The European Commission said Thursday it has officially asked Bulgaria to amend its legislation on value added tax (VAT) as itfinds that the national rules on the conditions for refunding VAT to taxable persons subject to a tax audit discriminate against persons involved in intra-Community transactions.

Under Bulgarian legislation, taxable persons who undergo a tax audit are refunded VAT at the end of the audit procedure. Bulgarian legislation, however, lays down specific time periods for audits of taxable persons involved in intra-Community transactions, and these time limits are twice as long as those applicable to traders only involved in domestic transactions.

Taxable persons carrying out intra-Community transactions who wish to obtain the refund before the end of the tax audit must lodge a security or a bank guarantee for twice as long a period.

The Commission considers that these rules, which distinguish between taxable persons operating only within Bulgaria and thosecarrying out transactions with other EU Member States, are incompatible with the VAT Directive and with the principle of proportionality.

The EC request takes the form of a Reasoned Opinion which is thesecond stage of an infringement procedure. If the rules are notbrought into compliance within two months, the Commission may refer the matter to the European Court of Justice.