Starting January 1, the VAT rate for restaurant services in Bulgaria will return to 20%, marking the end of the temporary 9% rate introduced during the Covid crisis. The reduced VAT was extended several times but will no longer apply, also affecting the zero VAT rate on bread and flour, which will revert to 20%. While the caretaker cabinet's draft budget proposed keeping the 0% VAT on bread for 2024, the delay in electing a new speaker of parliament and the subsequent Christmas break meant that the budget law would not be considered until January 7.

Richard Alibegov, chairman of the Association of Restaurateurs in Bulgaria, expressed concerns over the change, particularly with the transition happening just before New Year's Eve. He explained that cash registers will need to be recalibrated at midnight to accommodate the new 20% rate. Despite this, Alibegov assured that the VAT change would not affect the prices for customers during the New Year's celebrations or immediately following the change.

Restaurant owners are hopeful that the VAT rate will be reduced back to 9% with the new budget for 2025 or through an extension of the current budget. Alibegov mentioned that all political parties the industry has approached, including GERB, DPS-New Beginning, Revival, and BSP, have given assurances that they support restoring the lower rate. A decision is expected between January 7 and 20.

While the VAT change is a challenge for restaurateurs, they have opted to absorb the difference between the 9% and 20% rates until the new budget is approved. They also noted that adjusting the rates on short notice would incur additional costs, so they are keeping menu prices the same despite the change in VAT.

The restaurant industry has enjoyed significant support in recent years, particularly after the Covid pandemic, with many considering it a priority sector deserving of special tax relief. Alibegov emphasized the connection between the restaurant and tourism sectors, which he believes have driven this ongoing support.

However, the industry is unhappy with the caretaker cabinet's draft budget, which includes measures such as increased excise taxes on alcohol and beer, alongside the VAT hike on restaurant services. In response, some restaurateurs have launched an initiative to impose a "sanitary cordon" on lawmakers who oppose the lower VAT rate, with over 4,000 establishments already participating.

While the restaurant industry points to increased revenue for the budget since the VAT reduction to 9%, critics note the significant price hikes in the sector over the past few years.