Online Sales from the EU to Bulgaria: What Businesses Need to Know About VAT

VAT on online sales from the EU to Bulgaria is one of the most commonly underestimated tax risks for e-commerce businesses. The issue usually does not arise with the first sale. It becomes visible once the business has built up turnover through its own online store, a marketplace, an e-commerce platform, or several sales channels at the same time.

Following the changes to the EU VAT rules for B2C e-commerce from 1 July 2021, online sellers may be required to charge VAT in the country of the end customer, rather than in the country where the seller is established. The European Commission explains that the reform introduced a single EUR 10,000 threshold for intra-Community distance sales and the option for online sellers to use the One Stop Shop — OSS — to declare and pay VAT on sales to customers in the EU through a single Member State.

For owners, managers, CFOs, accountants and tax teams, this is a practical issue with a direct financial impact. Incorrect VAT treatment may lead to a tax audit, additional VAT assessments, interest, a dispute with the Bulgarian National Revenue Agency, corrections in another Member State, double taxation and cross-border recovery of tax liabilities.

When Does the Risk Arise?

The typical situation is this: a company established in one EU Member State sells goods online to end customers in Bulgaria. The goods are dispatched from a warehouse, logistics centre, supplier or partner in one country, while the transport ends with the customer in another country.

The risk arises when the seller continues to treat these sales as taxable only in its country of establishment, without checking whether the place of taxation has shifted to the country of the end customer — in this case, Bulgaria. For sales to Bulgarian end customers, this may mean Bulgarian VAT, provided that the conditions for distance sales are met and the threshold has been exceeded.

What Is a Distance Sale of Goods?

An intra-Community distance sale of goods is a sale where goods are dispatched or transported from one Member State to a customer in another Member State, and the supply is made to a person who does not act as a standard VAT-registered business customer. Under the VAT Directive, this regime applies to supplies of goods dispatched or transported by or on behalf of the supplier from a Member State other than the Member State in which the dispatch or transport of the goods to the customer ends.

In practice, this most often means sales to private individuals. In certain cases, it may also include sales to legal entities that are not VAT-registered, or whose intra-Community acquisitions are not treated under the general B2B regime.

This is why the first check is always customer-based: who is the buyer, does the buyer have a valid VAT number, is the buyer purchasing as a business customer or as an end consumer, how is the transaction documented, and where does the transport end?

B2C and B2B: Why the Difference Matters

B2C means a sale to an end customer — usually a private individual buying for personal use. These are the sales at the core of the distance sales regime.

B2B means a sale to a taxable person — for example, a company with a valid VAT number purchasing the goods for its business activity. In that case, a different VAT treatment may apply, such as an intra-Community supply and intra-Community acquisition, provided the relevant conditions are met.

A common practical mistake is to mix the two flows. If an online platform only shows “legal entity” or “invoice to company”, that is not enough. The validity of the VAT number, the customer’s status and the actual VAT treatment of the supply must be checked.

Place of Supply: The Seller’s Country or the Customer’s Country?

For distance sales, the key question is where the place of supply is for VAT purposes. For intra-Community distance sales, the VAT Directive rule is that the place of supply is where the goods are located when dispatch or transport to the customer ends.

If an online seller sells goods from one Member State to an end customer in Bulgaria, Bulgaria may be the country of taxation if the relevant conditions are met. In that case, the Bulgarian VAT rate for the specific goods must be applied, unless an exemption or reduced rate is available. The standard VAT rate in Bulgaria is 20%.

This is why the Bulgarian National Revenue Agency does not look only at who the seller is. It also checks where the recipient is located, where the transport ends, what the customer’s status is and what VAT has been charged.

The EUR 10,000 Threshold: How It Works

The EUR 10,000 threshold is an EU-wide threshold for certain cross-border B2C supplies, including intra-Community distance sales of goods. If the value excluding VAT of these supplies does not exceed EUR 10,000 in the current and previous calendar year, the supplier may, under certain conditions, continue to tax the supplies in its country of establishment. Once the threshold is exceeded, the rule that the place of supply is the customer’s country applies from the moment the threshold is crossed.

This threshold should not be understood mechanically as “EUR 10,000 per country”. That is a common error in practice. Sellers often track their sales by individual country, or only through one sales channel, without consolidating all relevant cross-border B2C supplies.

For example, if a company sells through its own website, through a marketplace and through social commerce channels, it is not enough to check the turnover from only one of them. The tax risk must be assessed on the basis of the overall picture.

What Is OSS?

OSS stands for One Stop Shop. It is a special VAT regime that allows an online seller to declare and pay VAT on certain cross-border B2C sales in the EU through one Member State, instead of registering for VAT separately in each customer’s country. According to the European Commission, online sellers, including platforms and marketplaces, may register in one Member State and use that registration to declare and pay VAT on distance sales of goods and cross-border services to customers in the EU.

OSS is not a VAT exemption. It is a mechanism for centralised declaration and payment of VAT that would otherwise be due in the Member States of consumption.

This has three practical consequences.

First, if sales to end customers in Bulgaria are taxable in Bulgaria, OSS may be used to declare Bulgarian VAT through the Member State of identification.

Second, OSS registration alone does not prove that the specific sales have been correctly declared. OSS returns, breakdowns by country, VAT rates, periods and payments are needed.

Third, OSS is not a regime for deducting input VAT. The OSS return contains the value of the supplies, the VAT rates and the VAT due for the relevant Member States of consumption, but it does not operate like a standard local VAT return for input VAT deduction. The VAT Directive provides for quarterly OSS returns and the reporting of data by Member State of consumption.

What Is IOSS and Why It Should Not Be Confused With OSS?

IOSS stands for Import One Stop Shop. It is a separate regime used for distance sales of goods imported from third countries or territories in low-value consignments. The European Commission explains that IOSS was created to simplify the declaration and payment of VAT on distance sales of imported goods with a value not exceeding EUR 150.

OSS and IOSS are not the same.

OSS is usually relevant for intra-Community distance sales — for example, goods that are already located in the EU and are dispatched from one Member State to an end customer in another Member State.

IOSS is relevant for imported consignments from third countries to customers in the EU.

This distinction matters. During a tax audit, incorrect use of the terminology may lead to an incorrect defence strategy. If the dispute concerns goods shipped between Member States, the main issue is usually OSS, not IOSS.

What Are the “Member State of Identification” and the “Member State of Consumption”?

There are two important concepts under OSS.

The Member State of identification is the country through which the seller registers and submits OSS returns. This is often the country where the company is established.

The Member State of consumption is the country where VAT is due for the specific sale — for example, the country where the end customer is located and where the transport of the goods ends.

If a Bulgarian consumer buys goods from an online seller established in another Member State, Bulgaria may be the Member State of consumption. In that case, the OSS return should separately report the sales to Bulgaria, the applicable rate and the amount of Bulgarian VAT.

Does the Marketplace Always Owe the VAT?

No. This is one of the most common misconceptions in e-commerce.

The fact that a sale is made through an online platform or marketplace does not automatically mean that the platform is the supplier for VAT purposes. In certain cases, an electronic interface may be deemed to have received and supplied the goods — for example, in distance sales of imported goods in consignments not exceeding EUR 150, or in certain EU supplies facilitated by a platform where the underlying seller is not established in the EU.

In many standard cases, however, the seller remains the online trader itself. The platform merely facilitates the sale, collects the payment, provides infrastructure or maintains order data.

This has practical significance. In a tax audit, the Bulgarian National Revenue Agency may use platform data as evidence — orders, delivery addresses, order statuses, returned goods, payments, commissions and invoices. But that does not necessarily mean that the platform is the person required to pay the VAT instead of the seller.

How Is the Risk Calculated for Sales to Bulgaria?

If the place of supply is Bulgaria, the taxable amount and the VAT due must be determined. For standard taxable supplies, the Bulgarian VAT rate is 20%, unless a reduced or zero rate applies.

A particularly important question is whether the price includes VAT. Under the Bulgarian VAT Act, where it is not expressly stated at the time of agreeing the supply that VAT is due separately, VAT is deemed to be included in the agreed price. VAT is also deemed to be included in the advertised retail price of goods.

This may have a significant financial effect.

If the price charged to the end customer is BGN 120 including VAT, the VAT due at a 20% rate is BGN 20 and the taxable amount is BGN 100.

If VAT is charged on top of a VAT-exclusive price of BGN 120, the VAT due would be BGN 24 and the final price would be BGN 144.

In online sales to consumers, final prices are usually used. Therefore, in a tax audit, it is important to check carefully how the Bulgarian National Revenue Agency has calculated the taxable amount — whether it has extracted VAT from the gross price, or charged VAT on an amount that already includes VAT.

What Should an Online Seller Monitor in Advance?

Good VAT management for online sales does not begin during a tax audit. It begins when the sales model is set up.

First, sales should be tracked by country of delivery, not only by country of customer registration, payment currency or platform.

Second, B2C and B2B customers should be separated. For B2B sales, VAT numbers, invoicing, transport documents and the applicable regime must be checked.

Third, the EUR 10,000 threshold for relevant cross-border B2C supplies should be monitored.

Fourth, if OSS is used, there should be a clear link between platform reports, accounting records and OSS returns.

Fifth, returns, cancellations, undelivered parcels, credit notes and other corrections should be recorded promptly.

What Documents Are Needed in an Audit or Tax Inspection?

In a dispute with the Bulgarian National Revenue Agency, a general explanation that “the sales were handled by the accountant” is rarely sufficient. The defence must be based on verifiable data.

Usually, the following documents and information are needed:

• reports of all online sales by period;
• data on the country of delivery;
• customer status — private individual, legal entity, VAT-registered customer;
• valid VAT numbers as at the date of supply;
• invoices, credit notes and cancellation documents;
• waybills or other transport documents;
• order status — completed, cancelled, returned, undelivered;
• payment reports;
• agreements with marketplaces, couriers and fulfilment providers;
• OSS registration and registration date;
• quarterly OSS returns;
• breakdowns by Member State of consumption;
• proof of VAT payment through OSS;
• correspondence with the tax administration in the Member State of identification.

The most important element is reconciliation. Platform data, accounting records, invoices, courier documents and OSS returns must tell the same story.

Audit Report and Tax Assessment Act: What Is the Difference?

In a Bulgarian tax audit, the audit report is not the final act establishing the liability. It contains the factual and legal findings of the revenue authorities and proposes the establishment of liabilities. The audited person may submit written objections and evidence within 14 days of service of the audit report. If the period is insufficient, it may be extended at the request of the audited person, but by no more than one month.

This stage should not be underestimated. The objection against the audit report is the first opportunity to challenge the factual findings before the tax assessment act is issued.

If a tax assessment act is issued, it may be appealed, in whole or in part, through the administrative appeal procedure within 14 days of service. The appeal is filed through the relevant territorial directorate, and the deciding authority is the Director of the Appeals and Tax and Social Security Practice Directorate.

What Are the Typical Defence Lines?

The first defence line is the correct classification of sales. It must be established which sales are genuinely B2C distance sales and which are B2B supplies, domestic supplies, cancelled orders or supplies outside the audited period.

The second defence line is the threshold analysis. It is necessary to determine when the EUR 10,000 threshold was exceeded and whether the authorities applied the correct date from which the place of supply changed.

The third defence line is OSS evidence. If the company used OSS, it must prove not only registration, but the actual declaration and payment of VAT for the relevant Member State.

The fourth defence line is correction of platform data. Returned, cancelled, reversed or incorrectly classified orders should not remain in the audit base.

The fifth defence line is review of the calculations. Often the dispute is not only whether VAT is due, but on what base, for which periods, at what exchange rate, at what rate, and whether the amounts already include VAT.

The sixth defence line is coordination with the foreign accountant or tax adviser. If the seller is established in another Member State or declares through a foreign OSS administration, the Bulgarian defence cannot be built in isolation.

Cross-Border Recovery: Why the Absence of Assets in Bulgaria Does Not End the Matter

If a foreign online seller has no office, warehouse, bank accounts or assets in Bulgaria, this does not mean that a public liability established in Bulgaria is practically uncollectible.

The EU has a mutual assistance regime for the recovery of claims relating to taxes, duties and other measures. Directive 2010/24/EU sets out the rules under which Member States assist one another in recovering such claims, including taxes, penalties, interest and costs.

In practical terms, if a Bulgarian tax assessment act becomes enforceable, the Bulgarian National Revenue Agency may, under certain conditions, request assistance from the competent authorities in another Member State where the company has bank accounts, receivables or assets. This is why the tax dispute should be managed already at the audit report stage, rather than waiting for enforcement measures.

Practical Checklist for Online Sellers

1. Identify the countries of delivery.
   Do not look only at the country of customer registration or the payment currency. For VAT purposes, it matters where the transport ends.
2. Separate the customers.
   Private individuals, legal entities without VAT registration and VAT-registered companies should not be grouped together.
3. Check the EUR 10,000 threshold.
   The threshold is assessed against the relevant cross-border B2C supplies and should not be checked only for one sales channel.
4. Decide whether to use OSS.
   If you use OSS, it must be applied consistently and in a way that can be evidenced.
5. Set the correct VAT rates.
   If sales are taxable in the customer’s country, the VAT rate of that country must be applied to the specific goods.
6. Collect data on returns and cancellations.
   A sale is not just an order. It must be clear whether it was delivered, returned, reversed or corrected.
7. Keep platform and accounting data aligned.
   Platform reports, invoices and OSS returns must be reconcilable.
8. Review agreements with marketplaces and logistics partners.
   It must be clear who sells, who collects payment, who issues documents and who bears the tax obligations.
9. Prepare an audit response procedure.
   When the Bulgarian National Revenue Agency sends a request, deadlines are short and the volume of data is often significant.
10. React immediately to an audit report.
    The 14-day deadline for objections is short, especially where data must be collected from platforms, foreign accountants and OSS systems.

Practical Risk Table

Most Common Questions About OSS

1. Is OSS mandatory?
   OSS is a simplification regime, not the only possible approach. If the seller does not use OSS, taxable sales in other Member States may require local VAT registration in those countries.
2. Does OSS mean there is no audit risk in Bulgaria?
   No. If Bulgaria is the Member State of consumption, the Bulgarian tax authorities may check whether sales to Bulgarian customers were properly reported. OSS registration is important, but it does not replace evidence.
3. Can OSS be used for input VAT?
   Not in the way a standard VAT return works. OSS is used to declare and pay VAT due on covered sales, not to deduct input VAT.

Most Common Questions About Bulgarian Tax Inspections and Audits

1. Which document is more serious — the audit report or the tax assessment act?
   The tax assessment act is the act that establishes the liability. The audit report, however, is critical because it provides the first opportunity to submit objections and evidence before the act is issued.
2. Should an objection be filed if not all documents have been collected yet?
   In many cases, yes. The objection may identify the disputed facts, request an extension of the deadline, indicate what evidence is being collected and prevent a tax assessment act from being issued solely on the basis of a one-sided factual picture.
3. What should be checked first?
   The date of service, procedural status, response deadline, audit period, platform data and whether the sales were declared through OSS or local VAT registration.

Frequently Asked Questions About VAT on Online Sales in the EU

1. When does an online seller owe VAT in Bulgaria?
   The risk typically arises when the seller sells goods to Bulgarian end customers, the goods are dispatched from another Member State to Bulgaria, and the applicable threshold for cross-border B2C supplies has been exceeded. The exact assessment depends on the facts.
2. If we sell through a marketplace, does the platform bear the VAT risk?
   Not always. In certain specific cases, the platform may be deemed to be the supplier, but in many cases the taxable person remains the seller itself. The contractual model and movement of the goods must be reviewed.
3. If we charged VAT in our own country, does that exclude VAT in the customer’s country?
   Not automatically. If the place of supply is the customer’s country, the local tax administration may claim VAT there. VAT paid in another country may require a separate correction or refund procedure.
4. What are the most common errors in platform data?
   Including returned or cancelled orders, mixing B2C and B2B sales, incorrect customer status, lack of validated VAT numbers, and mismatches between invoices, payments and goods actually delivered.
5. What happens if the accounting data and platform data do not match?
   A reconciliation by order and by period is required. In audits, the authorities often rely on platform data, so the seller must be able to explain every material discrepancy.
6. Can a liability established in Bulgaria be recovered in another Member State?
   Yes. Where the applicable conditions are met and there is an enforceable act, the EU mutual assistance mechanism for recovery may be used. This makes timely defence particularly important.

Conclusion

VAT on online sales in the EU can no longer be managed only through a general accounting setup or by assuming that the platform will “calculate it correctly”. For e-commerce businesses, the key questions are specific: who is the customer, where does the transport end, has the EUR 10,000 threshold been exceeded, is OSS being used, have the returns been filed correctly, and can the data be proven during an audit?

For managers, CFOs and investors, the risk is not only tax-related. Incorrect VAT treatment may result in interest, a tax assessment act, blocked funds, cross-border recovery, corrections abroad and tension with partners, accountants and platforms.

If your business sells online to end customers in other Member States, or has already received a request, audit report or tax assessment act from the Bulgarian National Revenue Agency, contact us. Vassilev & Partners Law Firm can assist with legal analysis of the VAT regime, review of OSS reporting, preparation of objections and appeals, coordination with foreign accountants and tax advisers, and representation in tax audits, administrative appeals and court proceedings.

Disclaimer

The information contained in this article is for general informational purposes only and provides basic guidance on the subject matter in light of the legal position as at the date of publication. Although we strive to ensure the accuracy of the content, legal rules and their interpretation evolve over time. To verify the current wording of the applicable provisions and their application to your specific situation, you should contact us directly. We accept no liability for any damage resulting from independent use of the information in this article without prior individual legal advice. This article does not constitute a legal opinion.