Salford & Co
The Role of
Foreign
Investment
Presentation by Cahaya Dewi
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Taxable Supply or Not?
Even though no outside sale occurs, EU VAT law considers an internal
cross-border transfer of goods to be a taxable event.
The Bulgarian office is treated as making an intra-Community supply
to the Italian branch, which in turn makes an intra-Community
acquisition.
EU law calls this a “transfer of own goods” - treating a company’s
movement of its own stock to another EU country as a sale for VAT
purposes.
taxation-customs.ec.europa.eu
VAT in Bulgaria (Origin)
The Bulgarian head office does not charge Bulgarian VAT on the goods sent to Italy.
The transfer is zero-rated (no VAT) as an intra-EU supply.
But the company must still:
Report the transfer as an intraCommunity supply on its VAT
return and EC Sales List using
the branch’s Italian VAT ID.
Keep proof of shipment (e.g.
transport documents) to show
the goods went to Italy and
justify the 0% VAT.
VAT in Italy (Destination)
The Italian branch must treat the arrival of the goods as an intra-Community
acquisition, meaning it needs to account for Italian VAT on those goods.
In practice, it will:
Self-charge Italian VAT on the
value of the goods via reverse
charge.
Claim the same VAT back as
input tax, so no net payment
due.
So, is any VAT Paid?
Overall, no VAT is actually paid on this
internal transfer.
Bulgaria does not charge VAT, and the Italian
VAT is offset by the branch’s input credit.
In the end, VAT is only paid in Italy when the
goods are sold to customers.
Legal Framework: Single Taxable
Person Principle
Under EU VAT law (FCE Bank
ruling C-210/04), a head office and
its branch in another EU Member
State are treated as one taxable
person
for
VAT
purposes,
provided they are part of the same
legal entity.
• The branch is not a separate
legal entity;
• Internal
transactions
outside the scope of VAT;
are
• Therefore
services
from
Bulgarian head office to Italian
branch
are
not
taxable
supplies.
Place of Supply and B2B
Rules
• Marketing research normally follows B2B
place-of-supply rules (Articles 44–45, EU VAT
Directive);
• Since head office and branch are one taxable
person, there is no B2B transaction;
• Therefore, normal place-of-supply rules do not
apply, and the services remain outside VAT
scope.
VAT Consequences in Bulgaria
and Italy
Bulgaria:
The head office does not charge
VAT on these services and does not
report them as taxable supplies in its
VAT return.
Italy:
The branch does not apply the reverse
charge and does not report receipt of
these services in its VAT return.
So, to conclude...
VAT treatment –
Goods vs. Services
The head office – branch
relationship
Under the EU VAT Law,
the head office in Bulgaria and its branch
in Italy form a single taxable person.
There is no legal relationship
of supplier and customer
between the two.
For goods,
cross-border transfers are
treated as deemed intracommunity supplies.
The movement of goods
from Bulgaria to Italy is
taxable for VAT reporting
purposes, even without a
sale - zero-rated (0% VAT).
For services,
provided by the
Bulgarian head office to
its Italian branch, there
is no taxable supply.
No VAT is charged in
Bulgaria, neither in Italy.
The services are reported as
non-supply for VAT purposes.
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