Reverse charge in Bulgaria, explained with examples
When the buyer, not the seller, accounts for VAT: services from abroad, intra-EU purchases and Bulgaria’s domestic reverse charge, with simple examples.
Normally the seller charges VAT on the invoice and pays it to the tax authority. Under the reverse charge, the buyer accounts for the VAT instead. It sounds technical, but it affects almost every VAT-registered business that buys from abroad.
How it works in practice
The buyer:
- receives an invoice without Bulgarian VAT,
- calculates the VAT itself, usually by issuing a protocol (протокол) for the transaction,
- records the VAT as output VAT in its sales ledger,
- and, if the purchase is for taxable activity, records the same amount as input VAT in its purchase ledger.
For a fully taxable business, the two entries cancel each other out, so no money changes hands. The point is that the transaction becomes visible in the VAT return.
Example 1: services from another EU country
A Bulgarian company buys online advertising from an Irish supplier. The supplier invoices without VAT and quotes the Bulgarian company’s VAT number. The Bulgarian company issues a protocol, charges itself 20% Bulgarian VAT and deducts it in the same return.
The same applies to most business services bought from suppliers established outside Bulgaria, inside or outside the EU.
Example 2: goods bought from another EU country
A Bulgarian retailer buys goods from a supplier in Italy, who ships them to Sofia. The Italian invoice shows 0% VAT as an intra-community supply. In Bulgaria, this is an intra-community acquisition: the retailer accounts for Bulgarian VAT through a protocol and deducts it if entitled.
Example 3: a foreign supplier selling in Bulgaria
A German company that is not registered for VAT in Bulgaria installs equipment for a Bulgarian VAT-registered customer. In many cases like this, the Bulgarian customer accounts for the VAT under the reverse charge. If the German company is registered for VAT in Bulgaria, the answer can be different, so these cases need checking.
Example 4: Bulgaria’s domestic reverse charge
For certain goods sold between Bulgarian VAT-registered businesses, the reverse charge applies even though both are in Bulgaria. The VAT Act lists these goods; they include cereals and industrial crops, and waste and scrap materials. The seller invoices without VAT and the buyer accounts for it.
The mistakes we see most
- No protocol issued, so the VAT never appears in the return.
- The wrong month: the reverse charge belongs to the period of the supply, not when someone notices the invoice.
- No deduction claimed, so the company pays VAT it was entitled to recover.
- Reverse charge applied where the supplier is registered in Bulgaria and should have charged VAT.
With SAF-T on the way, these entries will be visible in your accounting data as well as in your VAT return, so getting them right matters more each year.
How we can help
We review your foreign purchases, set up the right treatment in your ledgers and prepare the protocols every month as part of your VAT return. VAT compliance
