Posted on April 9, 2018 in Transportation

Performance of a “transit sale” through a Bulgarian Commercial Company

1. The Bulgarian legislation gives the opportunity to perform transactions related to the so called “transit sales”, whereas a Bulgarian company (the intermediary trader) enters into Contracts for the purchase of goods from a company in an EU country-member (the supplier), and,  for the sale of those goods to a company in a country outside the EU (the receiver), whereas the goods are transported directly from the country of the supplier to the country of the receiver without passing through Bulgaria ( the country of the intermediary trader).

In the studied case there are several separate trade transactions between the following commercial companies:

“А” – the supplier of goods, registered under the VAT System in France

“B” – the intermediary trader/ Bulgarian company registered under the VAT System in Bulgaria

“С” – the ultimate receiver/consignee of the goods in Ukraine, a country which is not an EU member

The ‘transit sale’ for VAT purposes are performed as follows:

Company “А” sells the goods to company “B” and issues an invoice to “B” subject to the transaction. The goods leave the territory of France, rather, they are transported from “A” for the account and on behalf of “B” to “C” outside the territory of the European Union. Between the French company/the supplier “A” of the goods and the Ukrainian receiver/consignee “C” there are no direct business, or monetary relations. (The delivery is invoiced from “A” to “B”).

Therefore for VAT purposes, the delivery of the goods, performed by the French company shall be considered as delivery with 0% VAT. Their invoice issued to the Bulgarian company shall include 0% VAT tax.

The customs declaration or the accompanying export document (EUR1) shall include as a Exporter the French company/supplier and in order to prove the delivery done by the Bulgarian company to the Ukrainian consignee/receiver, one should have a printout version from the computer version of the accompanying export document, issued by the respective customs administration, certifying that the goods have left the territory of the Union.

Therefore, in the invoice to be issued by the intermediary Bulgarian company (as seller) to the Ukrainian receiver (as Buyer), no VAT tax shall be included as well.

One should take into consideration that in case of doubt about the authenticity of the delivery of the goods outside the territory of the EU community, which has been performed  by taxable company in the territory of one EU country-member, different than the country from which territory the goods were exported, it is possible that the authorities officially require in writing the respective customs export department to certify the physical export of the goods outside the territory of the Union.

In addition to the monthly VAT declarations, the Bulgarian company has the obligation to present an Annual Report to the Trade Register. The Corporate Tax is 10 percent.

2. Transfer by the Bulgarian company to third party(ies) of the accumulated difference between purchase and sale prices.

The transfer of part of the accumulated benefit of the Bulgarian company could be done on the basis of signed contract(s) with third party(ies) for named services (for example, agreements for agency, commission, market research, advertising, consulting, etc.). There are no restrictions by the Bulgarian legislation for the specified agreements to be signed with an offshore company and relative payments  to be effected.

In order to make the payment, the respective company should issue an invoice to the Bulgarian company stating the provided services.

3. Requirements for the Bulgarian company

With regard to the questionnaires sent by you, would you provide us with a detailed information  about the  requirements and the expectations the Bulgarian company should correspond to:

  • Period of performance of business activity;
  • Amount of the turnover on annual basis;
  • Percentage on the turnover formed by the export of goods outside Bulgaria;
  • Realized benefit for previous periods.
  • Other specific requirements;

It is assumed that the Bulgarian company will require a due diligence report for  your company, description of the goods to be traded, estimated monthly and annual quantities and amounts, average difference between the purchase and sale prices and estimated annual profit to be invoiced through the Bulgarian company, information about the suppliers.


Other articles from same category:
Car transfer to Bulgaria
Blog categories:
Import Procedures Transportation

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