14.08.2013

This analysis of the VAT refund process has been made in order to improve the effectiveness of refunding VAT to taxable persons by the revenue administration. It covers a four-year period.

The following has been found out:

• Failure to observe the statutory periods for VAT refund, other than the cases of initiated or terminated appeal proceedings;
• Refunding lower VAT in the last one or two months of the financial year in order to report "better" execution of the revenue side of the budget;
• Lack of transparency in the VAT refund process;
• Absence of a uniform and unbiased principle of refunding VAT to taxable persons;
• Lack of taxable persons' awareness of the reasons for tax non-refunding on time.

2009

VAT refunded in Q4 of 2009

The analysis of the VAT refunded in Q4 of 2009 shows that an extremely low VAT, just BGN 129 million, was refunded in December. The failure to refund VAT on time and the transfer of its refund to the following financial year results in:

• retaining of turnover means of businesses;
• payment of default interest from the state budget;
• distortion of the real execution of the revenue side of the budget both for the current financial year and for the following one as well.

The amount of the non-refunded VAT directly affects the execution of the revenue side of the state budget for this tax.

2010

Amount of VAT to be refunded by month in 2010

VAT refunded by month in 2010

The analysis of the VAT refunded in 2010 shows that the amount of the VAT refunded in November and December is significantly lower than in the previous months of the same year. The refund of a smaller VAT in the last two months of the year influenced the execution of the revenue side of the budget for this tax.

Resulting from the failure to observe the statutory deadlines for refunding of VAT under returns subject to inspections and audits, including repealed certificates of audit (VAT and other taxes), default interest of BGN 17.4 million was paid out from the state budget in 2010.

2011

Amount of VAT to be refunded by month in 2011

VAT refunded by month in 2011

The analysis of the VAT refunded in 2011 shows that the amount of the VAT refunded in January, February and March is significantly higher, with part of it having had to be refunded in 2010.

Resulting from the failure to observe the statutory deadlines for refunding of VAT under returns subject to inspections and audits, including repealed certificates of audit (VAT and other taxes), default interest of BGN 28.6 million was paid out from the state budget in 2011.

2012

Amount of VAT to be refunded by month in 2012

VAT refunded by month in 2012

The analysis of the VAT refunded in 2012 shows that the amount of the VAT refunded in December is significantly lower than the previous months of the same year.

Resulting from the failure to observe the statutory deadlines for refunding of VAT under returns subject to inspections and audits, including repealed certificates of audit (VAT and other taxes), default interest of BGN 41.2 million was paid out from the state budget in 2012.

January-June 2013

Amount of VAT to be refunded by month in the period January-June 2013

VAT refunded by month in the period January-June 2013

The analysis of the VAT refunded in the period January-June 2013 shows that the amount of the VAT refunded in January, BGN 612 million, is significantly higher, with part of it having had to be refunded in 2012.

Resulting from the failure to observe the statutory deadlines for refunding of VAT under returns subject to inspections and audits, including repealed certificates of audit (VAT and other taxes), default interest of BGN 13.1 million was paid out from the state budget in the period January-June 2013.

Recommendations to the NRA authorities to improve the effectiveness of the VAT refund process

Recommendation 1 - Strict observance of the statutory periods of VAT refunds.

Recommendation 2 - Introduction of a principle of VAT refund by priority order of the VAT returns filed.

Recommendation 3 - Making monthly analyses of the structure of the non-refunded VAT and of the reasons for its non-refund.

Recommendation 4 - Introduction of monthly supervision of the VAT refund process.

Recommendation 5 - Release of monthly information about the VAT refunded in the relevant month on the website of the Ministry of Finance.