On 16 January 2018, the Bulgarian supreme court issued a decision (no. 600/16.01.2018) regarding a case concerning the deduction of VAT in relation to a non-declared acquisition by a Bulgarian company.
The taxpayer had purchased spare parts from an Austrian supplier, which declared the supply as an intracommunity despatch. However, the Bulgarian business omitted to declare the intracommunity acquisition on its Bulgarian VAT return and a result the tax authorities initiated a tax audit. As a result of the audit they assessed that output VAT was due with no right of deduction.
On the basis that the transaction was reported in the accounts of the company and that the tax authorities did not claim that the transaction was concealed, the supreme court ruled that the tax authorities must recognise and accept the right to the deduction of the VAT.
This allowed the Bulgarian business to offset the output tax declared on the acquisition against the input tax. Although this was a good result for the taxpayer, it again though demonstrates the need to take care that all transactions are reported correctly in order to minimise any negative cashflow positions which can occur when audits are initiated.