VAT registration of a company - what you probably don’t know?


The procedure of VAT registration of a company is a series of steps. The separate actions aiming the registration of a trader under the Value Added Tax Act (VAT Act) require the preparation of a precise balance sheet. Though, your financial statements are the ones that determine whether and when you need to register.


VAT registration of a company is usually performed when it is mandatory. Although the law allows all traders to register voluntarily, in most cases this measure is taken by obligation. The reason for this is the more complex accounting of the companies with VAT registration. For this purpose you will need a good accounting firm to prepare and submit declarations on a monthly basis, to form the income-expenditure part of your financial balance, as well as to contact the National Revenue Agency almost constantly.


When does VAT registration become mandatory?


The legal form of your company does not matter, as well as the subject of its activity. If you, as a registered trader, perform commercial operations, the taxable turnover of which exceeds the permissible threshold, then the obligation for VAT registration comes into force. Here we must specify that the limit set by law is BGN 100,000. This taxable turnover can be formed for 12 consecutive months or be achieved with only one financial operation. In both cases you automatically fall into the category of companies obliged to register.


The law obliges you to submit an application for VAT registration to the territorial directorate of the National Revenue Agency within 7 days from the expiration of the tax period during which this turnover has been reached. When the turnover has been reached for a period not longer than two consecutive months, including the current one, the person is obliged to submit the application within 7 days from the date on which the turnover has been reached.


An interesting paradox is observed in the whole procedure. On one hand, the law obliges you to register when the mandatory conditions are met, but on the other hand, you will have to convince the revenue authority of the reason to do so.


For this purpose, you must not only state the reasons in the application, but also provide for verification a report on the financial operations of your company, basing on which the relevant directorate of the National Revenue Agency at the place of registration to make the entry or return you a motivated refusal. The second option is quite possible, despite the mandatory nature of the registration. The reason for this is most often incorrectly prepared documents, missing data or established irregularities.


What happens if you don't comply with the regulations?


The VAT registration of a company is very rarely performed on request. This procedure is usually started when the company's activity requires it – when you will operate on international markets, trade securities or buy goods and services from a VAT registered supplier. Sometimes the registration also brings financial benefits, for example when buying fixed assets for the purposes of the company's activity - real estate, cars, professional equipment, etc.


When the conditions for mandatory VAT registration of your company occur, you must comply with the provision in time, because the sanctions for such violation are serious and inevitable. Many merchants try to hide a part of their income in order to avoid the registration, but this is a violation that we do not advise you to resort to. Even with the help of the best accountant, you can't mislead the tax authorities for long. A sudden inspection can detect such a violation and it can cost you fines in particularly large amounts.


If you are negligent and do not apply for VAT registration within the specified term of one week, the revenue authority can perform the registration on its own initiative, but this is not a great relief for you and your accounting team. In such cases, fines in the amount of BGN 500 to BGN 5,000 are imposed. A good accountant would not allow this to happen. Therefore, carefully choose the team that will keep your company accounting.


Registration procedure


The key point is to meet the deadlines. Your accounting team should keep a correct income-expenditure balance of your company, which means that the amount of the taxable turnover can be easily traced within the last 12 months or in a shorter period if the taxable threshold has been exceeded in a shorter time interval. Your accountant should initiate the procedure by preparing the necessary documentation.


The documents necessary for VAT registration of a company are:


  • Application form, containing the grounds for registration;
  • Monthly reports on the turnovers from the last 12 months;
  • Declaration stating the absence of effective sentences or criminal proceedings in connection with tax fraud or violations of the tax legislation in the country;
  • When the documents are submitted by a trusted person, a notarized power of attorney should be attached.


With the correctly prepared documents begins the actual work of VAT registration of your company, and this includes:


Submission of the application for registration


This can be done on site at the territorial directorate of the National Revenue Agency or electronically. If you choose the online submission of the application, you need to have an electronic signature. All good accounting firms in the country have such signature, so you can take advantage of this opportunity. Another requirement for online entry of the documents is the personal identification code, which you can get completely free of charge from the territorial directorate of the National Revenue Agency at your address registration.


It is important who will submit the application for registration. By law, this should be done personally by the manager when there are no physical obstacles to comply with the provisions. The law also allows the application to be submitted by a trusted person with a notarized power of attorney or by a person authorized with representative functions in accordance with a Memorandum of Association, for example such as the executive director of a joint-stock company or of another impersonal company.


The next and last step in the procedure of VAT registration of a company includes a visit to the territorial tax office for obtaining of the registration documents. The procedure takes at least two weeks, during which the tax authorities check the grounds for registration.


In case of correctly prepared documents, during this time period, you will receive consent for registration, together with the obligatory distinctive sign that distinguishes you from the others - the unregistered traders. The companies registered under the VAT Act receive an identification number, including the sign "BG", added to the UIC (unique identification code) or BULSTAT of the company. Afterwards you need a good accountant to take over the monthly preparation of VAT returns.


We already have a registered company - and now what?


With the registration of your company your contacts with the administrative bodies are not exhausted at all. In the working process and in order to be able to trade freely you will need some additional documents and you will have to take specific actions necessary for your legal existence. Here are the most important ones:


- Opening a current bank account - not mandatory for sole proprietors which are not VAT registered;

- Production of a company stamp - this is needed for absolutely all companies;

- Purchase of a fiscal device with registration and connection to the National Revenue Agency - mandatory for cash payments;

- Submission of a declaration for a self-insured person and starting an activity;

- A current status certificate - issued by the Registry Agency;

- Registration of a commercial object - when you use such for your activity in a prominent place in it must be placed:


  • Working hours of the object;
  • A copy of a cash register certificate;
  • A permission for use / act 16 /;
  • An assortment permit;
  • Categorization /for restaurants and hotels/;
  • A permission for extended working hours, other sketches and permits.


If you trade with food products, you will need the following papers:


  • An audit book, a book for initial instruction, a book for periodic instruction;
  • A book of complaints;
  • Invoices, а cash register book, receipts, reversal notes;
  • A book on sanitary conditions, a diary for the temperature of the refrigeration system, a diary for maintaining the hygienic condition of the object, a diary for personal hygiene of the staff, a book on the suitability of the food products, a diary for incoming control of foods and packaging materials, a diary for scrapping of food products, an act for scrapping of material stocks, a diary for training of the personnel on good production and hygienic practices.


If your business requires staff recruitment, you will also need:


  • Registration in the Labor Inspectorate - for employees employed on a labor contract;
  • A document for expertise and a contract with the occupational medicine service;
  • A schedule for employee leaves;
  • Rules for the internal labor order;
  • Orders and rules for the distribution of the working time and the organization of the work.