VAT in Bulgaria — Short Guide for Business (2026)

What you will learn

• What VAT is and how it functions as a consumption tax.
• What the rates are — 20% standard and 9% reduced — and which goods and services they apply to.
• When VAT registration is mandatory and when it is voluntary.
• How input VAT credit works and how to deduct input VAT.
• What a VAT invoice must contain.
• The deadlines for the monthly VAT return.
• The 2026 changes — SME scheme, new threshold, new registration date.
• The most common VAT mistakes businesses make.

What is VAT in brief

VAT (value added tax) is an indirect tax charged at every stage of the production and distribution chain, but ultimately borne by the end consumer. Businesses act as tax collectors — they charge VAT on sales and deduct VAT on purchases. The difference is remitted to the state budget.

Legal basis: Value Added Tax Act (ZDDS), which transposes Council Directive 2006/112/EC. Administering authority: National Revenue Agency (NRA).

Mechanism:

1. You sell goods for EUR 1,000 and charge 20% VAT = EUR 200 (output VAT).
2. You purchased materials for EUR 600 + 20% VAT = EUR 120 (input VAT).
3. You remit the difference: EUR 200 - EUR 120 = EUR 80.

The end consumer pays the full VAT (EUR 200), but it is remitted in portions by each participant in the supply chain.

Rates — 20% standard, 9% reduced

VAT rates in Bulgaria are set out in Art. 66 ZDDS:

Important: Exempt supplies are different from zero-rated supplies. With a zero rate, you retain the right to input VAT credit; with exempt supplies, you do not.

When to register for VAT

Mandatory registration (Art. 96 ZDDS)

From 01.01.2026, VAT registration is mandatory when taxable turnover exceeds EUR 51,130 in a calendar year (1 January to 31 December).

What changed compared to pre-2026:

Practical significance: The change from “12 consecutive months” to “calendar year” means the counter resets to zero on 1 January each year. Turnover must be monitored daily.

Voluntary registration (Art. 100 ZDDS)

You may register for VAT voluntarily at any time, regardless of turnover. Advantages:

• Right to input VAT credit on purchases (significant for investments).
• Stronger professional image with B2B clients.
• Ability to reclaim VAT on exports or intra-Community supplies.

Disadvantages:

• Charging 20% VAT on sales (higher end price for B2C clients).
• Obligation to file monthly returns and maintain purchase/sales ledgers.
• Restriction: you cannot deregister for 12 months from registration.

Registration under Art. 97a (receiving services from abroad)

If you receive services from persons established outside Bulgaria (e.g. advertising from Google, software subscriptions from a foreign provider), you must register under Art. 97a ZDDS within 7 days before receiving the service. This registration does not give the right to input VAT credit — only the obligation to self-assess VAT.

Registration for intra-Community acquisition (Art. 99 ZDDS)

For intra-Community acquisitions of goods exceeding EUR 10,226 in a calendar year — mandatory registration.

Input VAT credit — how to deduct VAT

Input VAT credit is the right to deduct VAT charged to you (input VAT) from the VAT you charge your clients (output VAT). This is regulated by Art. 68–72 ZDDS.

Conditions for exercising the credit

1. The goods or services are used for taxable supplies (not for exempt supplies or personal use).
2. You hold a tax invoice issued by a VAT-registered person.
3. The invoice contains all mandatory elements under Art. 114 ZDDS.
4. The input VAT credit is exercised within 12 tax periods from the period in which the invoice was issued (Art. 72 ZDDS).

When input VAT credit is NOT allowed

• Entertainment and hospitality expenses (Art. 70(1)(3) ZDDS).
• Goods and services for the personal use of the owner or staff.
• Passenger cars and related goods/services (with exceptions).
• Goods and services used for exempt supplies.
• Purchases for which there is no invoice or the invoice has incorrect details.

Proportional input VAT credit

If you use goods/services for both taxable and exempt supplies, you are entitled to partial input VAT credit — proportional to the share of taxable supplies in total turnover (Art. 73 ZDDS).

Invoices — mandatory content

Under Art. 113 ZDDS, an invoice must be issued within 5 days of the date of the chargeable event. The mandatory elements are set out in Art. 114 ZDDS:

1. The designation “invoice” and a sequential number.
2. Date of issue.
3. Name, address, and VAT number of the supplier.
4. Name, address, and VAT number (if registered) of the recipient.
5. Description of goods/services, quantity, and unit price (excluding VAT).
6. Taxable amount (total value excluding VAT).
7. VAT rate.
8. Amount of VAT.
9. Total amount payable (including VAT).
10. Grounds for not charging VAT (if applicable).

Important from 2026: Invoices are issued in EUR. For invoices issued in a foreign currency (other than EUR), the ECB reference exchange rate for the date of the chargeable event applies.

Electronic invoices: The ZDDS allows electronic invoices with the recipient's consent. Mandatory electronic invoicing is expected in the future (in line with the EU's ViDA initiative).

Monthly return — due by the 14th

The VAT return is filed monthly by the 14th of the month following the tax period (Art. 125 ZDDS). The tax period is one calendar month.

What is filed

1. VAT return — summarising output and input VAT.
2. Sales ledger — all invoices issued and other documentation for output VAT.
3. Purchases ledger — all invoices received for which input VAT credit is claimed.

Filing and payment

• Filing is electronic through the NRA portal (with a qualified electronic signature).
• VAT due is payable by the same deadline — by the 14th — to the NRA bank account.
• For VAT refunds — the NRA refunds or offsets against other liabilities within 30 days.

Penalties for non-filing

• Fine for failure to file the VAT return: EUR 250–5,000 (Art. 179 ZDDS).
• Interest on late payment: the statutory interest rate (BNB base rate + 10 percentage points per annum).

2026 changes — SME scheme, new threshold, calendar year

From 01.01.2026, significant amendments to the ZDDS enter into force, transposing Directive (EU) 2020/285 (special scheme for small enterprises):

Domestic SME scheme (Art. 168v ZDDS)

• Applies to persons with annual turnover of no more than EUR 51,130 (for both the current and the preceding calendar year).
• Persons under the scheme do not charge VAT and have no right to input VAT credit.
• The scheme applies automatically — no notification to the NRA is required.

When it is beneficial:

• B2C sales — the customer pays a lower price (without 20% VAT).
• Activities without significant input purchases (consulting services, software development).

When it is NOT beneficial:

• B2B services — under reverse charge, VAT is not a cost for the client in any event.
• Where there are significant input purchases — the right to input VAT credit is lost.
• When receiving services from third countries — registration under Art. 97a is still required.

EU SME scheme (Art. 168g–168n ZDDS)

• Turnover in Bulgaria of no more than EUR 51,130 AND total turnover across the entire EU of no more than EUR 100,000.
• Registration with the NRA is required, resulting in an identification number ending in “-EX”.
• Quarterly reporting of turnover (Art. 168l ZDDS).
• Allows VAT exemption for B2C sales in other Member States.

New registration date (Art. 103 ZDDS)

When the EUR 51,130 threshold is exceeded, the registration date is the day following the day of exceeding — not the date of the registration act, as it was previously. This means that from the next day you must charge VAT, even if you have not yet received the registration act.

New transactions included in turnover

Certain transactions involving real estate and financial services, which were previously excluded from the turnover calculation, are now included (in connection with Art. 168v ZDDS). This may affect businesses carrying out mixed activities.

Most common VAT mistakes

Our practice shows that businesses in Bulgaria most frequently make the following mistakes:

1. Failing to monitor turnover daily

From 2026, turnover is monitored for the calendar year, not the last 12 months. You must know your turnover every day, because upon exceeding the threshold you have 7 days to file an application, and registration takes effect from the following day.

2. Failing to file the application within 7 days

Missing the 7-day deadline leads to ex officio registration by the NRA and potential penalties.

3. Failing to charge VAT from the day after exceeding the threshold

The new Art. 103 ZDDS means that from the day after exceeding the threshold, you are a registered person and must charge VAT — even if the registration act has not been issued. If you fail to do so, you owe the VAT “out of your own pocket”.

4. Failing to exercise input VAT credit within the 12-period deadline

The right to input VAT credit may be exercised up to the 12th tax period after the period in which the invoice was issued (Art. 72 ZDDS). After this deadline, the right is lost irrevocably.

5. Failing to issue invoices within 5 days

The invoice must be issued by the 5th day from the date of the chargeable event (Art. 113 ZDDS). Delays lead to penalties.

6. Claiming input VAT credit for personal expenses

VAT on personal purchases by the owner, entertainment, and hospitality expenses is not deductible. During an audit, the NRA will assess VAT with interest and penalties.

7. Failing to account for the loss of input VAT credit under the SME scheme

If you opt for the SME scheme, you have no right to input VAT credit. If you have significant input purchases, the loss of input VAT credit may exceed the VAT saved.

8. Errors in self-assessment

When receiving services from foreign persons (Art. 97a) or upon intra-Community acquisition, self-assessment of VAT through a protocol is required. Many businesses miss this obligation, resulting in fines during audits.

Frequently asked questions

Conclusion

VAT is the tax that affects the day-to-day operations of every business in Bulgaria. From 2026, the changes are significant — a new threshold (EUR 51,130), a new turnover monitoring method (calendar year), a new SME scheme, and a new registration date (the day after the threshold is exceeded). Failure to understand these rules can result in serious penalties.

If you have questions about VAT registration, input VAT credit, or the SME scheme, contact Innovires Legal. We will analyse your specific situation and help you make an informed decision.

This article is for informational purposes only and does not constitute tax or legal advice. For specific cases, we recommend consulting a tax adviser or lawyer. The information is current as of March 2026 and reflects the legislation in force at that date.