The Government proposed changes in the VAT Act to cut down VAT frauds on January 11.

The new VAT Act would reduce customs and tax formalities to a minimum. European Union member states have experienced frauds related to internal trade, and there is a concern that such frauds will take place in Bulgaria as well. The most common form of fraud involves deliveries of goods within the EU and trade deals within the EU.

Substantial losses to state budgets are caused by “chain frauds”. This involves an invoice is issued over and over again for the same goods among traders registered in different EU member states. If such frauds are committed in this country, the state will be obliged to re-pay amounts from the budget unless it can check what really happened with the declared deliveries.

However, to do so is difficult because of the lack of customs control and the long time it takes for information to be exchanged about internal trade. Amendments to the Value Added Tax Act will introduce a mechanism requiring guarantees before the registration within the VAT Act of persons identified as “risky” by the administration.

The revenue agency will refuse registration to people who do not deposit a one-year-long unconditional and irrevocable bank guarantee. In addition, registration will be refused if it is known that one or more of the owners, managers, procurators, partners or shareholders have or have had similar roles in bodies owing more than 5000 leva in unpaid VAT. Registration will also be refused when person have been convicted of or charged with offences against the tax administration system.

The amendments provide for immediate tax repayment from the budget by conceding of guarantees before the end of the inspection and equalising of the repayment act with the Tax-Insurance Process Code (TIPC). If this mechanism is used, the income administration will repay the tax immediately. Anyone who has undergone an inspection will be able to make use of the facility.

The time frames for an audit have been changed. The basic term will last up to six months from the delivery of the order for inspection.

Until now, the term has been three months. The term may be extended by two months, instead of the current one month.

A time frame for the international exchange of information has been set at three to six months, depending on specific requests. As to the regular information exchange of data declared in the VIES system, data for each three-month period must be provided at the end of the next three-month period. For example, the data for January-March period will be received at the end of June.To enable check-ups on internal deliveries within the EU, the deadline for doing such inspections has been prolonged. This has been done because the current three-month timeframe is not enough.The amendments to the act also provide for tougher administrative sanctions. For failing to file a verification declaration on time, the fine will be between 500 and 10 000 leva. Currently it is between 250 and 2500 leva.

The same sanctions will be to registered persons who do not give information to the accounting register or give the information in electronic form different from that used by the register. Currently the fine amounts to between 250 and 2500 leva.