Accounting of car dealerships and auto parts companies in Bulgaria

When it comes to accounting for car dealerships and auto parts companies in Bulgaria, owners often face a number of issues related to both accounting requirements and licensing of their business. Elan Consulting offers specialized accounting services that meet the needs of this specific sector. Often our clients are interested in questions such as: “What accounting documents are needed for a car dealership?”, “What are the requirements for a car dealership license?” and “How do I manage VAT obligations of a car morgue?” Based on this, we can offer customized solutions tailored to the legal norms and specific needs of the business.

A key aspect in the management of car dealerships and auto parts companies is the licensing of car dealerships, which is mandatory for all companies engaged in this type of activity. Therefore, they are often asked: “What are the conditions for issuing a license for a car dealership in Bulgaria?” and “What specific accounting records should I keep?” These questions require a professional answer, which we at Elan Consulting can provide with the help of our long-standing experts.

Also, an important question that many car morgue owners ask is: “How to organize the accounting of end-of-life cars and parts?”. In this case, the accounting of spare parts and waste, which are often sold as scrap, is of particular importance for the proper management of finances and taxes. Obligatory compliance with the Accounting Act, as well as the correct application of the VAT Regulations, are only some of the issues that Elan Consulting can effectively solve for you.

Another common question is related to VAT registration. “Elan Consulting” helps its clients to answer questions such as “When is it mandatory for the car dealership to register under the VAT Act?” and “What is the impact of VAT registration on car sales?” Wekî din, rêveberiya envanter û firotanê ji bo serfiraziya firoşgehek an otomobîla otomobîlê girîng e, ji ber vê yekê hesabkirina profesyonel dikare xweşbîniya pêvajoyan û kêmkirina rîskên darayî garantî bike. Through our experience in the field of accounting, taxation and licensing, we at Elan Consulting can offer a full range of services for car dealerships and auto parts companies throughout Bulgaria — from Sofia to Burgas, Nessebar, Karnobat and others.

What are the accounting obligations of car dealerships and car auto parts companies in Bulgaria?

The accounting obligations of car dealerships and car auto parts companies in Bulgaria are specific and regulated by various laws and regulations, which should be observed by all traders in this sector. First of all, according to the Accounting Act (ZSC), every enterprise, including car dealerships and car auto parts companies, is obliged to organize its current accounting in accordance with the procedure of this Law. Accounting should be kept by bilateral recording of business operations, and they are reflected in chronological order and on the basis of documentary justification, in accordance with Article 3, paragraphs 1 and 2 of the Law of Civil Procedure.

A key aspect is the compilation and storage of primary accounting documents. These documents reflect all business operations and are mandatory for car dealerships and car dealerships when dealing with cars and spare parts. Primary documents must contain data on the date of issue, the name of the enterprise, the subject of the operation and natural expression, as provided for in Article 6, paragraph 1 of the Law on Civil Procedure. In addition, the primary document can be both paper and electronic media, subject to the requirements of the Electronic Document and Electronic Certificate Services Act.

Another important part of accounting obligations is VAT registration. Car dealerships and car auto parts companies that exceed the turnover of BGN 100,000 for the last 12 calendar months (until the end of 2024, as from 01.01.2025, the threshold for VAT registration in Bulgaria becomes BGN 166,000), are obliged to register under the Law on Value Added Tax (VAT) and issue invoices for sales si, pursuant to Art. 96, para. 1 of the GDPR. They must charge and report VAT on sales of cars and spare parts, correctly filling out the tax returns and keeping VAT registers, as specified in the regulations on the application of the law.

Inventory of assets and liabilities of car dealerships is also mandatory. This inventory must be made at least once a year, taking into account all assets, including means of transport and spare parts. This is regulated in Art. 22 of the Law of the Law and is an important part of the preparation of the annual financial statements.

The financial statements of car dealerships shall be drawn up in accordance with national accounting standards, including a balance sheet, an income statement, a cash flow statement and an annex. According to Art. 23, para. 1 of the CPC, these statements must faithfully reflect the financial position of the enterprise, while undergoing a mandatory audit upon reaching certain criteria.

Particular attention is paid to the correct accounting of goods offered for sale — in the case of car dealerships, these are cars, and in the case of auto parts companies— spare parts and metals. According to the Personal Income Taxes Act (ZDDFL) and the Corporate Income Tax Act (CPA), all income from the activity must be declared and the corresponding taxes charged on it.

Are there any specific features of the accounting of these industries?

The accounting of car dealerships and auto parts companies  in Bulgaria has specific features that distinguish them from other businesses. The main reason for these specifics is the nature of the activity — trade in cars, which are fixed assets, and trade in spare parts and scrap at car  auto parts companies . This requires the application of different accounting approaches and procedures related to the management of assets, tax liabilities and inventory.

First of all, at car dealerships, cars that are offered for sale are accounted for as a commodity. That is, when buying a car for resale, it is entered in the accounting registers as inventory, and after its sale it is accounted for as realized income. The specificity here is that these assets are often of high value and require proper and accurate accounting. According to the National Accounting Standards (NSS), in particular IAS 2 — Goods, they must be measured at acquisition cost or at fair value, if it is lower.

In addition, in car dealerships, transactions with used cars are often found, which may require specific accounting of sales at a reduced tax rate or the application of a margin scheme for VAT taxation, according to Art. 143 of the VAT. This scheme allows the trader to charge VAT only on the difference between the sale and purchase price of used cars, which is a significant relief for car dealerships.

In the case of car mortgages, the peculiarities are related to the fact that, in addition to trading in parts, they are often engaged in the sale of scrap, which requires the application of special VAT provisions in the sale of waste. According to Art. 163a of the VAT Code, scrap sales are subject to the VAT reverse charge mechanism. That is, the tax is charged by the recipient of the supply, and not by the supplier. This is a specific feature that car  auto parts companies must take into account in their transactions.

Another important aspect in the accounting of these industries is depreciation. Car dealerships and  auto parts companies often own significant fixed assets, such as vehicles, equipment and facilities. These assets are subject to depreciation and must be properly accounted for in accordance with IAS 4 — Tangible Fixed Assets, where the terms and methods of depreciation are specified. The important thing is that cars that are sold as a commodity are not depreciated, but are accounted for at the sale.

Additionally, asset inventory is key for car dealerships and auto  auto parts companies , as they often have a significant number of items in stock. This inventory must be carried out regularly to ensure the accuracy of accounting records and the availability of goods and spare parts. In car morgues, the inventory of waste materials and parts is more complicated, since they can have different values depending on their condition.

What are the requirements for importing, exporting and trading cars and parts for them through a car dealership or a car morgue?

The import, export and trade of cars and parts for them through a car dealership or car morgue in Bulgaria are strictly regulated and bound by a number of legal requirements. Compliance with these requirements is of utmost importance both for the proper functioning of the business and for avoiding legal and tax penalties.

First of all, the import of cars, especially used ones, requires compliance with European Union regulations and local legislation. When importing cars from countries outside the EU, customs procedures are applied in accordance with Article 17 of the Customs Act. Traders are required to file a customs declaration, as well as present a document of origin of the vehicle and other accompanying documents such as invoice and transport documents. Cars are subject to customs duties and VAT, the tax base being formed by the customs value of the vehicle and transport costs, according to Art. 55 of the Value Added Tax Act (VAT).

When importing from EU Member States, such as Germany or Italy, there is no need for customs declarations, but car dealerships must declare the acquired cars by intra-Community delivery. In these cases, VAT is charged according to Art. 84 of the VAT Act on a self-charging basis, and the tax is declared in the corresponding monthly tax return.

In terms of exports, exports of cars and parts outside the European Union are also subject to customs rules. A customs declaration and documents of origin of the car or parts are required. According to Article 28 of the VAT Code, the export of goods is exempt from VAT, provided that the goods leave the territory of the EU. Traders must provide evidence of the actual export, such as customs documents or transport documents.

The peculiarities of trade in car parts are mainly related to safety control and the standards to which they must comply. For the import of spare parts, it is necessary to present certificates of compliance with technical requirements, especially when it comes to critical components such as brake systems, lighting and airbags. Bulgaria, as part of the European Union, applies the product safety rules provided for in the European regulations, which traders are obliged to comply with.

The application of VAT schemes to the sale of used cars is also important. According to Art. 143 of the ZVAT, when the car dealership applies a margin scheme, VAT is charged only on the margin (the difference between the purchase and sale price) of used cars. This is an important aspect of accounting in the trade of used cars and parts.

According to §1, item 18 of the Supplementary Provisions of the VAT, “Passenger car” is a vehicle in which the number of seats without the driver's seat does not exceed 5. A passenger car is not a vehicle that is intended for the carriage of goods, or a passenger car that has permanently installed additional technical equipment for the purposes of the activity carried out by the registered person.