I am an English teacher, teaching Spanish students online.

Hi I think the threshold is 50000 BGN per year. If your annual revenue are likely to exceed this amount you have to register for VAT. I am not an accountant, best to ask a local accountant.

Thanks, but I also got a comment from a Bulgarian lawyer who told me that the income must come from Bulgarian, NOT from abroad (in this case from the Spaniards).
However, I couldn't find anything that said "income from abroad". Only what you wrote:
" threshold 50000 BGN per year".

Personally I would talk to accountants rather than lawyers. They are usually aware of VAT/Tax issues as they file returns. I assume you will need an accountant anyway?

I did not think about intra-EU services element. On basis students are private, I found following online:
B2C services [Article 45 of the VAT Directive].
Example 22: For consultancy services provided by a supplier established in Lisbon to a private customer who resides in Denmark, Portuguese VAT must be charged.
Example 23: A supplier established in Greece will need to charge Greek VAT to a business customer established in Romania who acquires legal services to be used for his private purposes.

Thanks a lot for your comments.

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The threshold is, as @VIDIN says, 50,000 leva for VAT registration.

We are in the EU so there is a common framework for charging VAT. If you are registered in BG, then you add the BG VAT (20%) to your prices, and you charge this to any customers in the EU (such as Spain). Your Spanish customer is paying you BG VAT, which you declare and pay in Bulgaria.

It's not super complicated, but I think most accountants would advise you to avoid it if you can (the extra bureaucracy of VAT returns, plus the impact on your pricing in a competitive market). As a language teacher, I suspect there's a good chance that you won't be earning much more than this threshold anyway.

It says that VAT registration is required if you "produce VAT taxable sales in Bulgaria". Teaching is a VAT-able service, I think. And if you are in Bulgaria, and you receive the payments in your Bulgarian bank account, and you perform the service while sitting in your Bulgarian home... most would agree you're producing the sale in Bulgaria... even if your customer is outside the country.

However, if I recall correctly, non-EU sales would not be considered VAT-able. So, for example, if you decided to find a bunch of Chinese students (either directly, or via an online school/agent like italki or dadaABC) then this income would both be non-VATable and not included in your threshold calculation. Hence, you could probably avoid registration by "reallocating your global sales mix" in a more favorable way. :-) Of course, your Chinese income and your Spanish income are still declared together for income tax purposes.

Alternatively, your accountant might suggest that you be self-employed and have a bank account for your Spanish customers, and also to have a BG company with its own bank account for your other EU and non-EU customers. Hence, each entity has its own threshold... but then you have two tax returns and a company to administer, so you may feel it's not worth the hassle.

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Useful link @EVTRA, thank you!

Here's a related official EU one about "cross-border" transactions. So, indeed, no VAT on your non-EU sales.

https://europa.eu/youreurope/business/t … dex_en.htm

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https://europa.eu/youreurope/business/t … services-1

"Selling services to customers outside the EU

If you provide services to customers outside the EU, you usually do not charge VAT. However, if the service is used in another EU country, that country can decide to charge the VAT.

You may still deduct the VAT that you paid on related expenses, such as for goods or services purchased specifically to make those sales."

It's much easier for the UK or China, for example, to levy VAT upon goods which are shipped to that country. You've probably experienced this yourself if you've bought goods from China (or, more recently, the UK) and shipped them to your address in Bulgaria. The package gets caught by customs, and they can ask the customer to pay import duty and VAT. So, of course, @EVTRA is absolutely correct that VAT is an issue for physical goods, separate from the EU VAT regime.

But this is different from the originating seller charging VAT and including it in the sales price.

Services are a completely different matter, and it's very difficult to enforce VAT payments on such transactions. So, we can ignore the UK, as we don't need to teach those guys English. :-) And China is certainly not going to try to impose their VAT on your lessons to their students. (And, besides, it's unlikely you'd go direct anyway, it's much easier via an intermediary, and that company would be charging any applicable sales tax/VAT without you even being aware of it.)

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The only question I have is this one:
I am planning to set up a Freelance "company" to give private classes to Spanish students.
I am paying income tax over these classes, but do I also have to pay VAT?
In addition: in Spain the VAT is exempt from giving private classes to Spanish students!

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If you expect to make over 50,000 leva from your Spanish students should you register for VAT in Bulgaria?

Well, the short answer is: yes...  probably. :-)

If you're over the threshold, why only "probably"?

(a) At face value, it's an easy decision: you're either over (or expecting to be over) the threshold, or you're not. If you're way over, then you have to. But many smaller traders prefer not to be VAT registered because of the extra admin involved, and it adds 20% to your prices. But to avoid the registration will involve some "re-engineering" and you have to decide whether the cost of this is justified.

(b) As three forms of re-engineering you could: have 2 entities (your self and a Bulgarian company) so both entities are below the threshold; give classes to two types of learner (Spain/EU and China/non-EU) so your VAT-able EU revenue is below the threshold; simply give fewer lessons, and stay below the threshold. All have their particular trade-offs.

(c) You raise an interesting issue about language classes being VAT exempt in Spain. As far as I know, the exempt categories in Country A don't affect your VAT if you're registered in Country B. I don't think education is similarly exempt in Bulgaria, but it's probably worth asking an accountant. So you either register in Bulgaria and charge VAT (because it's not exempt here), or you could incorporate a company in Spain instead, and have that register for VAT, and then supply zero-rated services (education). The EU supports cross-border trade, so, in principle, I see no reason why you can't incorporate as a Spanish entity to supply your services from Bulgaria.

(d) While investigating your question, I found a reference to a higher 70,000 leva threshold for "distance selling". But I don't know if this applies to goods or services or both. A Bulgarian accountant could tell us.

Personally, I much prefer NOT to be VAT registered, and I would take steps to avoid going over the threshold. You might be delighted to be VAT registered, in which case, no issue.

Separately, lIke @EVTRA, I question whether the best option is to be a freelancer / self-employed. I believe that you should discuss with your Bulgarian accountant as to whether incorporating a Bulgarian company would be more advantageous.