On 31 July 2019, a bill aiming to bring Bulgaria’s transfer pricing rules in line with the recommendations of the OECD has been adopted by the Bulgarian Parliament.
The Bill sets new obligations for Bulgarian companies, Bulgarian permanent establishments of non-resident foreign companies and locally registered sole traders to maintain mandatory transfer pricing documentation evidencing the arm's length basis of their transactions with related parties.
Exemptions from this requirement are provided for the following categories of taxpayers:
- Persons exempt from Bulgarian corporate income tax (i.e., certain collective investment schemes, national investment funds and alternative investment funds as well as SPVs under the Bulgarian Special Purpose Investment Companies Act);
- Persons subject to alternative taxes (e.g., the gambling or shipping industry);
- Persons not exceeding the following thresholds as of 31 December of the previous calendar year:
- balance sheet value of the assets: BGN 38 million (approx. EUR 19.4 million)
- net sales revenue: BGN 76 million (approx. EUR 38.8 million)
- average number of personnel: 250 persons.
- Persons carrying out transactions with related parties only in Bulgaria.
Businesses subject to the requirement to prepare and maintain transfer pricing documentation must keep records of any related-party transactions exceeding the following annual thresholds for the previous year (excluding VAT and excise duties):
- Transactions for the sale of goods: BGN 400,000 (approx. EUR 205,000);
- Loan transactions: BGN 1 million (approx. EUR 511,000) for the loan principal, or BGN 50,000 (approx. EUR 25,564) for the accrued interest or other revenues and expenses related to the loan.
- All other transactions: BGN 200,000 (approx. EUR 102,000).
No transfer pricing documentation is required for transactions with related individuals regardless of their value, unless the individuals act in their capacity as sole traders.
Bulgarian businesses must prepare and keep a local transfer pricing file for all related-party transactions subject to disclosure undertaken during the respective year, by 31 March of the following year. Entities which are part of a multinational group must also be able to provide a transfer pricing master file prepared at group level by the ultimate parent company or another member of the group. The transfer pricing documentation is to be kept by the taxpayer and provided to the Bulgarian tax authorities upon their request within the course of a tax check or a tax audit. The first year for which transfer pricing documentation must be prepared is 2020.