VAT-Exempt Supplies in Bulgaria — Complete List & Guide (2026)

What Does “Exempt Supply” Mean Under the VAT Act

Under the Bulgarian VAT Act, three main regimes exist:

1. Taxable supplies — subject to the standard rate of 20% (or the reduced rate of 9%) and granting the right to full input VAT credit.
2. Exempt supplies (Art. 38-50 VAT Act) — no VAT is charged, but the supplier has no right to deduct input VAT on related purchases.
3. Zero-rated supplies (Art. 28-35 VAT Act) — VAT is charged at 0%, but the supplier retains the full right to deduct input VAT.

Pursuant to Art. 38 of the VAT Act, an exempt supply is a supply of goods or services listed in Art. 39-50, carried out by a taxable person. The fundamental consequence is established in Art. 70(1)(1) — no right to input VAT credit exists when the goods or services are intended for making exempt supplies under Chapter Four.

Complete List of Exempt Supplies by Category

1. Healthcare (Art. 39)

• Provision of health (medical) services and directly related services rendered by healthcare establishments and nurseries
• Supply of human organs, tissues and cells, blood and blood components
• Supply of prostheses and implantable medical devices when forming part of healthcare services
• Supply of dental prostheses by dental practitioners or dental technicians
• Transport services for sick or injured persons by specially designated vehicles
• Medical assistance by a person exercising a medical profession pursuant to the Health Act

Note: Aesthetic medicine and cosmetic procedures performed outside licensed medical establishments generally do not qualify.

2. Social Welfare and Social Security (Art. 40)

• Social services under the Social Services Act
• Supplies connected to social security and social assistance
• Goods and services within humanitarian activities of the Bulgarian Red Cross and not-for-profit entities

3. Education, Sport and Physical Education (Art. 41)

• Pre-school preparation, school or university education, vocational education and training, postgraduate training — when provided by institutions within the education system
• Private lessons substituting for school or university education
• Textbooks and teaching sets approved by the Minister of Education
• Services related to sport or physical education provided by not-for-profit sports organisations

Important: Private educational centres offering supplementary courses must carefully analyse whether they meet the criteria under Art. 41.

4. Culture (Art. 42)

• Sale of tickets by cultural organisations for circus, musical and music-stage performances, concerts, museums, art galleries, libraries and theatres; zoological and botanical gardens
• Activity of Bulgarian National Radio, Bulgarian National Television and the Bulgarian News Agency funded by the state budget

5. Religious Activities (Art. 43)

Supply of goods and services by the Bulgarian Orthodox Church and other registered denominations, when related to their religious, social, educational and healthcare activities.

6. Non-Commercial Supplies (Art. 44)

Supplies by non-trader organisations related to fundraising for their activities, provided this does not distort competition.

7. Land and Buildings (Art. 45)

• Transfer of ownership of land (including creation or transfer of limited real rights and leasing/letting)
• Creation or transfer of a right to build — until issuance of the building permit
• Supply of “old” buildings — more than 60 months since issuance of the use permit or certificate of commissioning
• Leasing of a building as a dwelling to a natural person who is not a trader (excluding hotel accommodation)

Right of option: Under Art. 45(7), the supplier may choose to treat these supplies as taxable — a powerful tax planning tool when counterparties are VAT-registered.

8. Financial Services (Art. 46)

• Negotiation, granting and management of credit against interest
• Transactions relating to payment accounts, payment services, electronic money
• Transactions in financial futures and options
• Management of alternative investment funds
• Transactions in company shares, stocks or other securities and their derivatives

Exception: Factoring and debt collection are expressly excluded from the exemption and are taxable at 20% VAT.

9. Insurance Services (Art. 47)

Insurance and reinsurance services, including related services performed by insurance brokers and agents.

10. Gambling (Art. 48)

Organisation of gambling within the meaning of the Gambling Act.

11. Postal Stamps and Postal Services (Art. 49)

Supply of postal stamps at face value and the universal postal service.

12. Other Supplies (Art. 50)

Supply of goods or services for which no right to input VAT credit existed under Art. 70 upon their acquisition.

Difference Between Exempt and Zero-Rated Supplies

Characteristic	Exempt (Art. 38-50)	Zero-rated (Art. 28-35)
VAT rate	Not charged	0%
Input VAT credit	None (Art. 70(1)(1))	Full (Art. 69(2))
Typical examples	Financial services, education, healthcare	Export of goods, international transport
Included in taxable turnover for registration	No (Art. 96(2))	Yes
Legal basis	Art. 38-50 VAT Act	Art. 28-35 VAT Act

Consequences for Input VAT Credit

The Prohibition Under Art. 70(1)(1)

If your company makes exclusively exempt supplies, you have no right to deduct the VAT charged to you on incoming invoices. The tax on purchases remains as a cost.

Mixed Supplies and the Pro Rata Coefficient Under Art. 73

When a registered person makes both taxable and exempt supplies, the right to partial VAT credit is determined through the coefficient under Art. 73:

Coefficient = Turnover from taxable supplies / (Turnover from taxable + Turnover from exempt supplies)

The coefficient is rounded to the second decimal place. At year-end, it is recalculated based on actual annual turnovers and an adjustment to the utilised VAT credit is made (Art. 73(6)).

Mandatory Registration and Turnover

Under Art. 96(2), turnover from exempt supplies is not included in the taxable turnover for mandatory registration. A person making exclusively exempt supplies is not subject to mandatory VAT registration, even if their turnover exceeds BGN 166,000 (≈ EUR 85,000).

Right to Opt for Taxation

1. Immovable property (Art. 45(7)): The supplier may choose to treat supplies of land, creation/transfer of a right to build, and old buildings as taxable.
2. Financial leasing (Art. 46(1)(1)): For credit supplies under a financial leasing agreement, the supplier may choose taxation, which grants the right to full input VAT credit.

Practical Tips for Businesses

When Making Exempt Supplies

• Assess whether you have the right to opt for taxation — if your counterparties are VAT-registered, opting for taxation can be mutually beneficial.
• Calculate the hidden cost — VAT that you cannot deduct is a real cost that must be factored into your pricing.
• Maintain separate accounting — if you have both taxable and exempt supplies, ensure correct segregation for the Art. 73 coefficient.

Documentation

• Invoices for exempt supplies are issued without charging VAT — no tax rate or tax amount is indicated.
• The invoice must state the legal basis for exemption (e.g. “Exempt supply under Art. 39 of the VAT Act”).
• Exempt supplies are reflected in the sales ledger and in the VAT return.

Specific Scenarios and Disputed Cases

Real Estate Supplies

The distinction between “new” and “old” buildings is critical. A “new building” is one for which the statutory period of 60 months from the issuance of the use permit has not elapsed. The sale of an “old” building is exempt, unless the supplier exercises the right to opt for taxation.

Financial Services and Factoring

Although financial services are exempt under Art. 46, factoring and debt collection are expressly excluded and are taxable at 20% VAT.

Healthcare Services Outside Medical Establishments

Services such as massages, alternative medicine, cosmetic procedures, when performed by persons without a medical establishment licence, are not exempt and are subject to VAT.

Frequently Asked Questions

Conclusion

Exempt supplies under Art. 38-50 of the VAT Act represent a specific tax regime with far-reaching consequences for the overall tax burden of the enterprise. The key understanding is that the exempt regime is not necessarily an advantage — the loss of input VAT credit entitlement can increase the real cost to the business.

If your activity includes exempt supplies, the team at Innovires Legal can help with a thorough analysis of the tax consequences and optimal structuring of operations. Contact us for a consultation.

This article is for informational purposes only and does not constitute legal advice. For specific questions regarding the VAT treatment of your supplies, please consult a qualified tax adviser or lawyer.