Different countries within the European Union (EU) have different rates of value added tax (VAT) and different reductions on the standard rate for various goods. The standard VAT rate applicable in all EU countries for goods and services is at least 15 per cent. EU countries may apply one or two reduced rates of at least 5 per cent to specific goods or services. Under certain conditions, a number of exceptions to these rules also apply (lower rates, reduced rates for other goods or services, etc.). The current EU VAT legislation is set out in Council Directive 2006/112/EC – the EU’s common system of value added tax. Value added tax is levied on all transactions carried out by a taxable person in the EU for consideration, i.e. by any person or entity supplying goods or services in the course of a business.
Intra-Community supplies (ICS) and intra-Community acquisitions (ICA) of goods
Here we examine intra-Community supplies (ICS) and intra-Community acquisitions (ICA) of goods – supplies of goods dispatched or transported from the territory of one EU Member State to the territory of another.
Pursuant to Article 53(1) of the Value Added Tax Act /VAT Act, intra-Community supplies under Article 7 are subject to a zero rate of tax, with the exception of exempt intra-Community supplies under Article 38(2).
Pursuant to Article 66 of the VAT Act, the standard rate of VAT is 20 per cent for taxable supplies where the place of supply is within the country, except for those expressly specified as being subject to a reduced or zero rate of VAT. The rate referred to in paragraph 1 also applies to the importation of goods into the country and to taxable intra-Community acquisitions within the country, except for those expressly specified as being subject to a reduced or zero rate of tax.
Under Article 84 of the VAT Act, VAT on intra-Community acquisitions is payable by the person making the acquisition.
In the case of an intra-Community acquisition, VAT is charged where the goods arrive and are not to be transported elsewhere, i.e. the EU country where the goods are finally located following their transport from another EU country. VAT may be charged on an intra-Community acquisition when the supply of goods to the relevant EU Member State is completed. The taxable amount for the supply of goods and the intra-Community acquisition of goods is determined on the basis of the consideration for the supply – the consideration received or due for the supply.
Cases where VAT is exempt
The Directive allows for certain exemptions from VAT. Most of these are exemptions without the right to deduct, for example financial and insurance services, and medical or social services. However, there are also exemptions with the right to deduct, such as intra-Community supplies of goods. A taxable person is entitled to deduct the amount of VAT paid on goods or services acquired in the EU Member State where those supplies took place. VAT on input supplies may be deducted from the VAT due on taxable supplies, such as domestic supplies of goods or services.
Put simply, in general, when making an intra-Community supply of goods (ICS), the supplier does not charge VAT in their own country, but the relevant recipient of the supply, in the case of an intra-Community acquisition (ICA), charges VAT in their own country and is entitled to a tax credit.
As, in the case of intra-Community supply of goods, the supplier does not charge VAT in their own country, the tax authorities strictly monitor compliance with the rules governing this type of transaction and require the relevant evidence. In Bulgaria, in accordance with the Value Added Tax Act (VAT Act) and the Regulations for the Application of the VAT Act (Rules for the Application of the VAT Act (RAVAT)), in order to prove an intra-Community supply of goods, the supplier must hold the following documents:
- delivery note:
- (a) an invoice for the supply, which contains the recipient’s VAT identification number issued by another Member State, under which number the supply was made to the recipient;
- (b) a report pursuant to Article 117(2) of the Act – in cases of intra-Community supply under Article 7(4) of the Act;
- (c) a document pursuant to Article 168(8) of the Act – where the supplier is a natural person who is not a sole trader and is not registered under the Act;
- documents relating to the dispatch or transport of goods from the territory of the country to the territory of another Member State, where the presumption under Article 45a of Implementing Regulation (EU) 2018/1912 of 4 December 2018 amending Implementing Regulation (EU) No 282/2011 as regards certain exemptions in intra-Community transactions (OJ L 311, p. 10, of 7 December 2018):
- (a) a transport document or written confirmation from the consignee or a person authorised by the consignee, certifying that the goods have been received within the territory of another Member State – where the transport was carried out by the consignee or by a third party on the consignee’s behalf; the written confirmation shall specify the date and place of receipt, the type and quantity of the goods, the type, make and registration number of the vehicle used for the transport, the name of the person who delivered the goods and their official capacity, the name of the person who received the goods and their official capacity;
- (b) a transport document certifying that the goods have been received within the territory of another Member State – where the transport has been carried out by the supplier or by a third party on the supplier’s behalf.
As goods are often transported by road, the transport document used is the CMR – the common name for the international consignment note for road transport.
The CMR contains data on:
- the company sending the goods;
- the location from which the goods are to be collected;
- the company receiving the goods; place of unloading;
- the haulage company;
- the vehicle used to carry out the transport;
- product details; other details;
- date, signature, sender’s stamp;
- date, signature, carrier’s stamp.
Once the goods have been delivered to the unloading point, an authorised representative of the company receiving the goods shall enter the date, sign and affix a stamp in the goods receipt field.
Exchange of data on intra-Community supplies
Within the EU, data is exchanged regarding intra-Community supplies. Any taxable person who has carried out intra-Community supplies must submit details of the supplies they have made to taxable persons established or registered for VAT purposes in another Member State of the European Union. This is done via a VIES return.
In Bulgaria, the VIES return must be submitted together with the VAT return by the 14th day (inclusive) of the month following the tax period to which it relates. The data on taxable persons collected from the VIES returns is processed and analysed by the tax authorities. Checks are carried out to ensure that taxable persons within a given tax authority have correctly classified certain supplies to persons in other Member States as zero-rated and that they hold the necessary documents proving those supplies.
Among these documents, the CMR consignment note plays an important role – it is issued by a haulage company that is not affiliated with either the consignor or the consignee. Following an analysis of the data from the VIES returns, the data on intra-Community supplies declared in respect of a particular person can be cross-checked against the data from that person’s VAT returns relating to declared intra-Community acquisitions. Where discrepancies are found, control measures are taken.
