Ex. № 20-00-106

Date: 05.08.2021

VAT, Art. 118;

Additional provisions of VAT, §1, item 41;

Ordinance №. H-18/2002, Art. 3;

Ordinance №. H-18/2006, Art. 27.

REGARDING: Registration and reporting of intra-community distance sales of goods pursuant to Art. 118 of The Value Added Tax Act (VAT) and Ordinance №. H-18 of 13.12.2006 on registration and reporting through fiscal devices of sales in commercial establishments, requirements for software for their management and requirements for persons who carry out sales through an electronic store (Ordinance №. H-18/2006 .)

DEAR MADAM/SIR,

This opinion is issued on the basis of Art. 10, para. 1, item 10 of The Law on the National Revenue Agency. The purpose is to clarify the order and method of registration and reporting under Art. 118 of VAT and Ordinance №. H-18/2006 on intra-community distance sales of goods within the meaning of Art. 14, para. 1 of VAT, carried out by liable persons, given the numerous inquiries received by the National Revenue Agency.

In this regard, I express the following opinion:

Conducting electronic commerce is carried out through the sale of goods and services over the Internet. It has some specifics that distinguish it from traditional trade, such as – the customer and the supplier are not physically in the same place at the time of the sale, sales are usually carried out by concluding a contract at a distance, the commercial premises from which they are carried out sales, is a physical location with a specific address, and payment for the sale is made through various methods.

In order to answer the questions of when and how they are registered and reported in accordance with Art. 118 of the VAT and Ordinance №. H-18/2006, intra-community distance sales of goods carried out by a liable person, it should first be determined where the commercial establishment is located and what the commercial establishment from which the sales are carried out actually is, in view of the territorial scope of the provisions of the VAT and Ordinance №. H-18/2006, after which the methods of payment by the customers should also be taken into account.

1. Commercial entity in e-commerce:

In order to apply the provisions of Art. 118 of the VAT and Ordinance № H-18/2006 in relation to a given sale, the commercial establishment from which the sale is carried out must be on the territory of the Republic of Bulgaria.

The general rule laid down in Art. 118, para. 1 of the VAT, is that every person (registered and unregistered according to the law) is obliged to register and account for the deliveries/sales made by him in a commercial establishment by issuing a fiscal receipt from a fiscal device (fiscal receipt) or by issuing receipt from an integrated automated business management system (system receipt), regardless of whether another tax document is requested. The order and method for registering and accounting for sales in commercial establishments by issuing a fiscal receipt (fiscal receipt) from a fiscal device are defined in Ordinance № H-18/2006.

For the purposes of Art. 118 of the VAT and Ordinance № H-18/2006, the concept of “commercial establishment” is that of §1, item 41 of the additional provisions of the VAT, namely: “any place, room or facility (for example: tables, stalls and other similar) outdoors or under sheds, in or from which sales of goods or services are carried out, regardless of whether the premises or facility may simultaneously serve other purposes (for example: office, residence or the like), be part of an owned immovable property (for example: garage, basement, room or the like) or be a production warehouse or a vehicle from which sales are made’.

As can be seen from the given definition, in the first place, the law has provided that “commercial object” is any place, and the same includes any physical place on the territory of the country, in or from which sales of goods or services are carried out.

In electronic commerce, it is not the place where the technology that supports the website is located or the place where the website is accessible, but the place where the trader carries out his economic activity with a significant degree of regularity that is relevant for determining the commercial establishment. That is, as with traditional trade, with e-commerce there is also a physical location from which the obliged entity manages and carries out its sales. This can be both a shop and an office, warehouse, other premises or part of it, in which an organization is created for the management and implementation of this activity from the point of view of human and material resources – for example, the place where requests are received, processed orders are made, transport is organized, customer complaints are processed, etc.

In certain cases, given a specific organization of the activity or in view of modern business or technological solutions, the designation of a given physical location as a commercial entity could be extremely difficult or impossible. In such a hypothesis, if the criteria for determining a given physical place as a commercial establishment are inapplicable, it should be assumed that the commercial establishment is the place from which the trader manages his activity (the address of management), cf. in this sense, Art. 12 of the Criminal Code.

In view of this, when carrying out an intra-community distance sale of goods, the physical place managed (managed) by the supplier, from which the relevant sale was made, is usually considered a commercial establishment.

1. Registration and reporting of sales through a fiscal receipt depending on the payment method.

In the general case, when making a sale/delivery where payment is made in cash, with a check, with a voucher, with a bank credit or debit card or with other means of payment that replace money, there is an obligation to register and account for the sales of goods carried out through issuing a fiscal receipt. In the event that payment is made by making a cash deposit to a payment account, credit transfer, direct debit or available money transfer made through a payment service provider within the meaning of The Law on Payment Services and Payment Systems LAW ON PAYMENT SERVICES AND PAYMENT SYSTEMS or by postal money order made through a licensed postal operator, in the sense of The Postal Services Act (The Postal Services Act) fiscal receipt is not issued.

It is important to note that the method of payment for the goods by the customer is decisive for the issuance of a fiscal receipt, and not the method of receipt by the merchant of the cash paid for the sale.

In e-commerce, in particular when intra-community distance sales of goods are carried out, the most frequently used payment methods are:

• Payment by credit or debit card;
• Payment by bank transfer / depositing money to a payment account, credit transfer, direct debit, available money transfer/;
• Payment via electronic payment systems of a payment service provider;
• Payment in cash or by credit or debit card upon delivery of the goods by courier using the “Cash on delivery” service;
• Payment by postal money order.

The specified payment methods are not exhaustively listed, and it should be borne in mind that others are also possible, but from the point of view of those listed, payments for sales of goods in electronic commerce can be grouped as follows:

• payments for which a fiscal receipt is required;
• payments for which the issuance of a fiscal voucher is not required.

1. payments for which the issuance of a fiscal voucher is not required:

1.1. Payment by bank credit and debit card through a virtual POS terminal.

When paying for the sale of goods using a bank credit or debit card, the obligee is obliged to register the sale by issuing a fiscal voucher from a fiscal device or a system voucher from Integrated automated trading activity management system. This obligation derives from the provision of Art. 118, para. 3 of the VAT Act, in which it is expressly stated that a fiscal or system receipt is issued upon payment made with a bank credit or debit card. From this point of view, the fact that the payment was made by means of a virtual terminal POS-device is irrelevant.

1.2. Payment through electronic payment systems of a payment service provider.

Payment service provider is:

a) bank, according to the Law on Credit Institutions;

b) a payment institution within the meaning of LAW ON PAYMENT SERVICES AND PAYMENT SYSTEMS, operating on the territory of the country, which has an account in a bank on the territory of the country or an EU member state;

c) an electronic money company within the meaning of LAW ON PAYMENT SERVICES AND PAYMENT SYSTEMS, operating on the territory of the country as a payment institution.

Usually, when performing payment services, electronic payment systems of payment service providers provide the possibility of more than one payment method. Usually, when performing payment services, electronic payment systems of payment service providers provide the possibility of more than one payment method.

In view of this, when an obligated person carries out sales, the payments of which are made by debit or credit cards through an electronic payment system of a payment service provider, there is an obligation to register and account for these sales by issuing a fiscal/system voucher.

In the case of sales of goods or services, the payment of which the customer makes by transferring funds from his payment account (not by credit or debit card) to the payment account of the seller, there is no obligation to register and report these sales by issuing a fiscal receipt.

In the event that the obligated person does not have information about how the customer made the payment, it is permissible and does not constitute a violation of the requirements of Ordinance № H-18/2006 that the two types of payments made through the electronic payment systems be registered and reported with issuance of a fiscal receipt, in the presence of a reliable audit trail in the company’s accounting. In this case, in order to prevent double reporting of the same payment for a sale, it is necessary for the obligated person to take actions for the correct reflection of the payments for these sales in their accounting records.

1.3. Payment in cash or with a bank credit or debit card upon delivery of the goods by courier using the “Cash on Delivery” service:

In the sense of §1, item 12 of the Postal Services Act “cash on delivery” is an additional service in which the postal item is delivered to the recipient against payment of an amount determined by the sender. The supplier of the goods hands it over to the courier, who in turn delivers it to the recipient against payment of an amount determined by the sender (the value of the goods with or without the charge for the cash on delivery service, depending on what was agreed between the parties on the delivery). The courier collects the amount specified by the sender and then, depending on their arrangements, transfers it to a bank account or pays it in cash to the sender. The way in which the courier transfers the amount to the sender is irrelevant in this case, since the way in which the recipient pays for the goods – in cash or by bank debit – is decisive when complying with the requirements of the legislation for issuing a fiscal receipt /credit card.

In the case of delivery of goods using the “cash on delivery” service, where the customer pays in cash or with a bank credit or debit card upon delivery of the goods, there is an obligation to register and account for the sale with a fiscal receipt note.

2. Payments for which the issuance of a fiscal receipt is not required:

Payments for which the issuance of a fiscal receipt is not required:

• depositing money in cash on a payment account;
• credit transfer, direct debit or available money transfer made through a payment service provider within the meaning of the LAW ON PAYMENT SERVICES AND PAYMENT SYSTEMS;
• postal money transfer, made through a licensed postal operator, in the sense of Postal Services Act, in which case the merchant has the obligation to provide the customer with a paper or electronic document containing at least the information under Art. 26, para. 1, items 1, 4, 7 and 8 of Regulation № H-18/2006.

Definitions of the listed payment methods are given in the Additional Provisions of the LAW ON PAYMENT SERVICES AND PAYMENT SYSTEMS and Postal Services Act

• Registration and reporting of intra-community distance sales of goods under Art. 118 of the VAT and Ordinance № H-18/2006, when sales are carried out from a commercial establishment on the territory of the Republic of Bulgaria.

The provision of Art. 27 of Ordinance № H-18/2006 obliges the persons for whom there is an obligation to issue a fiscal/system receipt to register every sale of goods or services by tax groups according to the type of sales, namely:

1. group “A” – for goods and services, the sales of which are exempt from taxation, for goods and services, the sales of which are taxed at 0% VAT, as well as for sales for which no VAT is charged;
2. group “B” – for goods and services, sales of which are subject to 20% VAT;
3. group “B” – for sales of liquid fuels through liquid fuel consumption measuring devices;
4. group “D” – for goods and services, sales of which are subject to 9% VAT.

When the person carries out intra-community distance sales of goods and no Bulgarian VAT is charged, these sales should be referred to tax group “A” in the amount of the amount paid by the customer. In addition, the provision of Art. 27, para. 3 of Ordinance № H-18/2006 obliges persons using fiscal devices to program and register with name and unit price as separate items the goods or services pertaining to tax group “A”. For the convenience of individuals, it is possible for sales made to non-taxable persons in other Member States to be referred to in one department with, for example, the general name “EU GOODS” or “INTRA-COMMUNITY DISTANCE SALES OF GOODS”, as the names of the types of goods/services printed on the fiscal receipt include the name of the department. Given this, if the person carries out other sales of goods in Bulgaria, which should be attributed to tax group “A”, they will be able to be clearly distinguished from the sales of non-taxable persons in other member states. When adopting such an approach to accounting for sales, the daily financial statement will record on a separate line the total amount of sales attributed to that department as part of the person’s total turnover. On the other hand, it will be easy to compare the reported turnovers through the fiscal device for sales to non-taxable persons in other member states with those reflected in the electronic register that the person keeps by country. It should be borne in mind that in fiscal devices all registered and accumulated amounts are expressed in BGN and cents (Article 26, Paragraph 3 of the Regulation).

1. An alternative way to record and report sales.

As of February 1, 2020, an alternative option has been created which, under certain conditions, allows another sales document to be issued instead of a fiscal/system receipt. Pursuant to Art. 3, para. 17 of Ordinance № H-18/2006, a person who sells goods and/or services through an electronic store can register and report these sales instead of with a fiscal or system receipt through a document for registering the sale, which has not been issued by the Fiscal device or Integrated automated trading activity management system, when an absentee payment was made with a credit or debit card and provided that:

1. the software/software for sales management meets the requirements under Art. 52c of the regulation; and
2. for sales made through the electronic store, the person accepts absentee payments made by credit and debit card.

In this case, it is necessary for a person fulfilling the conditions and wishing to implement the indicated alternative option for reporting sales through an electronic store to familiarize himself in detail with the provisions in Articles 51o – 52u of Ordinance № H-18/2006.

In case the obligee does not have information about how the customer made the payment, i.e. whether with a bank credit or debit card or by transferring funds from the client’s payment account (not through a credit or debit card) to the seller’s payment account, is permissible and does not constitute a violation of the requirements of Ordinance No. H-18/2006. the two types of payments, made through the electronic payment systems, to be registered and reported by issuing a document for registering the sale under Art. 52o of the regulation, in the presence of a reliable audit trail in the company’s accounting. In this case, in order to avoid double counting of the same payment for a sale, it is necessary for the obliged person to take actions for the correct reflection of the payments for these sales in their accounting records.

DEPUTY EXECUTIVE DIRECTOR OF NRA: /GEORGI DIMOV/

Source: NRA