Food supplies for humanitarian activity exempted from VAT
On 27.10.2016, the National Assembly adopted on second reading the Act for Amendment and Supplement to the Value Added Tax Act, which was promulgated on 08.11.2016. The adopted amendments shall enter into force on 01.01.2017.
The Act regulates the gratuitous provision of food items to an operator of a food bank. In order to arise such supply of goods, the following conditions must be simultaneously fulfilled at the time of provision:
- the single unit of a food item to be of negligible value;
- the operator of a food bank to have been entered in the register of issued permits for operators of food banks under the Food Act;
- the food item to have been included in the list of foods, subject to food banking under the Food Act;
- the term in the list of foods, subject to food banking under the Food Act, within which the food item may be delivered not to have been expired;
- the food item to be marked “donation, is not subject to sale”;
- the total value of the gratuitously provided food items to operators of a food bank for the current calendar year not to exceed 0.5 percent of the total value of the performed by the person taxable supplies of food items during the calendar year preceding the current one;
- the person that has gratuitously provided food items not to have due and unpaid tax, insurance or other public duties and over the past two years not to have an effective penal provision for violation of the Value Added Tax Act.
The food supplies are exempted from VAT when: 1) they are within the framework of humanitarian activity carried out by the Bulgarian Red Cross or other non-profit legal entities pursuing activities for public benefit and entered in the register of issued permits for operators of food banks under the Food Act as an operator of a food bank and 2) when there is no sale of the gratuitously provided food items.
A VAT registered person that has gratuitously provided food items mandatory issues a protocol in 5 days from the date on which the food items have been provided. The protocol for the gratuitous provision of food items is noted in the sales record of the registered person and in the VAT return.
The Act also provides an opportunity for deduction of tax credit in gratuitous provision of food items to an operator of a food bank.
