Bulgaria Completes VAT Refund Reform

by Ulrika Lomas

Tax-News.com, Brussels

After several years of criticism, the Bulgarian Ministry of Finance has committed to a raft of measures to ensure the timely payment of value-added tax (VAT) refunds.

The package of measures aims to bring Bulgaria's VAT refund process in line with European Union rules that require member states to make payment of VAT refunds within a month, or two in exceptional circumstances.

The Ministry has committed to:

- Strictly adhere to these statutory deadlines for VAT refunds;
- Implement a new system whereby value-added tax returns eligible for VAT refunds will be earmarked for payment after processing;
- Monthly analysis of the structure of non-refunded VAT, and the reasons for non-refund;
- Monthly supervision of the process of VAT refunds; and,
- The release of monthly data about VAT refunded each month.

In line with the Ministry's final aforementioned commitment, the Ministry has newly released comprehensive details of the VAT refunds issued during July.

According to the Ministry's statistics, VAT refunded in July amounted to BGN563m (USD383m). 93 percent of the VAT creditors paid were due VAT refunds worth less than BGN100,000, the Ministry said. The largest VAT refund exceeded BGN50m, the figures show.

The VAT refund pledge comes after several years' criticism of the Government's tardy approach to repayment. Previously, in 2009 the Government used output VAT to buoy state coffers.

VAT refunds were a key issue too for Finance Minister Peter Tchobanov's predecessors, Kalin Hristov and Simeon Djankov. In a March 2013 interview, Hristov heralded the tax authority's progress on reducing the value of outstanding VAT refunds, which he said had been reduced to the lowest level since 2008.

Bulgarian businesses have long contested that slow VAT refunds have stymied Bulgarian economic growth, creating serious cash flow pressures on Bulgarian traders.

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