Changes in the VAT Act were published on 19.06.2020 introducing the application of a reduced rate of 9% VAT for certain supplies of goods and services. According to the amendments as of 01.07 2020 the supply of books, restaurant and catering services, baby food and diapers will be taxed with a reduced 9 % VAT rate.  The measure is temporary and will be applied for the period from 01.07.2020 to 31.12.2021.

Thus the reduced 9% VAT rate will temporarily benefit publishers and distributors of books and textbooks, including owners of electronic publications. Goods to which the new VAT rate will apply may be such as textbooks, reference books and study sets, children’s books with illustrations, for drawing or coloring, printed or handwritten music editions. The sale of publications that are entirely or mainly intended for advertising, as well as publications that are entirely or mainly composed of video content or audio-music content are excluded from the scope of the law.

The reduced VAT rate will be applied on the supply of foods suitable for babies or small children, baby diapers similar hygiene products for babies, explicitly listed in an annex to the amendments in the VAT Act. These include infant formulas and powder meals for babies and small children, homogenized vegetable or fruit purees, mixed homogenized purees of meat, fish, vegetables, fruit or nuts for babies and infants, baby diapers.

As it concerns the restaurant and catering services, where the biggest public debate took place, the reduced rate of 9% VAT will apply to supplies related to offering food and the corresponding service for consumption, performed only in the restaurant. When an order is made for delivery of food for home this falls out of the scope of the reduced rate and will be taxable at 20% VAT.

In order the reduced 9% VAT rate to be applied to catering services, they should also include supplies accompanied the principal services such as arranging tables, delivery of equipment (tables, chairs, decorations), serving. Otherwise, if the catering service includes only delivery of food to a place other than the supplier’s premises, it will be taxable at 20% VAT.

By the same logic sales from kiosks, shops, vending machines, food carts will continue to be subject to 20% VAT rate.

The National revenue agency clarifies on its website that the food courts/areas in the shopping centers/malls will also profit from the reduced VAT rate, except the cases when ordering food packed for home.

Out of the scope of the reduced rate, taxable at 20% VAT, will remain restaurant or catering services comprising the supply of beer, wine, or spirits, including the cases where the supply of such drinks accompany a principal supply of food in restaurant and catering services.

The National Revenue Agency is expected to publish on its website https://nap.bg/ an opinion on the implementation of the new VAT Act in due course.