Pursuant to Article 177 of the Bulgarian VAT Act, a registered person acting as the recipient of a taxable supply may be held liable for VAT that is due but unpaid by another person, to the extent that the recipient has exercised the right to deduct input VAT directly or indirectly related to the unpaid tax. Such liability arises where it is established by the tax authorities that the registered person knew or should have known that the VAT would not be paid.

Until a few years ago, judicial practice was marked by inconsistent interpretations regarding the scope of the joint and several liability under Article 177 of the Bulgarian VAT Act.

The controversy focused on whether this liability is limited solely to the amount of the unpaid VAT or whether it also extends to default interest. Part of the case law took the view that interest falls outside the scope of liability under Article 177. Another line of judicial practice maintained that persons liable under Article 177 of the VAT Act qualify as liable persons within the meaning of Article 14(3) of the Tax and Social Security Procedure Code and, accordingly, pursuant to Article 16(3) in conjunction with Article 16(1) of the same Code, their liability encompasses not only the tax itself but also the accrued interest and the costs of its collection.

With Interpretative Decision No. 4 of 10 May 2022, the Supreme Administrative Court adopted the latter view, concluding that the scope of the joint and several liability under Article 177 of the Bulgarian VAT Act also includes obligations for default interest accrued on the VAT that is due but unpaid by another person.