Thursday, March 19, 2009

VAT is going on in the Bulgarian furniture world?

Well folks, pending the consolidation and final draft of our story on "Strange Bulgaria Seminars" we thought we would wrestle with the very confusing situation regarding VAT on furniture in Bulgaria.

So far (that we know of) we can only find a couple of companies that appears to be the cause, and you guessed it, it's MRI, and loosely mentioned are Bulgarian Dreams.

Now, as per usual, we need to insert a disclaimer here. Apologies for any boredom it might cause, but it has to be.

Investment Property Rumours is purely relaying and consolidating information that is freely available on the internet, which is linked to and/or displayed within the blog. We are not responsible for your opinion on what you read or think, nor any conclusion that you might come to as a result (be that positive or negative). This blog is here to inform. It is not an instruction or a religion and should not be treated as such.

Investment Property Rumours is not linked to any company, nor does it solicit or sell advertising (other than automatic web generated search engine ads for which we are not responsible).

Ok, down to the nitty gritty!

As members of various forums and subscribers to a large number of blogs about the overseas property business, we obviously see a lot of conversations amongst owners and prospective owners of property overseas. A large number of them can't be taken seriously, but every so often we see the odd thread that warrants looking into.

There seems to be substantial concern about furniture prices, where it is, how much it costs, and whether that cost is what it says it is, or subject to change later on.

The overseas furniture business has been very competitive from day one, with everyone jostling in the search engines for position due to the substantial profits to be made out of it, not only as the sale of the products themselves, but also the fitting and so on. Some companies have manipulated the situation further by insisting that certain packages and specifications be installed to comply with rental agreements (which may or may not exist of course!) basically holding buyers over a barrel, having been sold more than they could afford in the first place by offering rental programs which many seem to be failing to profit from despite assurances and promises from salesmen.

The subject of VAT in any country is a complex one to say the least. We are not accountants, and make no claims to be either. However, VAT has long been used for scams in the past and no doubt will continue to be in the future.

It would seem in the forums that people who have paid in full for a furniture package in Bulgaria (In some cases as long ago as 2006) are now being sent a bill for an additional 20% VAT!

Now the 20% part is correct. The current rate of VAT in Bulgaria is 20%. No qualms there.

Charging the VAT after the fact? Well that's a different story.

Due to the rather heated affair with MRI "restructuring" which we uncovered at the end of last year, many of the original web pages about LIFEtime aftersales and furniture have disappeared from the usual search engines and general public view. On a mission as ever though, we found a very handy tool that appears to archive all sorts of things that were thought to be neatly hidden under the carpet, doused with "Shake 'n' Vac" and never to be seen again.

With the tool in question, we stumbled across this, (Click the image to enlarge, or, if you would like to see the archived Furniture Packages page click here.)

Now providing my eyes aren't deceiving me, it says on there that "The emphasis is on creating packs that include absolutely everything from cleaning to VAT to give you an apartment you can walk straight into - with NO hidden charges. We strongly recommend organising a furniture package well in advance of completion."

Hmmm. Now this page was last archived according to waybackmachine on February 14th 2008 (you can see other pages from the same site there too)

Now as we have said, accountants we are not. Let alone Bulgarian accountants. But, if someone tells me the price is fully inclusive "from cleaning to VAT", and tells me there are "NO hidden charges" how the hell can they present a VAT invoice years later?

After asking a few book keepers and accountants on the subject and subsequently being baffled into a corner with a pencil and a calculator, the general gist of what we could make of it in layman's terms is as follows.

There are occasions and situations for VAT disbursement to occur. These would normally be in the case of accountants providing services via a third party. Certainly as a rule only within the service industry and not in the case of products.

It has also been known if a company has made errors in it VAT charging or reclamation, they are advised (usually after inspection) that they politely ask their clients to pay VAT on previous bills. Having said that though, said clients are within their right to tell the company in error where to put their VAT bill. If it isn't settled, the company in error is responsible, not the end user.

On the face of it, this all seems to be a case of moved goal posts, possibly a misinterpretation somewhere, maybe even a mistake, but after looking deeper, it all seems to get a little more sinister....

It would seem as some clients have found, that if you try to take the latter path of suggesting that MRI put their VAT bill where the sun doesn't shine, clients are being told that not only will they not get their furniture (which they have paid for "in full, with no hidden charges") but they will lose what they have already paid! No refund offered, partial or otherwise.

Again, we are not accountants, forensic or otherwise, neither are we high court judges, but this is tantamount to extortion is it not??

To see specific details on this area of the discussion, simply take a look at the VAT on Furniture thread here from Someone has amusingly posted in an excerpt of a letter from MRI staff stating that all their furniture packages are inclusive of VAT.

The apparently now defunct Bulgarian Dreams is also implied on some threads as well, but after the high profile heat on the TV, one would suspect they have had the sense to go to ground!

One would hope that MRI Property (Which now seems to only consist of MRI Construction on their website) will sort this out in a civilised manner. I mean, it wouldn't be the first time they issued press releases cover things up, or taking stabs in the dark at innocent companies. We wouldn't be surprised that all hands are washed, and the buck gets passed to the "non-related company" Solutions Overseas who appear to be recommended by MRI on their FAQ page, being as MRI apparently don't supply furniture?!

What can you do about it?

Well there is a small thing called "Distance Selling Regulations" that have to be complied with that catagorically state a few simple things according to The Office of Fair Trading;

Cancellation periods
"The regulations give consumers an unconditional right to cancel an order. This is to allow the consumer the opportunity to examine the goods or consider the nature of a service.

If a consumer cancels an order, written notice must be given to you by:

goods – seven working days from the day after that on which the goods are received by the consumer;
services – seven working days from the day after that on which the consumer agrees to go ahead with the contract.

If you fail to provide consumers with written confirmation of all the required information, then the cancellation periods can be extended up to a maximum of three months and seven working days. If the missing information is provided during this time, then the cancellation period ends seven working days beginning with the day after the full written confirmation is received by the consumer.

Where a contract is cancelled, the consumer must ensure that reasonable care is taken of any goods received and 'restore' them to you. This does not mean that they have to return them - unless you stipulate this in the contract - only that they make them available for you to collect.

You must refund the consumer's money as soon as possible and, at the latest, within 30 days of receiving the written notice of cancellation. The consumer may, at your discretion, be charged the direct cost of returning the goods, but you must tell them about this in the written information you give them.

If payment for the goods or services is under a related credit agreement, the consumer's cancellation notice also has the effect of cancelling the credit agreement."

If you feel we are being unfair in anything we cover, feel free to comment. We do read all comments, and have published 99% of those posted. If you wish to post, be sensible and do not put personal information in. We cannot edit it out.

We will leave you here with this article, make of it as you wish. We are now going to have a chat with yet more lawyers about some seminars to see how we can publish the next article, covering the very complex issue that appears to run along the lines of "I sold you something in good faith, have taken your money and spent it on fast cars, now because I have no cash, I'm going to blag you into another development and claim the original developer that I haven't paid has gone bankrupt, and charge you several arms and legs for the pleasure"

Until next time, invest wisely. If you have already invested, keep an eye out!

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Anonymous said...

There are also a lot of letters from well known UK lawyers demanding final payment for property in Bulgaria, even when investors have legally terminated their contracts. They are being threatened with court action in the UK!

Some people cannot complete as they have no money and had bought property on the promise of getting a mortgage. They were assured this was not a problem.

Even buyers who had got used to the idea that they might never see their deposit again are now being threatened with court action in the UK if they cannot find the money for completion.

It would be great if you found out more about this topic as many people are having sleepless nights.

investmentpropertyrumours said...

Regarding the cancellation of property purchase contracts, this is something we have had a few enquiries about. As far as we understand, the following applies.

If you purchased and signed in person on site, European law allows foreign banks to chase payment and completion in other European countries.

If you purchased over the phone, or by e-mail, then in theory you could use the distance selling act to quash the sale. Having said that, we are not aware of any successful cases where this worked to date, although it is still very early in the day as far as the general problems of completing on oversold investment property.

We are compiling information about the subject in general and will release an article on the subject soon, hopefully with some ideas as to which laws can be used to ease the ever growing problems of mis-sold investments.