Proposal for a COUNCIL IMPLEMENTING DECISION authorising Bulgaria to introduce a special measure derogating from Article 287 of Directive 2006/112/EC on the common system of value added tax
Date: 2022-10-13
Institutions: Directorate-General for Taxation and Customs Union, European Commission
Subjects: Bulgaria, VAT, derogation from EU law, small business, tax exemption

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   EUROPEAN COMMISSION  Brussels, 13.10.2022  COM(2022) 520 final 2022/0322 (NLE)  Proposal for a COUNCIL IMPLEMENTING DECISION authorising Bulgaria to introduce a special measure derogating from Article 287 of Directive 2006/112/EC on the common system of value added tax   
 
EXPLANATORY MEMORANDUM 

Pursuant to Article 395(1) of Council Directive 2006/112/EC of 28 November 2006 on the 
common  system  of  valued  added  tax1  (‘the  VAT  Directive’),  the  Council,  acting 
unanimously on a proposal from the Commission, may authorise any Member State to apply 
special measures for derogation from the provisions of that Directive in order to simplify the 
procedure for collecting VAT or to prevent certain forms of tax evasion or avoidance. 

By  letter  registered  with  the  Commission  on  17  May  2022,  Bulgaria  requested  an 
authorisation  to  apply,  until  31  December  2024,  a  measure  derogating  from  Article  287  of 
the  VAT  Directive,  allowing  Bulgaria  to  exempt  from  VAT  taxable  persons  whose  annual 
turnover is no higher than the equivalent in national currency of EUR 51 130. 

In  accordance  with  Article  395(2),  second  subparagraph,  of  the  VAT  Directive,  the 
Commission informed the other Member States by letter dated  26 July 2022 of the request 
made by Bulgaria. The Commission notified Bulgaria by letter dated 27 July 2022 that it had 
all the information necessary to consider the request. 

1. 

• 

CONTEXT OF THE PROPOSAL 

Reasons for and objectives of the proposal 

Chapter 1 of Title XII of the VAT Directive allows for the possibility for Member States to 
apply  special  schemes  for  small  enterprises,  including  the  possibility  of  exempting  taxable 
persons below a certain annual turnover. This exemption implies that taxable persons do not 
have to charge VAT on their supplies and, consequently, they cannot deduct the VAT on their 
inputs. 

Under  Article  287  of  the  VAT  Directive,  particular  Member  States  which  acceded  after  1 
January  1978  may  exempt  taxable  persons  whose  annual  turnover  is  no  higher  than  the 
equivalent  in  national  currency  of  the  amounts  at  the  conversion  rate  on  the  day  of  their 
accession as specified in that provision. 

Under  point  (17)  of  Article  287  of  the  VAT  Directive,  Bulgaria  may  exempt  from  VAT 
taxable persons whose annual turnover is no higher than the equivalent in national currency of 
EUR 25 600. 

An authorisation to raise the threshold of annual turnover from EUR 25 600 to EUR 51 130 
would  significantly  simplify  the  administrative  burden  on  businesses  eligible  for  the 
exemption and would stimulate the development of such small businesses by releasing them 
from the VAT obligation under normal VAT arrangements, such as keeping VAT records or 
submitting VAT returns. Further, the introduction of such a special measure would result in a 
smaller burden on the tax administration by lowering the requirement to manage and inspect 
taxable  persons  with  a  turnover  under  the  threshold.  In  addition,  there  would  be  a  positive 
effect on the general level of compliance with VAT obligation for these taxable persons. 

The special measure is fully optional for taxable persons. Therefore, small businesses whose 
turnover does not exceed the threshold would still have the possibility to exercise their right to 
apply the normal VAT arrangements. 

1 

OJ L 347, 11.12.2006, p.1. 

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According to estimates provided by Bulgaria, the introduction of the special measure would 
lead to a decrease in VAT revenue collection of approximately 1 % and would therefore not 
significantly  affect  the  total  amount  of  revenue  from  VAT  or  the  overall  amount  of  tax 
revenue collected at the stage of final consumption. More specifically, Bulgaria reported that, 
in 2020, out of 319 666 registered taxable persons, 32 619 (i.e. 1 %) taxable persons had an 
annual  turnover  between  EUR  25 600  and  EUR  51 130  and  could  have  benefited  from  the 
special measure. 

The  special  measure,  simplifying  the  obligations  of  small  operators,  is  in  line  with  the 
objectives set out by the European Union for small businesses. 

Given the positive impact on the reduction of administrative burden for businesses and the tax 
administration without a major impact on the total VAT revenue, it is appropriate to authorise 
Bulgaria to apply the special measure until 31 December 2024. 

• 

Consistency with existing policy provisions in the policy area 

The derogating measure is in line with the objectives of Directive (EU) 2020/285 amending 
Articles 281 to 294 of the VAT Directive on a special scheme for small enterprises2, which 
resulted from the VAT action plan3, and aims to create a modern, simplified scheme for those 
businesses.  In  particular,  it  seeks  to  reduce  VAT  compliance  costs  and  distortions  of 
competition  both  domestically  and  at  EU  level,  reduce  the  negative  impact  of  the  threshold 
effect, and facilitate business compliance as well as monitoring by tax administrations. 

Moreover, the threshold of EUR 51 130 is consistent with Directive (EU) 2020/285, insofar as 
it allows Member States to set the annual turnover threshold required for an exemption from 
VAT at a level no higher than EUR 85 000 (or the equivalent in national currency). 

Similar derogations, exempting from VAT taxable persons whose annual turnover is below a 
certain  threshold,  as  provided for in  Articles 285 and 287 of the VAT  Directive, have been 
granted  to  other  Member  States.  The  Netherlands4  and  Belgium5  have  been  granted  a 
threshold of EUR 25 000; Italy6 a threshold of EUR 30 000; Luxembourg7 a threshold of EUR 

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5 

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7 

Council  Directive  (EU)  2020/285  of  18  February  2020  amending  Directive  2006/112/EC  on  the 
common system of value added tax as regards the special scheme for small enterprises and Regulation 
(EU)  No  904/2010  as  regards  the  administrative  cooperation  and  exchange  of  information  for  the 
purpose  of  monitoring  the  correct  application  of  the  special  scheme  for  small  enterprises  (OJ  L  62, 
2.3.2020, p. 13). 
Communication  from  the  Commission  to  the  European  Parliament,  the  Council  and  the  European 
Economic and Social Committee on an action plan on VAT – Towards a single EU VAT area – Time to 
decide COM(2016)148 final. 
Council  Implementing  Decision  (EU)  2018/1904  of  4  December  2018  authorising  the  Netherlands  to 
introduce  a  special  measure  derogating  from  Article  285  of  Directive  2006/112/EC  on  the  common 
system of value added tax (OJ L 310, 6.12.2018, p. 25). 
Council  Implementing  Decision  (EU)  2022/88  of  18  January  2022  amending  Implementing  Decision 
2013/53/EU  as  regards  authorisation  to  the  Kingdom  of  Belgium  to  apply  for  a  further  period  the 
special measure derogating from Article 285 of Directive 2006/112/EC on the common system of value 
added tax (OJ L 14, 21.1.2022, p. 23)  
Council  Implementing  Decision  (EU)  2020/647  of  11  May  2020  authorising  the  Italian  Republic  to 
apply a special measure derogating from Article 285 of Directive 2006/112/EC on the common system 
of value added tax (OJ L 151, 14.5.2020, p. 7). 
Council  Implementing  Decision  (EU)  2019/2210  of  19  December  2019  amending  Implementing 
Decision 2013/677/EU authorising Luxembourg to introduce a special measure derogating from Article 
285  of  Directive  2006/112/EC  on  the  common  system  of  value  added  tax  (OJ  L  332,  23.12.2019,  p. 
155). 

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35 000;  Poland8,  Latvia9  and  Estonia10  have  been  granted  a  threshold  of  EUR  40  000; 
Hungary11  a  threshold  of  EUR  48  000;  Lithuania12  a  threshold  of  EUR  55  000;  Croatia13  a 
threshold of EUR 45 000; Malta14 a threshold of EUR 30 000; Slovenia15 a threshold of EUR 
50 000; Czechia16 a threshold of EUR 85 000; and Romania17 a threshold of EUR 88 500. 

Derogations from the VAT Directive should always be limited in time so that their effects can 
be  assessed.  In  addition,  the  inclusion  of  an  expiry  date  of  the  special  measure  until  31 
December 2024 is aligned with the requirements of Directive (EU) 2020/285. That directive 
provides  for  1  January  2025  as  the  date  on  which  Member  States  will  have  to  apply  the 
national provisions, which they are required to adopt, to comply with it. 

The proposed measure is therefore consistent with the provisions of the VAT Directive. 

• 

Consistency with other Union policies 

The  Commission  has  been  consistently  stressing  the  need  for  simpler  rules  for  small 
enterprises.  In  this  respect,  the  Commission  adopted  in  March  2020  an  SME  Strategy  for  a 
sustainable  and  digital  Europe18,  where  it  committed  to  continue  to  work  on  reducing  the 
burden on SMEs. The objective to reduce the regulatory burden for SMEs is one of the pillars 

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Council Implementing Decision (EU) 2021/1780 of  5 October 2021 amending Decision 2009/790/EC 
authorising  the  Republic  of  Poland  to  apply  a  measure  derogating  from  Article  287  of  Directive 
2006/112/EC on the common system of value added tax (OJ L 360, 11.10.2021, p. 122). 
Council  Implementing  Decision  (EU)  2020/1261  of  4  September  2020  amending  Implementing 
Decision  (EU)  2017/2408  authorising  the  Republic  of  Latvia  to  apply  a  special  measure  derogating 
from  Article  287  of  Directive  2006/112/EC  on  the  common  system  of  value  added  tax  (OJ  L  296, 
10.9.2020, p. 4). 
Council Implementing Decision (EU) 2021/358 of 22 February 2021 amending Implementing Decision 
(EU) 2017/563 authorising the Republic of Estonia to apply a special measure derogating from Article 
287 of Directive 2006/112/EC on the  common system of value added tax (OJ L 69, 26.2.2021, p. 4).

Council  Implementing  Decision  (EU)  2022/73  of  18  January  2022  amending  Implementing  Decision 
(EU) 2018/1490 as regards authorisation to Hungary to apply for a further period the special measure 
derogating from Article 287 of Directive 2006/112/EC on the common system of value added tax (OJ L 
12, 19.1.2022, p. 148). 
Council  Implementing  Decision  (EU)  2021/86  of  22  January  2021  authorising  the  Republic  of 
Lithuania  to  apply  a  special  measure  derogating  from  Article  287  of  Directive  2006/112/EC  on  the 
common system of value added tax (OJ L 30, 28.1.2021, p. 2). 
Council  Implementing  Decision  (EU)  2020/1661  of  3  November  2020  amending  Implementing 
Decision (EU) 2017/1768 authorising the Republic of Croatia to introduce a special measure derogating 
from  Article  287  of  Directive  2006/112/EC  on  the  common  system  of  value  added  tax  (OJ  L  374, 
10.11.2020, p. 4). 
Council  Implementing  Decision  (EU)  2021/753  of  6  May  2021  authorising  Malta  to  apply  a  special 
measure derogating from Article 287 of Directive 2006/112/EC on the common system of value added 
tax, and repealing Implementing Decision (EU) 2018/279 (OJ L 163, 10.5.2021, p. 1). 
Council  Implementing  Decision  (EU)  2022/464  of  21  March  2022  amending  Implementing  Decision 
2013/54/EU  as regards the  authorisation  granted to the  Republic of  Slovenia to  continue  to apply the 
special measure derogating from Article 287 of Directive 2006/112/EC on the common system of value 
added tax (OJ L 94, 23.3.2022, p. 4). 
Council  Implementing  Decision  (EU)  2022/865  of  24  May  2022  authorising  the  Czech  Republic  to 
introduce  a  special  measure  derogating  from  Article  287  of  Directive  2006/112/EC  on  the  common 
system of value added tax (OJ L 151, 2.6.2022, p. 66). 
Council  Implementing  Decision  (EU)  2020/1260  of  4  September  2020  amending  Implementing 
Decision (EU) 2017/1855 authorising Romania to apply a special measure derogating from Article 287 
of Directive 2006/112/EC on the common system of value added tax (OJ L 296, 10.9.2020, p. 1). 
Communication  from  the  Commission  to  the  European  Parliament,  the  Council,  the  European 
Economic  and  Social  Committee  and  the  Committee  of  the  Regions  –  An  SME  Strategy  for  a 
sustainable and digital Europe (COM(2020) 103 final). 

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of that strategy. This special measure is in line with such objectives, as far as fiscal rules are 
concerned.  It  is  also  consistent  with  the  2020  Action  Plan  on  fair  and  simple  taxation 
supporting  the  recovery  strategy19,  which  acknowledges  that  tax  compliance  costs  remain 
high in the EU, and that compliance costs are typically substantially higher for small than for 
large companies. 

2. 

• 

LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY 

Legal basis 

Article 395 of the VAT Directive. 

• 

Subsidiarity (for non-exclusive competence)  

Considering the provision of the VAT Directive on which it is based, the proposal falls under 
the exclusive competence of the European Union. Hence, the subsidiarity principle does not 
apply. 

• 

Proportionality 

The Decision concerns an authorisation granted to a Member State upon its own request and 
does not constitute any obligation. 

Given  the  limited  scope  of  the  derogation,  the  special  measure  is  proportionate  to  the  aim 
pursued,  i.e.  to  simplify  the  tax  collection  for  small  taxable  persons  and  for  the  tax 
administration. 

• 

Choice of the instrument 

The instrument proposed is a Council Implementing Decision. 

Under Article 395 of the VAT Directive, a derogation from the common VAT rules is only 
possible upon authorisation by the Council, which is acting unanimously on a proposal from 
the  Commission.  A  Council  Implementing  Decision  is  the  most  suitable  instrument  since  it 
can be addressed to an individual Member State. 

3. 

• 

RESULTS 
CONSULTATIONS AND IMPACT ASSESSMENTS 

EX-POST 

EVALUATIONS, 

OF 

STAKEHOLDER 

Stakeholder consultations 

No stakeholder consultation has been conducted. The present proposal is based on a request 
made by Bulgaria and concerns only this particular Member State. 

• 

Impact assessment 

The proposal for a Council Implementing Decision aims at increasing the current exemption 
threshold  from  EUR  25 600  to  EUR  51 130  (the  equivalent  in  national  currency).  This 
increase  is  a  simplification  measure,  which  removes  many  of  the  VAT  obligations  for 
businesses  operating  with  an  annual  turnover  no  higher  than  EUR  51  130.  It  will  therefore 
have a positive impact on the reduction of administrative burden for both businesses and the 
tax administration without a major impact on the total VAT revenue. Because of the narrow 

19 

Communication  from the  Commission to the  European Parliament and the  Council  –  An  Action Plan 
for fair and simple taxation supporting the Recovery Strategy (COM(2020) 312 final). 

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scope of the derogation and its limited application in time, the impact of the measure will in 
any case be limited. 

Currently,  based  on  data  available  from  2020,  there  are  approximately  175 000  small 
enterprises exercising their right to be exempted from VAT. The increase in threshold to EUR 
51 130  would  benefit  around  32 000  additional  enterprises,  leading  to  a  decrease  in  VAT 
revenue of approximately 1 %. 

The derogating measure will be optional for taxable persons. Taxable persons will be able to 
opt  for  the  regular  VAT  arrangements  in  accordance  with  Article  290  of  Directive 
2006/112/EC.  The  budgetary  impact  in  terms  of  VAT  revenue  for  Bulgaria  is  estimated  at 
approximately EUR 56 million (1 % of the overall VAT revenue), which can be considered 
negligible. 

• 

Fundamental rights 

The proposal does not have any consequences for the protection of fundamental rights. 

4. 

BUDGETARY IMPLICATIONS 

Following  entering  into  force  of  Council  Regulation  (EU,  Euratom)  2021/769  of  30  April 
2021  amending  Regulation  (EEC,  Euratom)  No  1553/89  on  the  definitive  uniform 
arrangements for the collection of own resources accruing from value added tax20, there will 
be no compensation calculation carried out by Bulgaria as of VAT own resource statement for 
the financial year 2022 onwards. 

20 

Council  Regulation (EU, Euratom) 2021/769 of 30 April  2021 amending Regulation (EEC, Euratom) 
No 1553/89 on the definitive uniform arrangements for the collection of own resources accruing from 
value added tax (OJ L 165, 11.5.2021, p. 9).  

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2022/0322 (NLE) 

Proposal for a 

COUNCIL IMPLEMENTING DECISION 

authorising Bulgaria to introduce a special measure derogating from Article 287 of 
Directive 2006/112/EC on the common system of value added tax 

THE COUNCIL OF THE EUROPEAN UNION, 

Having regard to the Treaty on the Functioning of the European Union,  

Having  regard  to  Council  Directive  2006/112/EC  of  28  November  2006  on  the  common 
system of value added tax1, and in particular Article 395(1) thereof, 

Having regard to the proposal from the European Commission, 

Whereas: 

(1) 

(2) 

(3) 

(4) 

1 
2 

Pursuant  to  Article  287,  point  (17),  of  Directive  2006/112/EC  Bulgaria  may  exempt 
from value added tax (VAT) taxable persons whose annual turnover is no higher than 
the equivalent in national currency of EUR 25 600 at the conversion rate on the day of 
its accession. 

By  letter  registered  with  the  Commission  on  17  May  2022,  Bulgaria  requested  an 
authorisation  to  introduce a special measure derogating from  Article 287, point (17), 
of Directive 2006/12/EC and thus to exempt from VAT taxable persons whose annual 
turnover  is  no  higher  than  the  equivalent  in  national  currency  of  EUR  51 130  at  the 
conversion  rate  on  the  day  of  its  accession  (‘the  special  measure’).  The  special 
measure  would  be  applicable  until  31  December  2024,  the  date  by  which  Member 
States  are  to  transpose  Council  Directive  (EU)  2020/2852.  It  follows  from  that 
Directive that, from 1 January 2025, Member States will be allowed to  exempt from 
VAT the supply of goods and services made by taxable persons whose annual turnover 
in a given Member State does not exceed  a threshold of EUR 85 000 or the equivalent 
in national currency. 

Pursuant  to  Article  395(2),  second  subparagraph,  of  Directive  2006/112/EC,  the 
Commission transmitted the request made by Bulgaria to the other Member States, by 
letter  of  26  July  2022.  By  letter  of  27  July  2022,  the  Commission  notified  Bulgaria 
that it had all the information necessary for the appraisal of the request. 

The  special  measure  is  in  line  with  Directive  (EU)  2020/285,  which  seeks  to  reduce 
the compliance burden of small enterprises and avoid distortions of competition in the 
internal market. 

OJ L 347, 11.12.2006, p. 1. 
Council  Directive  (EU)  2020/285  of  18  February  2020  amending  Directive  2006/112/EC  on  the 
common system of value added tax as regards the special scheme for small enterprises and Regulation 
(EU)  No  904/2010  as  regards  the  administrative  cooperation  and  exchange  of  information  for  the 
purpose  of  monitoring  the  correct  application  of  the  special  scheme  for  small  enterprises  (OJ  L  62, 
2.3.2020, p. 13). 

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(5) 

(6) 

(7) 

(8) 

(9) 

The special measure will remain optional for taxable persons as they may still opt for 
the normal VAT arrangements pursuant to Article 290 of Directive 2006/112/EC. 

According to the information provided by Bulgaria, the special measure will only have 
a negligible effect on the overall amount of tax revenue Bulgaria collects at the stage 
of final consumption. 
Following the entry into force of Council Regulation (EU, Euratom) 2021/7693, there 
is to be no compensation calculation carried out by Bulgaria with regard to the VAT-
based own resource statement for the financial year 2022 onwards. 

Given  that  the  special  measure  is  expected  to  reduce  VAT  obligations  and  thus  the 
administrative  burden  and  compliance  costs  for  both  small  enterprises  and  the  tax 
authorities,  and  given  the  lack  of  any  major  impact  on  the  total  VAT  revenue 
generated, Bulgaria should be authorised to introduce the special measure. 

The  authorisation  to  apply    the  special  measure  should  be  limited  in  time.  The  time 
limit  should  be  sufficient  to  allow  for  the  evaluation  of  the  effectiveness  and 
appropriateness of the threshold. Moreover, pursuant to Article 3(1) of Directive (EU) 
2020/285,  Member States are to  adopt  and publish, by 31 December 2024, the laws, 
regulations  and  administrative  provisions  necessary  to  comply  with  Article  1  of  that 
Directive, which amends Directive 2006/112/EC and lays down simpler VAT rules for 
small  enterprises,  and  apply  those  provisions  from  1  January  2025.  It  is  therefore 
appropriate  to  authorise  Bulgaria  to  apply  the  special  measure  until  31  December 
2024,  

HAS ADOPTED THIS DECISION:  

Article 1 

By  way  of  derogation  from  Article  287,  point  (17),  of  Directive  2006/112/EC,  Bulgaria  is 
authorised to exempt from VAT taxable persons whose annual turnover is no higher than the 
equivalent  in  national  currency  of  EUR  51  130  at  the  conversion  rate  on  the  day  of  its 
accession. 

This Decision shall take effect on the date of its notification. 

It shall apply until 31 December 2024. 

Article 2 

This Decision is addressed to Bulgaria. 

Article 3 

Done at Brussels, 

For the Council 
The President 

3 

Council  Regulation (EU, Euratom) 2021/769 of 30 April  2021 amending Regulation (EEC, Euratom) 
No 1553/89 on the definitive uniform arrangements for the collection of own resources accruing from 
value added tax (OJ L 165, 11.5.2021, p. 9). 

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