Category: Public Sector

Alexandra and Jessica from our team ranked in top 10 of a prestigious law competition    

We are delighted that Alexandra Dogandzhiyska and Jessica Spasova from the YNG Legal team have returned from their participation in the Telders International Law Moot Court 2024 – Europe’s most prestigious international law competition. Alex and Jessica, together with Svetlana Slavcheva and Dian Stavrev, their fourth-year Law colleagues at Sofia University represented Bulgaria at the competition. 

The team finished in the top 10 of the best universities and Alex and Jessica also made the list of the best oralists. Their coaches were Nadia Denkova and Ioanna Chenalova – students from upper years who have considerable experience in similar competitions.  

The University of Cologne, Inner Temple College in London, Dublin University and the University of Timisoara were among the universities the Sofia University team faced. 

“This experience was an unparalleled opportunity to gain practical experience in the field of International Law, to go in depth on current social and political issues related to today’s political reality in a global perspective,” shared Alexandra, paralegal at YNG legal.

Jessica (leftmost, seated) and Alexandra (rightmost, seated), together with their Sofia University teammates at Telders International Moot Court 2024.
Jessica (leftmost, seated) and Alexandra (rightmost, seated), together with their Sofia University teammates at Telders International Moot Court 2024.

The Telders International Law Moot Court Competition has been held since 1977 in The Hague, the Netherlands, at the local campus of Leiden University and at the so-called Peace Palace – the headquarters of the International Court of Justice of the United Nations. The aim is to give students the opportunity to build upon their theoretical and practical knowledge in the course of preparing for and participating in a simulated litigation between different countries. Telders also aims to promote teamwork and European integration.     

This year’s case was about the dispute of three fictitious states with claims to the so-called island of Hermet, which dispute develops into a serious conflict. Each year, the simulated trial is put before a simulated court at a level at which in real life it would be put before the UN’s International Court of Justice. National student teams are assigned to represent the states substantively both in writing and through pleadings before the so-called moot courts. The students’ work is reviewed by legal experts, including actual judges from the real UN International Court of Justice, professors of law and lawyers. 

The Hermett Island case confronted contestants with topics such as the jurisdiction of international courts and tribunals, incidental proceedings, the authority of advisory opinions, the law of armed conflict, the law of treaties, the law of the sea, and the law of state responsibility. 

“One of the most significant lessons we have learned is that success is much more satisfying when you have someone to share it with! We are especially grateful for our amazing team, with whom we shared months of preparation and many sleepless nights,” shared Jessica, also a paralegal at our team.

Training in sports law successfully accomplished

Attorney-at-law Radina Vakrilova and associate Filena Vassileva from our team took part in a two-day seminar on sports law – one of the areas in which YNG Legal.

The AI Act: Preserving civic rights or hindering innovation in the EU? 

The first set of regulatory frameworks aiming at responding to the new challenges this technology brings

In recent years artificial intelligence tools of various applications and scales became more and more included in our life. And the faster the technology developed, the more present and available it became outside of specific industries and big corporations. To a point of a commercial boom so wide, that such AI tools swiftly reached small and medium enterprises (SME) and end-customers en mass. 

This quick and wide spread of a technology which evolves every day inevitably brought threads to information, personal data, intellectual property, jobs, businesses, human rights. That is why the European union moved to regulate artificial intelligence. 

A robot looking at a digital image of scales, symbolizing the regulation of artificial intelligence which comes into force in the European union.
Image by Freepik

The AI Act’s aim

On 13 March The European Parliament adopted the first amendments to the proposal for a Regulation of the European Parliament and of the Council laying down harmonised rules on artificial intelligence the so-called Artificial Intelligence Act.  

The new regulation aims to ensure safety and compliance with fundamental rights and also boost innovation. 

According to the first recital the purpose of this legislation is to: 

improve the functioning of the internal market by laying down a uniform legal framework in particular for the development, placing on the market, putting into service and the use of artificial intelligence systems in the Union in conformity with Union values, to promote the uptake of human centric and trustworthy artificial intelligence while ensuring a high level of protection of health, safety, fundamental rights enshrined in the Charter, including democracy and rule of law and environmental protection, against harmful effects of artificial intelligence systems in the Union and to support innovation.” 

Whom will the AI Act apply to?

  • Providers
    • placing on the market or putting into service AI systems or 
    • placing on the market general-purpose AI models in the Union, irrespective of whether those providers are established or who are located within the Union or in a third country.
  • Deployers of AI systems that have their place of establishment or who are located within the Union.
  • Providers and deployers of AI systems that have their place of establishment or who are located in a third country, where the output produced by the system is used in the Union.
  • Importers and distributors of AI systems.
  • Product manufacturers placing on the market or putting into service an AI system together with their product and under their own name or trademark; 
  • authorised representatives of providers, which are not established in the Union; 
  • affected persons that are located in the Union. 

What does the AI Act actually regulate?

The new regulation works in several directions to protect the interests of EU citizens and businesses. 

  1. The AI Act defines AI applications which pose a significant threat and completely bans them, such as certain cases of biometric categorisation, emotion recognition, social scoring, predictive policing, manipulation of human behaviour or exploitation of people’s vulnerabilities. 
  2. It provides an exception for strictly and narrowly defined situations in which biometric categorisation could be used by law enforcement only if strict safeguards are met: such as limited use in time and geographic scope and prior judicial or administrative authorisation. 
  3. The Act defines and regulates high-risk systems, for example AI uses in critical infrastructure, education and vocational training, employment, essential private and public services (e.g. healthcare, banking), certain systems in law enforcement, migration and border management, justice and democratic processes (e.g. influencing elections). It also gives citizens the right to submit complaints about AI systems and receive explanations about decisions based on high-risk AI systems that affect their rights. 
  4. The regulation imposes transparency requirements, including compliance with EU copyright law and publishing detailed summaries of the content used for training. Artificial or manipulated images, audio or video content (“deepfakes”) will need to be clearly labelled as such. Systems posing systemic risks will need to undergo additional evaluations. 
  5. The AI Act also requires measures at the national level to ensure SMEs and start-ups have a healthy environment to develop and train innovative AI before its placement on the market. 
A robot left hand and a human right hand typing on a laptop keyboard, symbolizing the development of artificial intelligence (AI) technologies. Image by Freepik.
Image by Freepik

What’s next?

The development of The AI Act took 3 years until it reached this point. Now the final Regulation needs to be formally adopted by both European Council and European Parliament before its publication to the Official Journal of the European Union. After the adoption from the European Parliament, the European Council is expected to adopt in due time the text without further changes or negotiations as the two institutions reached a deal on the Regulation at the beginning of December last year. 

The European Union is thus becoming a global pioneer in the regulation of the artificial intelligence sector, as happened a few years ago with the regulation of personal data. Since the introduction of the General Data Protection Regulation (GDPR) in the EU, similar regulations have been introduced elsewhere in the world. 

The new legislation enters into force 20 days after its publication in the official Journal and should fully apply from 2026. Yet there are some exceptions:

  • bans on prohibited practises will apply 6 months after the entry into force date; 
  • codes of practise – 9 months after entry into force; 
  • general-purpose AI rules including governance – 12 months; 
  • and obligations for high-risk systems – 36 months. 


Only the time will tell to what extent and how the new Regulation will face the many challenges the AI technology brings to the legislative and economic landscape within the member states of the European Union. Our team will analyse and stay up do date with the new set of rules making sure your business needs comply with the Regulation. We are committed to help companies navigate through the complexities of the European Union’s legal landscape. 

If you work in the field of AI, do not hesitate to get in touch and prepare your business ahead of time for the new legislation before its mandatory provisions kick-in.

Tax credit in case of goods being defective, subsequently sold, or destroyed. 

Is a correction of the deducted tax credit necessary? What does the Court of Justice of the EU say?

This piece was written in due course following the CJEU judgment in May 2023.

On 1 January 2024, changes to the Bulgarian Value Added Tax Act (VAT Act) came into force, in particular Article 80(2), which harmonises Bulgarian with European legislation in accordance with the Court’s judgment. Thus, cases such as the one described here should no longer arise.

Consult us about your tax obligations by emailing us at:


In May 2023, the Court of Justice of the European Union (CJEU) issued a landmark decision (Decision of 04.05.2023 in Case C-127/22) in the field of the right to deduct tax credit, clarifying questions of practical importance. The Court’s decision concerns the need for a correction of the initially determined amount for deduction in cases of goods being defective, subsequently sold as waste, or destroyed. 

The tax credit allows registered persons under the VAT law to deduct from their tax obligations the tax paid on taxable supplies of goods and services. One of the conditions for exercising this right is for the goods or services to be subject of subsequent taxable supplies. Often, certain goods need to be declared defective after the tax credit has already been deducted.

After the process of declaring the goods defective is completed, a decision regarding their subsequent treatment should be made. In some cases, the defective goods are subject to destruction, which practically excludes the possibility of them being the subject of subsequent taxable supplies. However, it is not excluded that the goods may be sold as waste. 

Many businesses have raised the question of whether they should return the deducted tax credit to the budget in cases where the defective goods have been destroyed or have become the subject of a subsequent taxable supply but as waste. This question now has a clear and categorical answer. It was initially prompted by the incompatibility of the national regulations regarding the correction of deducted tax credit with European rules. We have paid special attention to the collision between the provisions of Council Directive 2006/112 (the “Directive”) and the provisions of the VAT Act. 

The dispute in the context of which the preliminary question was made

The dispute concerns a tax-related issue that arose between the Appeals and Tax Insurance Practice Directorate (ODOP) of the National Revenue Agency (NRA) and “BTK” EAD – a Bulgarian company providing telecommunications services. In the course of its activities, the company acquired various long-term assets through taxable supplies.

A calculator and a pen on top of a tax document.
Image by Steve Buissinne/ Pixabay

After availing itself of its right to deduct input tax credit, between October 2014 and December 2017, the company disposed of various goods that had become unfit for use or sale due to wear and tear or defects. It is important to note that some of the goods were sold as waste, while others were destroyed. Subsequently, the company made corrections to the utilized VAT credit based on Article 79, paragraph 3 of the Value Added Tax Act (VATA) (in its version effective until December 31, 2016) and Article 79, paragraph 1 of the VATA (in its version effective until January 1, 2017).

These provisions provide for the refund of the deducted tax credit (in full or in part) in case of destruction, disposal, or identification of shortages of goods. The corrections were made by issuing protocols under Article 117 of the VATA and reflecting them in the respective monthly VAT returns. 

On January 18, 2019, BTK submitted a request to the NRA for the refund of the returned tax credit, maintaining that there was a discrepancy between the provisions of the VATA and the Directive. The request was rejected by the NRA, leading BTK to file an appeal with the Sofia City Administrative Court (SAC). In its appeal, the company argued that the dispute was purely legal and is related to the question whether the VATA requires the correction of the utilized tax credit in cases of destruction or disposal of goods when duly proven or confirmed, in violation of the Directive.

The appeal was dismissed, with SAC stating that our national legislation (Article 80, paragraph 2 of the VATA) lists exceptions where no corrections are made under Article 79 of the VATA, including the disposal of goods, but under additional conditions. The company appealed SAC’s decision to the Supreme Administrative Court (SAC), which stopped the proceedings and referred a preliminary question to the Court of Justice of the European Union (CJEU). 

Where does the problem stem from?

The root of the problem lies in the contradiction between the provisions of Article 78 and subsequent articles of the VATA, regulating the matter, and the European rules on correction of deducted tax credit provided for in Directive 2006/112.


What does Directive 2006/112 provide for?

The fundamental possibility of adjusting the initially determined amount for deduction is provided for in Article 184 of the Directive. Article 185 clarifies that the correction is made in cases where there is a change in the factors used to determine the deduction amount after the preparation of the VAT return. Article 185, paragraph 2, provides that in cases of destruction, loss, or theft of goods, duly proven or confirmed, the utilized tax credit is not subject to refund, regardless of the change in factors. The Directive grants Member States the freedom to establish detailed rules for the application of Articles 184 and 185 and to adapt their national legislation according to the requirements of the Directive.

A caliper "measuring" money on top of a tax document.
Image by Steve Buissinne/ Pixabay

What does Bulgarian legislation provide for?

In Bulgaria’s legislation, the regulation of the matter is in Articles 79 and subsequent articles of the VAT Act. Contrary to Article 185, paragraph 2 of the Directive, Article 79, paragraph 1 of the VAT Act provides that in cases of destruction, loss, and disposal of goods, taxable persons must refund the deducted tax credit.

Article 80, paragraph 2 of the VAT Act (in its version effective from January 1, 2017) regulates the exceptions to this rule. It specifies that there is no obligation to refund the utilized tax credit only when destruction, loss, or disposal are caused by any of the events listed in the provision. For example, taxable persons are not obligated to refund the tax credit when destruction is caused by force majeure (item 1) or accidents or disasters (item 2). 

Analysis of Article 185, paragraph 2 of the Directive and Article 80, paragraph 2 of the VAT Act shows that there is a collision between them. The VAT Act provides that as a rule, in cases of destruction, loss, and disposal of goods, the tax credit should be refunded. Only in cases where they are caused by the events listed in Article 80, paragraph 2, there is an exception to the rule, and the utilized tax credit is not subject to correction and refund. On the other hand, the Directive regulates that as a rule, destruction, loss, or disposal of goods does not require the refund of the utilized tax credit, without considering the specific events that led to them. 

This contradiction leads to significant practical problems for many businesses, which are obligated to refund the utilized tax credit.

A sculpture of goddess Themis, symbolizing justice.
Изображението е от Sang Hyun Cho/ Pixabay

The interpretation by the Court of Justice of the European Union (CJEU)

The interpretation by the CJEU resolves the disputed points and provides a clear answer to the questions posed. The CJEU comments on two hypotheses, which differ depending on how defective goods, for which the taxable person has determined cannot be realized due to physical wear or damage, have been treated. In the first hypothesis, the goods were destroyed after being declared defective, while in the second, they were sold as waste under a taxable supply 

The first question relates to the interpretation of Article 185, paragraph 1 of the Directive. The CJEU is expected to clarify whether there is a “change in the factors” used to determine the deductible tax credit when the declaration of defective goods is followed by a sale of those goods as waste subject to VAT. 

According to the CJEU, such a hypothesis should not be considered a “change in the factors” within the meaning of Article 185 of the Directive. It specifies that one of the conditions allowing for the deduction of tax credit is met—the goods have become the subject of a subsequent taxable supply in form of a waste. According to the decision, it is irrelevant that the sale of waste does not relate to the usual economic activity of the taxable person.

The second, third, and fourth questions are considered together by the CJEU. With them, the referring jurisdiction essentially seeks to establish the following: 

Whether there is a “change in the factors” used to determine the deductible amount when the declaration of defective goods is followed by their voluntary destruction? 

If the answer to the previous question is affirmative, then the CJEU is asked to clarify whether the declaration of defective goods in such circumstances constitutes “destruction” or “loss” within the meaning of Article 185, paragraph 2 of the Directive, even though it is not an event beyond the control of the taxable person, and which could not have been foreseen and prevented by the latter.

A computer mouse and a pen on top of tax documents.
Image by Steve Buissinne/ Pixabay

The Court of Justice of the European Union specifies that destruction and spoilage should undoubtedly be classified as “changes in the factors” within the meaning of Article 185 of the Directive, insofar as they lead to the impossibility of using the goods for subsequent taxable supplies. On the other hand, they fall within the scope of Article 185, paragraph 2 of the Directive, which lists hypothesis where no adjustment and repayment of input tax credit is required. Therefore, no correction should be made in this case either.  

However, there are two additional requirements that must be met to conclude that destruction falls within the scope of Article 185, paragraph 2 of the Directive. Firstly, the destruction must be properly proven. In addition, the destruction must be result of a decision taken beforehand by the taxable person to destroy the goods due to the impossibility of using them for their usual economic activity. 

The CJEU also pays attention to the terms “destruction” and “spoilage”, highlighting the differences between them and clarifying that the spoilage of an item could not result from the voluntary action of its owner or possessor, whereas this is not ruled out in the case of destruction. In the dispute between ODOP and BTK destruction is present, as the existence of the goods has been terminated as a result of actions by the taxable person. 

The decision also addresses the second question, which essentially seeks to establish whether destruction must be beyond the control of the taxable person in order for Article 185, paragraph 2 of the Directive to apply. The CJEU clarifies that from the text of the provision, it cannot be inferred that destruction must necessarily result from an event beyond the control of the taxable person. 

Considering the above, according to the CJEU, there is no need to repay the input tax credit when the scrapping of the goods is followed by their voluntary destruction, provided that the destruction is properly proven or confirmed and there is no longer any benefit from the goods in economic activity. 

Additional notes

It is important to recall that directives are acts of EU law that give Member States freedom in their choice of form and means to achieve the objectives set out in them. It is precisely in this sense that Article 186 of the Directive provides Member States with the freedom to determine detailed rules for the application of Articles 184 and 185.

However, they must refrain from introducing rules that contradict those in the Directive or are more restrictive than them. In this regard, in its decision, the CJEU explicitly notes that the Directive does not allow provisions of national legislation that provide for the correction of deducted VAT in cases where the scrapping of goods is followed by their subsequent sale as waste, destruction, or disposal. 

Practical consequences of the CJEU decision

The commented decision poses a challenge to the Bulgarian legislative authority to undertake legislative changes through which the VAT Act will be brought into compliance with the interpretation provided by the CJEU. We expect changes in the VAT Act to put an end to the existing practical problem. In the meantime, taxable persons who have made adjustments to deducted tax credit have the opportunity to request a refund of the returned tax, citing the commented decision, as it is binding on Bulgarian courts.