Design services in construction

Design services in construction

 

 

Question:

Hello,
My colleague and I are planning to register a limited liability company whose main activity will be design
construction services to other EU countries - Germany in particular.
I have the following questions:
- should we immediately register under the VAT Act after providing such services to other EU countries;
- do we have to fill in the VIES declaration;
- will we be eligible for a Tax Credit;
- should we charge VAT on invoices we issue to other EU companies;
- will your answers to the questions I mentioned above be up to date if given
period we start sending our employees to germany to fulfill part of
the objects, ie if the company is no longer concerned only with design but also with construction
activity?
Thank you in advance for your time!

 

Answer:

Hello,

At your request, the answers are as follows:

- should we immediately register under the VAT Act after providing such services to other EU countries;

Yes, you are subject to compulsory registration under Art. 97 of the VAT Act, if you provide services to legal entities (companies) in the EU. You can also register voluntarily under Art. 100 of the VAT, but I will comment on that below. Either way, registration is mandatory in your case, only the member and the resulting benefits and obligations are different.

- do we have to fill in the VIES declaration;

In short - yes. As the VAT system in the EU is synchronized, this VIES declaration is for reference in the countries where you have provided the services in order to be able to access the information provided by the recipient of the service. This eliminates the possibility that you or the recipient of the service may not declare VAT at the end of the month.

- will we be eligible for a Tax Credit;

Whether you will be eligible for a tax credit depends on which member you are registered with. If it is under Article 97 of the VAT Act, you will only owe VAT on transactions abroad (Germany in your case), not in Bulgaria, until the turnover for compulsory registration (BGN 50 000) is reached, but you will not be entitled to a tax credit. If under Art. 100 of VAT you will owe VAT are all transactions, whether in Bulgaria or abroad and you will be entitled to a tax credit. The question of planning here is which is the better option, given where transactions are expected and where and what costs will be incurred.

- will your answers to the questions I mentioned above be up to date if given
period we start sending our employees to germany to fulfill part of
the objects, ie if the company is no longer concerned only with design but also with construction
activity?

In this case, whether or not you will send workers to Germany has nothing to do with VAT matters. I will only mention that in order to send construction workers to Germany, the company must meet certain conditions in order to remove A1 and apply the Bulgarian insurance legislation to them. Otherwise, you will need to be insured at the German insurance thresholds, which are significantly higher than ours. In short, some of the basic requirements for a company to take out A1 for workers abroad are:

* at least 25% of the workers employed in the main activity are in Bulgaria.

* at least 25% of the company's clients should be Bulgarian companies (their turnover)

* at least 25% of the company's suppliers are Bulgarian companies (their turnover)

There are other requirements, but these are the basic ones that you must meet.

Greetings!