Many Bulgarian companies use the services of Booking.com to sell their hotel and guest house accommodation services. Some of these companies are small and are not registered under the Bulgarian Value Added Tax Act (VATA).
Booking.com is a foreign company, based in the Netherlands. The Bulgarian company owns brokerage fees (commission) for each sale performed through Booking.com. Assuming that the hotels and guest houses are located on the territory of Bulgaria, we can conclude that the received mediation service, for which the commission is due, is considered with a place of performance on the territory of Bulgaria.
Any taxable entity, which receives VAT-taxable services with a place of performance on the territory of the country where the VAT is payable by the recipient, is subject to obligatory VAT registration. This includes all Bulgarian companies, which are not registered under VAT Act and pay a commission to Booking.com. We will refer to them as “unregistered hoteliers” below as the company owning Booking.com is a taxable entity, which is not residing on the territory of Bulgaria.
The unregistered hotelier is obliged to apply for VAT registration no later than 7 days before the date on which the VAT becomes due.
For each commission invoice, issued by Booking.com, the unregistered hotelier must issue a protocol under art.117, par 2 of the VAT Act, for self-accrual of VAT.
The unregistered hotelier will not be allowed to use VAT credit right – neither for other deliveries, nor under the issued protocol under art.117, par 2 of VAT Act for the self-accrued VAT. This means that, if the commission amounts to BGN 100, the unregistered hotelier will self-accrue VAT of BGN 20 and will not be able to use it as VAT credit, i.e. the total commission expense will increase from BGN 100 to BGN 120.
Thanks to Stefan for the idea for this article.