How do I get a license to sell electricity through a photovoltaic power plant in Bulgaria?
Obtaining a license to trade in electricity in Bulgaria in the presence of a photovoltaic power plant is a key process for the legitimate realization of commercial activity with the produced energy. The procedure is strictly regulated in the Energy Act and relevant by-laws, and is carried out through the Energy and Water Regulation Commission (EWRC). To obtain a license to trade in electricity, you need to follow specific steps and meet certain requirements, which we will consider in detail.
The first step is to submit an application for a license to the EWRC. According to Art. 39 of the Energy Act, any person wishing to trade in electricity must obtain a license from the EWRC, regardless of whether it produces energy from conventional or renewable sources, such as photovoltaic systems. The application must be submitted in writing and contain full information about the person applying for a license, as well as about the installation that will be used to generate electricity.
The following documents are attached to the application:
- Information on the financial condition of the company — the applicant must submit a balance sheet and income statement that demonstrates a stable financial position necessary for conducting electricity trading.
- Technical data for the photovoltaic system — information on the capacity of the plant, the layout, the type of facilities and the estimated volume of electricity produced.
- Business plan — a document that contains details of the expected revenues, expenses and investments related to electricity trading, as well as the strategic objectives of the company to carry out this activity.
- Evidence of ownership or right to use the facilities — documents that show that the company has the legal right to use the photovoltaic system to generate electricity.
After submitting the application, the EWRC shall assess the technical and financial feasibility of the applicant to trade in electricity. According to Art. 43 of the Energy Act, the EWRC may request additional information or clarification from the applicant in the process of considering the application.
One of the key points in issuing a license is the demonstration of technical and operational readiness for trading in electricity. The applicant must prove that he has the relevant contracts for access to the electricity distribution or transmission network. This includes signing contracts with network operators that will ensure the connection of the photovoltaic system to the electricity grid and the sale of the energy produced.
Upon successful examination of the documents and upon proof of compliance with all requirements, the EWRC issues a license to trade in electricity. The license is valid for a certain period of time, usually between 10 and 20 years, depending on the specific conditions of issue and the type of activity. The license can be renewed after the expiration of this period if the company continues to meet the conditions to carry out the activity.
The license entitles the company to sell the electricity produced on the free market or through long-term contracts with electricity distribution companies and consumers. In order to trade on the free market, the company must also be registered in the electricity trading platforms, such as the Bulgarian Independent Energy Exchange (INEB), which carries out the free trade in energy in the country.
It is important to note that the person who holds a license to trade in electricity must keep accounts and submit regular reports to the EBRD on their activities. These reports include information on the electricity produced and sold, the financial results of commercial activities, as well as the fulfillment of license conditions. Failure to comply with these requirements may result in the revocation of the license or the imposition of penalties.
How is the registration of a photovoltaic power plant under the Excise and Tax Warehouses Act (ZADC) carried out in Bulgaria and issuance of a certificate for registration of persons carrying out activities with coal, coke, natural gas, biogas and electricity?
The registration of a photovoltaic plant under the Excise and Tax Warehouses Act (ZADC) in Bulgaria and the issuance of a certificate of registration of persons who carry out activities with coal, coke, natural gas, biogas and electricity is an important step for companies that produce and sell electricity. This procedure is regulated in the ZADC and is mandatory for persons engaged in certain activities related to energy products, including electricity.
According to Art. 57a, para. 1 of the ZADC, all natural and legal persons who produce and sell electricity, including from renewable energy sources such as photovoltaics, must register with the Customs Agency. Registration is mandatory in order for the person to legally carry out the activity of electricity generation and trade.
The registration process begins with the submission of an application to the competent territorial customs directorate where the photovoltaic plant or the company's registered office is located. The application should indicate all the necessary data about the person, including information about the installation, the capacity for generating electricity and the activities to be carried out. Also, the person must submit documents certifying his right to carry out the activity, including licenses and permits, if such are required.
After submitting the application, the Customs Agency conducts a check of the submitted documents and, if all the requirements are met, issues a certificate of registration of the person. This certificate allows the company to legally produce and sell electricity from photovoltaic systems. It is important to note that the certificate must be kept and presented upon request by the control authorities.
One of the main requirements for registration under the ZADS is the obligation to keep records. Companies that produce and sell electricity must keep a record of the electricity produced and sold and submit it to the Customs Agency. This reporting includes data on the quantities of electricity produced and sold, as well as other information related to the activity of trading in energy products. Persons registered under the ZADC are obliged to submit regular declarations and reports on their activities, as specified in Art. 57a of the Act.
In addition to electricity, ZADC also covers other energy products such as coal, coke, natural gas and biogas. Persons who carry out activities with these products are also subject to registration and must comply with the same requirements for keeping records and filing declarations.
The procedure for registration and issuance of a certificate under the ZADS is aimed at ensuring control over activities with energy products and ensuring compliance with the tax and excise obligations of companies. The Customs Agency has the power to check and control registered persons, and in case of violations it may impose sanctions and fines.
What are the features of FEC accounting in Bulgaria?
The accounting of photovoltaic power plants (PV) in Bulgaria is characterized by numerous features related both to the specific activity of electricity production from renewable sources and to the requirements of the Bulgarian legislation. According to the Energy Act, photovoltaic systems fall under the regulation of activities related to the production and trade of electricity (Art. 1 of the PE). From the point of view of accounting, this means that all income and expenses associated with these systems must be accounted for according to specific rules, keeping separate accounting records for the sale of energy, depreciation of systems and other aspects, respectively.
One of the main features is the accounting of electricity produced, which can be both for own needs and for the sale of electricity on the free market. In the case of sale, electricity is treated as a commodity subject to VAT pursuant to Article 2 (3) of the Value Added Tax Act (VAT). When selling electricity produced by the FEC, the issuance of an invoice is mandatory, and the income from this activity is accounted for as usual sales revenue. Expenses related to the maintenance of the FEC, including the costs of depreciation of facilities, must also be accounted for in accordance with the National Accounting Standards (NSS), as described in Art. 5 of the NSA.
Depreciation of photovoltaic systems is another key aspect, with different damping rates applied depending on the type of installation. According to Art. 55 of the Corporate Income Tax Act (CPA), depreciable fixed assets, including photovoltaic panels, must be depreciated on the basis of previously established norms, using the linear method of depreciation as standard. Depreciation costs are recorded as current expenses in the accounting records and are reflected in the annual financial statements of the company.
In addition, the financing of the construction of the FEC, especially when it is carried out through grants or other forms of state support, requires specific accounting. Amounts received under a consultancy contract in connection with the use of financial assistance should be accounted for in accordance with the agreed terms and treated as specific revenue reflected in the relevant accounting records. Accounting for financing under projects related to the construction of photovoltaic power plants requires an accurate classification of expenses and revenues by categories, in accordance with Article 11, paragraph 1 of the CPA.
Another important aspect is registration under the Excise and Tax Warehouses Act (ZADC). Electricity is an energy product that falls under the regulation of this Act, and all producers of electricity from renewable sources, including FTEs, are obliged to register and comply with specific reporting and reporting requirements. Registration under BULSTAT is also mandatory for natural persons who own power plants and conclude contracts for the purchase of electricity.
The accounting of costs and revenues from the operation of photovoltaic power plants also includes specific treatment of contracts for consulting services and costs for studies related to the construction of the system. These expenses must be accounted for as capital expenses and be amortized in future periods in accordance with accounting standards.
How are amounts accounted for under a contract for a consultancy service on the construction of an FEC in connection with the use of financial assistance?
The accounting of amounts under a contract for consulting services in connection with the construction of a photovoltaic power plant (PV) and the use of financial assistance has several key aspects that are directly related to the National Accounting Standards (NSS) and the Corporate Income Tax Act (CPA). Those provisions provide the framework for the correct accounting of the costs and revenues associated with such consultancy contracts.
First of all, according to the NSS, the amounts paid under contracts for advisory services related to investments in the construction of an FEC must be treated as expenses for the acquisition of fixed assets. In this case, consulting services can be considered as part of the acquisition costs of the FEC, which means that these costs are not recognized as current expenses, but are capitalized and increase in the value of the asset. According to Art. 33 of the CPC, the costs of services that are directly related to the construction of fixed assets, including the ECF, are accounted for as part of the cost of the asset.
According to Article 67 of the CPA, if the consulting service is directly related to the receipt of financial assistance, for example, from state or European funds, the amounts under the contract must be accounted for as investment costs and, accordingly, depreciated together with the rest of the costs of building the plant. In this case, the value of consulting services is included in the initial value of the asset and is depreciated according to the rules for depreciation of fixed tangible assets.
In the case of financing for a project related to the construction of an EGF, the accounting of the amounts under consultancy contracts must also reflect the revenue from the financial assistance received. In such a case, the amounts received as financial assistance may be recognised as income in the period in which they are recognised or deferred during the depreciation period of the asset. Depending on the nature of the aid and the conditions agreed, the amounts may be accounted for as deferred revenue, which is gradually recognised in the revenue part of the company's accounts.
If the consultancy services cover not only technical but also administrative or legal advice related to the process of obtaining the financing, they must be clearly divided into categories of costs that can be directly related to the construction of the plant and those that constitute administrative costs. Expenses that are not directly related to the acquisition of the asset can be accounted for as current expenses for the period in which they were incurred.
Finally, to ensure that all expenses and revenues are properly accounted for, it is important that the accounting policy of the firm is in accordance with the provisions of the NSS and the CPA. This includes the correct classification of advisory services and the corresponding financial assistance, as well as the documentary justification of all costs and revenues associated with the construction of the FEC.
How is an accounting value taken into account for a study in connection with the construction of a photovoltaic system?
Accounting value accounting for a study in connection with the construction of a photovoltaic system follows specific principles set out in the National Accounting Standards (NSS) and the Corporate Income Tax Act (CPA). These costs are generally considered investment costs related to the acquisition of a fixed tangible asset, in this case a photovoltaic system, and can be capitalised in certain cases.
According to Art. 33 of the NSA and the applicable provisions of the CPA, the exploration costs that are incurred in order to assess the technical and economic feasibility of the construction of a photovoltaic system may be treated as part of the cost of the asset. To be capitalized, these costs must be directly related to the construction of the plant and meet the criteria for recognition as a fixed asset. This means that the costs must contribute to the future economic benefits of the company through the photovoltaic system itself.
Exploration costs may include costs for geodetic surveys, soil analysis, legal advice related to the acquisition of land plots, as well as costs for environmental assessments. It is important that these expenses are documented and accounted for in accordance with the requirements of the ZSC (Art. 24). If the studies lead to a decision to build the photovoltaic system, they are capitalized as part of the cost of the asset and are amortized over the service life of the system.
According to Article 67 of the CPA, if the exploration expenses do not lead to the construction of the asset or if the construction of the photovoltaic system is not approved due to economic or technical unsuitability, these expenses are accounted for as current expenses for the period in which they were incurred. This means that in cases where the project does not proceed to construction, these costs cannot be capitalized, but must be accounted for as losses for the current reporting period.
Where studies are financed with funds from external sources, for example through grants or other forms of financial assistance, the accounting of these funds must be in accordance with the agreed terms. If part of the studies is financed, the funds received can be treated as deferred income, which is recognized gradually over the period of depreciation of the asset. In the event that the project is not implemented, the financial assistance is recognized as income for the current reporting period.
It is important that all research expenses are properly classified and separated from the rest of the administrative or running costs. Expenses related to studies must be clearly identified in the accounting records and supported accordingly with the necessary documents. This ensures that they are correctly accounted for both in terms of capitalization and in terms of depreciation or current recognition.
How is the accounting of financing for the construction of a photovoltaic system carried out?
Accounting for financing for the construction of a photovoltaic system is a process that requires precise accounting of both the funds received and the costs associated with the construction of the system. This process is regulated by the National Accounting Standards (NSS) and the Corporate Income Tax Act (CPA), and the specific accounting operations depend on the source of financing — whether it is equity, loans or grants.
When financing is provided in the form of a loan, the amount is reported as a liability on the company's balance sheet. Loans used for the construction of photovoltaic systems are accounted for in accordance with Art. 34 of the NSS and must be clearly separated as long-term or short-term debt depending on the repayment period. The interest costs associated with these loans are not capitalized, but are accounted for as current expenses for the financial period in which they arose.
Funding through grants or other forms of grants has a different approach to accounting. According to Art. 28 of the NSS and Art. 68 of the CPA, if the company receives financing in the form of a grant or subsidy for the construction of a photovoltaic system, this financing must be reflected as deferred income. The amount of the subsidy received is not recognised immediately as revenue, but is deferred and recognised pro rata over the depreciation period of the asset for which the aid was granted. This means that when the system is put into operation, the subsidy received is recognized as income in accordance with the depreciation costs of the photovoltaic system.
When rescheduling revenues related to the financing received, the accounting policy of the firm must clearly define the mechanism for recognizing income. According to Article 70 of the CPA, if there are subsidies received to cover specific costs for the construction or purchase of assets, they should be recognized as income in the same period during which these costs are amortized. This ensures that the financial statement of the company reflects the real economic benefits derived from the financing.
If the company receives financing through a loan agreement with favorable terms or subsidized interest, these privileges must also be accounted for correctly. Depending on the financing conditions, the reduced interest expense can be recognized as income or as a direct reduction in debt obligations.
Accounting for financing is also related to the exact classification of expenses. All costs for the construction of the photovoltaic system, which are covered by the financing, must be capitalized as part of the value of the asset. This includes the costs of materials, labor, consulting services and other services directly related to the construction of the system. In addition, the costs of surveys, site preparation and legal expenses can also be included in the value of the asset and amortized over the operating period.
It is important to note that if part of the financing refers to current expenses that are not related to the construction of the asset, these funds must be accounted for as current income for the period in which they were received and used. In this case, they are not subject to rescheduling and are not related to fixed assets.
What are the main accounting entries when acquiring a photovoltaic plant?
The acquisition of a photovoltaic power plant (PV) represents a significant capital investment that requires accurate and detailed reporting in the company's accounting records. The main accounting entries in the acquisition of a FEC include the recording of the assets associated with the acquisition, the capitalization of expenses, the accounting of depreciations and, if applicable, the recognition of financing liabilities. All these operations are regulated by the National Accounting Standards (NSS) and the Corporate Income Tax Act (CPA).
The initial step in the acquisition of a FEC is the recording of the value of the asset on the balance sheet of the company. According to Art. 33 of the Accounting Act, the asset is recognized in accounting at the value, which includes all costs incurred for the acquisition and installation of the plant. This includes the purchase price of the facilities, the cost of installation, as well as any other costs directly related to the commissioning of the asset. The acquisition value is recorded in the asset of the balance sheet in the form of a fixed tangible asset (DMA), this value will be the basis for calculating future depreciation costs.
Capitalization of costs is essential for the correct accounting of the acquired photovoltaic plant. The costs that can be capitalized include not only the purchase price, but also the costs associated with the acquisition, such as transportation, installation, legal and consulting services related to the process. All these costs are included in the initial value of the asset, according to Art. 67 of the CPA.
After the photovoltaic plant is put into operation, it is subject to depreciation. The depreciation process starts from the moment the asset is ready for use and continues throughout its useful life. In accordance with Art. 55 of the CPA and the NSS, the depreciation of the photovoltaic system is carried out on a linear basis, depreciation costs are recognized as current expenses for each reporting period. Depreciation must be reflected in the income and expense account and included in the accounting records, reducing the carrying amount of the asset over time.
If the acquisition of the photovoltaic plant is financed by a loan, the accounting of the loan must be reflected in the liabilities of the balance sheet. Interest on the loan is accounted for as current expenses, which are not capitalized, but are recognized for the reporting period in which they are due. The loan is recorded as a long-term or short-term obligation depending on the terms of repayment.
The acquisition of an ECF may also involve the recognition of VAT, where applicable. VAT on the purchase of fixed assets is recognized as a claim on the account for the recovery of a tax credit in the event that the company is entitled to a VAT refund. Otherwise, VAT is capitalized as part of the value of the asset.
In the event that the plant is acquired through financial assistance, for example, grants, these funds must be recognized as deferred income and rescheduled during the depreciation period of the asset, as described in Art. 28 of the NSA. Revenue shall be recognised in the same period during which depreciation is accrued in order to ensure an even distribution of the benefits of the subsidy over the useful life of the plant.
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