Should I register for VAT?

Should I register for VAT?
The topic of this article is about the benefits and losses of VAT registration. Often, our new customers come to us with VAT registration already done, even with the registration of the enterprise in the Commercial Register. Being able to register for VAT right from the start is generally a positive thing, but it can be misleading in some cases. The lawyer who will offer it to you does not always think about whether it is suitable for your enterprise.
I will try, as briefly as possible and not exhaustively, to mention the cases in which you would benefit from such a registration, as well as those in which you simply cannot avoid it.
Pros
- If you want to trade goods, you buy those goods from registered persons and sell them to registered persons. In this case, the tax credit will help you make more profit from the sale of the goods if you are registered for VAT.
- You perform services and your customers are mostly registered persons. In this case, for your customers anyway, the VAT in the price is not a factor to consider because they are generally entitled to a tax credit, and if you are registered, you will be able to deduct the VAT paid from the total price, for which you use services and buy goods, i.e. you will reduce your expenses, respectively you will increase your profits again.
Cons
- You trade in goods, but your customers are mostly unregistered individuals. For example, you have a neighbourhood grocery store. In this case, you rather have no benefit to register for VAT, as your customers are not entitled to a tax credit and VAT raises the prices of the goods they buy, making you less competitive.
- You perform services and your customers are unregistered persons. In this case, you will also generally not benefit from VAT registration. Here are hairdressers, beauticians and the like who work mainly with individuals.
Mandatory VAT registration
- You want to work abroad. Well, in this case, whether you want it or not, in most cases you will have to register for VAT. Whether in the general order or only for certain deliveries, is already a matter of a specific situation.
You have made BGN 100,000 taxable turnover for the last 12 months, before the current one. You have no choice and you must hell register whether it’s profitable for you or not.
I deliberately do not go into detail about the various cases of registration, because it is neither possible to say briefly, nor is it the business of laymen to go into such details. The important thing to know is that when this question of “to register or not” arises, you must consult an accountant and/or tax attorney, not just a lawyer who specializes in registrations. There are many variations and exceptions to the cases described above. The matter is sometimes complicated even for specialists, and each case must be considered in its specifics. For consultations for your specific company, contact us through the contact forms.