Bulgaria adopts new rules on mandatory transfer pricing


With the recent passage of new tax legislation on mandatory transfer pricing (TP) documentation, Bulgarian taxpayers meeting certain criteria are now obliged to prepare local TP documentation with information about their related-party transactions.

In addition, the new legislation also requires any taxpayer, whether it is an entity or permanent establishment that is part of a multinational corporate group, to have the group master transfer pricing file at his disposal for inspection by authorities. Failure to present the files upon request can lead to significant liabilities.The newly adopted rules conform to OECD guidelines released under the BEPS Action 13 Report.

Who is affected?

All taxpayers engaged in related-party cross-border TP transactions will be obliged to prepare a local TP file if they have аn annual net revenue exceeding BGN 76,000,000 and either:

  • Assets with a balance-sheet value exceeding BGN 38,000,000 as of December 31 of the previous tax year; or
  • A workforce of more than 250 employees on average for the respective tax period.

Taxpayers are exempt from having to prepare a local file if they are not subject to corporate income tax, subject only to alternative taxes, or meet the above criteria but are only engaged in domestic related-party transactions.

What transactions are affected?

Related-party transactions exceeding the following annual thresholds are subject to mandatory transfer pricing documentation:

  • For transactions for the transfer of goods – BGN 400,000;
  • For supply of services or transactions with intangibles – BGN 200,000;
  • For loans received or granted – principal of BGN 1,000,000; or total amount of interest income or expenses accrued – BGN 50,000.

What are the deadlines?

The local file needs to be prepared by March 31 of the following tax year. Taxpayers who are part of multinational corporate groups must also have the group master file at their disposal, and be ready to present it upon request. The master file will be available no later than 12 months after the deadline for preparing the local file. The first tax year for preparing these files will be 2020.

What is the penalty for non-compliance?

The legislation also levies administrative penalties in cases of non-compliance with the newly adopted rules. Although TP files do not need to be submitted to the National Revenue Agency, failure to include a local TP file within a tax check or audit can incur a penalty of up to 0.5% of the volume of the related-party transactions. Any taxpayer who is obliged to but does not have a master TP file at his disposal could receive a fixed penalty of between BGN 5,000 and BGN 10,000. If the TP documentation contains false information, is incomplete or is not compliant with the new legal requirements, the taxpayer could receive a fixed penalty of between BGN 1,500 and BGN 5,000.

For more information on this eAlert and changes to Bulgaria's tax laws, please contact your usual CMS source or one of the following local CMS experts: Alexander Rangelov and Yana Antonova.