Compulsory VAT registration of related parties and persons acting in concert, which carry out the same activity

Amendments aiming at termination of avoidance of VAT registration by taxable persons were introduced by the provision of Art. 96, para. 10 and para. 11 of the Bulgarian Value Added Tax Act (the “VAT Act”) as of 1 January 2020.

Often upon reaching the VAT taxable turnover of an entity, a new legal entity is registered, which performs the same activity; it is located in the same commercial premises / with the same seat; it uses the same resource (personnel, assets). The provision focuses on the control on controlling and ceasing such practice as this significantly damages the state’s budgets. Currently the obligation for VAT registration in Bulgaria is upon reaching turnover in the amount of BGN 50,000 (approx. EUR 25,000).

For the purposes of VAT, in case of consistent performance of the same activity in the same commercial premises by two or more related persons or persons acting in concert, the turnover realized at those premises by all persons who consistently performed the activity at the respective premises shall be included in the turnover of the person performing the activity after them, for a period not exceeding the last 12 consecutive months, including the current month, and this shall be considered as turnover realized by the respective person on the first day of commencement of the same activity in the commercial premises by this person.


For the purposes of this provision “the same activity”, shall mean when there is a significant identity with respect to two or more of the following characteristics:

  • Goods or services offered,
  • Assets used, personnel,
  • Trademark / name of the site,
  • Suppliers / customers.


The term “consistent” performance of the same activity is essential for the interpretation of the provision.

An example of the application of this provision:

Company “A” and company “B” have the same sole owner, the same business activity and are located in the same commercial premises. Until reaching the VAT taxable turnover of BGN 50,000 company “A” is actually operating, however in order to avoid VAT registration and the corresponding consequences, company “A” ceases to operate and company “B” starts operating.

In case the activity of an entity ceases for more than one month (calculated as of the date of ceasing the activity of one entity until the date of commencement of the activity by another entity, determining the turnover), it shall not be assumed as consistent performance of business activity. This shows that it is important not only to have related parties carrying out the same activity, but doing this consequently, whereas one entity ceases its operation, and the other starts operation thus abusing the fiscus.


For the purposes of the VAT Act, “commercial site” means any place, premises or facility (for example: tables, stalls, etc.) in the open air or under shelters, where goods or services are sold, no matter whether the premises or facility may serve at the same time for other purposes (for example: office, residence, etc.), or are part of real estate (for example: garage, basement, room, etc.) or represent a production warehouse or vehicle from which sales are carried out.

The provision is applicable to physical commercial places, and is not applicable to e-commerce sites.

Persons acting in concert

The VAT Act provides definition of “persons acting in concert”:

Persons acting in the management, control and / or capital which are related within the meaning of § 1, item 3, letters “a”, “b”, “c” and “l” of the additional provisions of the Tax and Social Insurance Procedure Code (spouses, relatives under straight line, in silver – up to the third degree inclusive; and relatives by marriage – up to the second degree inclusive; employer and employee; shareholders; the persons, one of whom made a donation to the other), or

Persons who may be considered acting in concert due to (1) their relationship or (2) the relationship between each of them and a third party according to the economic, organizational, family or other relation / connection existing between them, and they may negotiate conditions other than the usual ones.

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