real estate: valuation, management or repair services for foreign property follow the property location — not the general B2B rule.
• Art. 97a registration without actual self-charging: registered but VAT not self-charged on Google Ads/SaaS → full tax audit of foreign expenses.
• Mixing EU and third countries: applying VIES rules to UK or Swiss clients — they are third countries, not EU.
• Missed IOSS on B2C sales: distance sales of goods from a third country to an EU consumer under EUR 150 — requires IOSS registration.

Frequently asked questions