Global

Details

  • Service: Tax, Global Indirect Tax, Global Compliance Management Services
  • Type: Regulatory update
  • Date: 11/2/2012

Bulgaria - Adjustments of input VAT for subsequent events 

November 2:  Two recent judgments of the Court of Justice of the European Union (CJEU) examine EU rules for input value added tax (VAT) adjustments in the context of VAT assessed under the Bulgarian VAT rules.

In both cases, tax authorities proposed adjustments of the amount of input VAT deducted by the taxpayers based on subsequent events.


  • In TETS Haskovo, the taxpayer demolished some buildings that it had acquired with an intention of modernizing its thermal power station. The taxpayer argued that no adjustment to the initial VAT deduction was warranted because the old buildings were demolished in order to create new buildings that would be used for taxable transactions.
  • In PIGI, the authorities established that there was a shortfall in the taxpayer’s stock caused by a theft at the company’s premises. The theft was reported to the police, but the perpetrator was not identified. The taxpayer argued that the theft of stock was to be viewed as force majeure, as it could not have been foreseen, and therefore, no input VAT adjustment was warranted.

Both judgments indicate that, when analyzing whether or not an input VAT adjustment is to be made under EU rules, the taxpayer must first consider if there is a change in the factors used to determine the initial VAT deduction.


  • In TETS Haskovo—due to the link of the destruction with the future taxable activity—the CJEU concluded that no such factor change occurred, and ended its analysis at this point.
  • By contrast, in PIGI, the CJEU found that a change in the factors determining the VAT deduction took place and, as a next step, proceeded to analyze the exceptions of Article 185 (2) of the VAT Directive.

Read an October 2012 report [PDF 33 KB] prepared by the KPMG member firm in Bulgaria: The ECJ on the requirements for adjustments of input VAT



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