Customs Duties and VAT
Customs duties
Regarding the import of goods on the territory of Bulgaria, the Customs Tariff and its annexes provide for the following basic rates of duties:
Conventional, applied to commodities coming from countries to which Bulgaria granted the Most Favored Nation clause (MFN). In the Customs Tariff for 2003 the average rate of duties is 11.31% and with respect to the import of industrial goods is 8.62 %. A large number of industrial commodity groups, such as energy sources, raw materials, medicines and others, are treated with zero rate of customs duties.
Preferential, applied to commodities originated from the EU (in accordance with Association Agreement), EFTA and CEFTA countries, Turkey, Macedonia, Estonia Israel, Lithuania, Latvia and Albania (in accordance with Free Trade Agreements). When the Industrial goods (incl. machinery, equipment, etc.) have origin from the EU, EFTA, CEFTA countries and Turkey, there are no any duties to be paid (0 rate of duty). In accordance with FTA’s with Macedonia, Estonia, Israel, Lithuania, Latvia and Albania there is a process of gradual reduction of duties on industrial goods ((the advancing depending mainly of the year of implementation of the respective FTA);
Preferential, applied under the General System of Preferences for commodities listed in a separate annex, coming from the developing countries (70% of the conventional rates) and from the least developed countries (suspension of rates).
In cases when a foreign company is planning on moving its entire business including machines, equipment, inventory, etc. (complete transfer of the activities) on the territory of Bulgaria, there are no import duties to be paid (Art.726-732 of the Implementing Regulation of the Customs Act).
Note:
The rate of customs duty for each specific item of machinery, equipment, etc. and country of origin could be checked with the corresponding customs code (tariff number) in the Bulgarian Customs Tariff and its annexes on the Web site of the National Customs Agency on address: http://www.customs.bg
Some VAT regulations
The VAT rate is 20% of the value of the equipment and is due for payment at the time of import.
In case of import of manufacturing equipment, machinery and tools it is possible to defer the VAT payment for a period of 6 months, which period can be extended up to 24 months under the regime of “deferred payment and temporary import”.
Because of the complicated procedure, however, for investors this is not recommendable, except in the cases when the importer intends to take the machines out of the country after the expiration of this period; deposit on due duties and VAT is at the rate of 20%.
The VAT tax rate shall be zero in the event of export of goods.
Special preferential VAT regime for imports
As of 1 January 2003 VAT on the import of goods can be charged by the VAT registered importer if he holds a permit issued by the Minister of Finance and imports goods that are included in the list approved by the Minister of Finance.
The importer shall exercise his right by:
declaring in the filed customs declaration that he will use this regime;
declaring that at the time of the import he is registered for VAT and has no outstanding tax liabilities and liabilities to the obligatory social and health insurance.
Where the importer has exercised his right, the customs authorities shall agree to the release of the goods without effective payment or securing of the VAT.
The investment project shall be approved by the Minister of Finance in compliance with the following requirements:
- term of fulfillment of the project – up to two years;
- size of the investments – over BGN 10 million (about EUR 5 million) for a period not longer than two years;
opening of more than 50 new jobs;
- the capability of the person to finance the project, as well as to construct and maintain sites providing its fulfillment.