EU Data Helps Bulgaria Identify Massive Tax Evasion

EU Data Helps Bulgaria Identify Massive Tax Evasion

Data from the EU has led Bulgarian authorities to investigate the evasion of some EUR 175 M in taxes by local companies. Bulgaria's National Revenue Agency has announced it will check the companies, suspected of declaring fictitious received services from EU companies.

The discrepancies have been detected by the VIES system when comparing VIES declarations by the EU companies with the data from the VAT declarations of their Bulgarian counterparts. The largest discrepancies in the volume of provided and received services in Bulgaria have been registered in deals with the Netherlands - more than 10 times, with Italy - more than 6 times, and with Germany - more than 3 times. What this means is that the Bulgarian companies have declared more paid services to their European counterparts than they have declared in their VIES declarations.

The National Revenue Agency, in cooperation with tax administrations from the EU member states, will check the discrepancies because they suspect losses in VAT and corporation tax by declaring fictitious deals. Some of the differences might be due to the change in the rules for determining the place of supply of services within the EU.

According to the new requirements from January 1, 2010, when services are supplied to a company, listed in the VAT register, the place of supply of services has to be the place where the customers have established their businesses. In other words, if a European company supplies services to a Bulgarian company, which is listed in the VAT register, the tax is levied in Bulgaria and not as previously in the supplier country.

The Bulgarian National Revenue Agency has sent inquiries for specific Bulgarian companies to the tax administrations in the EU member states, referring to the discrepancies, in order to confirm the veracity and the nature of the delivered services and to clarify the reasons for the differences.

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