Regime of intra-community acquisition of goods, which are not transported to Bulgaria
Interpretation Ref. No 1158 of 14 July 2010 of Bulgarian National Revenue Agency
Regarding: Regime of Intra-Community Acquisition of Goods
In connection with your written inquiry, filed in the registry of Department “Appeal and Enforcement Management”, city of ..., file No ... I make general statement, consistent with the effective provisions of the Value Added Tax Act /the VAT Act/.
In your inquiry you say that a person registered under the VAT Act buys goods from a company established on the territory of the EU. The buyer acquires ownership of the goods at a port in the EU, where the buyer sells the same goods to another Bulgarian company. The goods are not transported to Bulgaria. The second Bulgarian company transports them to a EU Member State or to a third party.
With regard to the exposed factual situation you put the following questions:
1. Is the purchase of goods intra-Community acquisition for the first Bulgarian company?
2. Is the sale of goods from the first to the second Bulgarian company a subject to taxation under the VAT Act, or does it form turnover for VAT registration in the European country where the ownership of the goods is transferred?
3. When the second Bulgarian company sells the goods to a person, established in an EU Member State, is it intra-Community supply, or export, respectively, when selling the goods to a person established in a third country?
4. Does the first Bulgarian company need to have a document, that the goods are received by the final recipient?
According to Art. 20 of Council Directive 2006/112/EC of 28 Nov 2006 on the common system of value added tax, „intra-Community acquisition of goods” shall mean the acquisition of the right to dispose as owner of movable tangible property dispatched or transported to the person acquiring the goods, by or on behalf of the vendor or the person acquiring the goods, in a Member State other than that in which dispatch or transport of the goods began.
For Bulgaria the regime of intra-Community acquisition /ICA/ was introduced with the VAT Act /published State Gazette, issue 63 of 04 Aug 2006, and is effective since 01 Jan 2007. This regime replaces the regime of import effective until 31 Dec 2006 in the cases where transport of goods, subject of supply, is carried out between EC Member States, and the supply is between persons, registered for VAT purposes in two different Member States. Thus, for each intra-Community supply, recorded in the Member State where the supplier is registered, intra-community acquisition in the Member State in which the recipient is registered shall be accounted.
The conditions for applying ICA regime, which is regulated by Art. 13, paragraph 1 of VAT Act, are as follows:
- the supplier shall be a taxable entity, who is registered for VAT purposes in another Member State as of the date of the tax event;
- the subject of intra-community acquisition shall be a product;
- the acquisition shall be on a remuneration basis;
- the goods shall be transported to the territory of the country from the territory of another Member State.
- the acquiring person shall be a taxable entity or a non-taxable legal entity.
Taxation of intra-community acquisition is dependent on the place of acquisition. According to Art. 62, paragraph 1 of the VAT Act, the intra-community acquisition takes place on the territory of the country and respectively is a subject of taxation in the country when the goods arrive or their transport ends within the territory of the country.
When the goods are transported by or on behalf of the vendor or the person acquiring the goods to the territory of another Member State by virtue of Art. 62, paragraph 2 of the VAT Act, intra-community acquisition takes place in the country if the person acquiring the goods is registered under VAT Act and the acquisition is performed under identification number issued in the country. In this case the taxation of goods shall be carried out in the country, too. The above paragraph shall not apply when as of the date on which the tax for ICA has become chargeable in the country, the person has evidence that the acquisition was taxed in the Member State where the goods arrived or their transport ended /Art. 62, paragraph 3/.
Provisions of Art. 62, paragraph 2, 3, and 4 of the VAT Act, as well as Art. 41 of Council Directive 2006/112/EC on the common system of VAT regulate the hypothesis in which one taxable person is registered for VAT purposes in more than one Member State. In these cases, the person himself chooses under what identification number to make the acquisition of the goods. For example, when goods purchased by a person registered for VAT purposes in Germany are transported from Germany to Romania and the acquiring person has provided the vendor a Bulgarian identification number, if the person does not prove that the intra-Community acquisition was taxed in Romania, where the goods arrived, the place of acquisition shall be in the country, respectively they shall be taxed in the country.
Given the circumstance specified in your inquiry, that the goods will not be transported to the territory of Bulgaria, we consider that in the three hypotheses described there is no intra-community acquisition of goods within the meaning of Art. 13, paragraph 1 of the VAT Act for persons registered under the VAT Act.
For the purposes of VAT taxation, the proper determination of the place of implementation of the supply is essential. With regard to the provision of Art. 17 of the VAT Act, we consider that:
1. With the purchase of goods by person registered for VAT purposes in an EC Member State, for the first Bulgarian company – trader “A” registered under the VAT Act - supply with place of implementation within the EC Member State, where the goods are located at the time of transfer of ownership takes place, if transport is not agreed between the parties hereunder /art. 17, paragraph 1 of VAT Act/;
2. The place of implementation in case of supply of goods by trader “A” registered under the VAT Act to trader “B” registered or unregistered under VAT Act /the second Bulgarian company/ should be regulated by the provisions of paragraph 1 of Art. 17 of the VAT Act when the goods are not transported, or paragraph 2 of the same article in case of agreed transport of goods between the parties herein. On the grounds of Art. 86, paragraph 3 of the VAT Act, in case of supplies with place of implementation outside the territory of the country, tax is not charged, but you should consider that the value of these supplies forms the turnover for registration for VAT purposes of the trader „A” in the EC Member State where the place of implementation of the supply is;
3. Similarly, the place of implementation of supply of goods from the trader “B” to a person established in a third party or in another Member State shall be determined. The regime of taxation in these cases depends on the VAT legislation of the state, where the supply will be delivered.
Concerning the legal regulations on intra-community supplies and intra-community acquisition of goods, the Executive Director of Bulgarian National Revenue Agency issued guidelines ref. No 24-00-27 of 24 Jan 2007 and ref. No 91-00-241 of 04 June 2009, which are available at the website of Bulgarian National Revenue Agency - www.nap.bg.
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