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August 13, 2019



In issue 64/13.08.2018 of the State Gazette, a Law on Amendment and Supplementation of the Tax and Social Security Procedure Code (TSSPC) was published, introducing:

  • new rules on mandatory transfer pricing documentation, which are briefly summarised below. They have been enacted more than half a year following the end of the public consultation on their introduction and have been amended compared to the texts presented for public consultation;

  • the requirements of Council Directive (EU) 2017/1852 of 10 October 2017 on tax dispute resolution mechanisms in the European Union. Its key objective is the improvement of the mutual agreement procedure between EU member states as a mechanism for resolving international tax disputes. Other changes have been passed as well, which are not covered by the summary below.

 1. As from when shall the new rules on mandatory transfer pricing documentation (the “new rules”) apply?

The changes in TSSPC regarding transfer pricing documentation enter into force as from 1 January 2020 and shall apply to transactions with related parties (controlled transactions) performed after that date.

2. Which taxpayers do the new rules apply to?

The new rules are mandatory for taxpayers liable for corporate tax and sole traders applying the CITA rules to calculate taxable income, that have related party transactions in the respective tax year, except if:

  • at 31 December of the previous year, the taxpayer’s indicators do not exceed:
    - BGN 38 million of carrying amount of assets, and
    - BGN 76 million of net sales, or
    - 250 average number of employees;


  • the taxpayer is a party to controlled transactions carried out in Bulgaria only.

Notwithstanding the above limitation of the scope of liable persons according to the new rules, it should be noted that under the substantive tax laws (CITA and IITA), taxpayers are obliged to carry out transactions with related parties at arm’s length. Therefore, in the course of a tax examination or a tax audit, any taxpayer may be required to evidence that its controlled transactions were performed on market terms.

3. What are the contents of the documentation and what transactions does it cover?

The documentation comprises a local file that shall be prepared by a taxpayer obliged to comply with the new rules. The local file shall cover the taxpayer’s controlled transactions for the year that exceed the following thresholds:

  • BGN 400 thousand for transactions for transfer of goods;
  • BGN 200 thousand for all other transactions except loans;
  • BGN 1 million for a loan given or BGN 50 thousand of accrued interest and other income or expenses related to the loan.

The thresholds shall be calculated for each transaction alone. In certain cases, if two or more transactions were concluded with one or more related parties in comparable circumstances, the threshold shall be applied with respect to the total value of the transactions.

Besides a local file, an obliged taxpayer belonging to a multinational group of enterprises shall also have available with it a master file of the group.

The law prescribes explicitly the contents of the documentation (local file and master file), which generally follows the international standard on transfer pricing documentation adopted as a result of the BEPS Project.

 4. What are the deadlines for preparation of the documentation?

The law requires that the local file be ready within the deadline for submission of the corporate tax return – 31 March of the year following the covered tax year, while the master file shall be available within 12 months following the deadline for preparation of the local file. The documentation is not to be filed with the NRA but instead shall be presented to the revenue authorities if asked for.

 5. What are the penalties for failure to comply with the rules?

 The penalties are:

  • for failure to prepare or present a local file when asked for by the revenue authorities – up to5% of the total value of transactions that should have been covered in a local file;
  • for taxpayers obliged to but not having available a master file within the prescribed deadline – between BGN 5 thousand and BGN 10 thousand;
  • for untrue or incomplete data in the documentation – between BGN 1.5 thousand BGN 5 thousand.

 Penalties double in case of repeated failure.

This material is not exhaustive, is only of general nature and does not represent a specific advice or consultation. Should any additional questions arise, please do not hesitate to contact us at tel.: 02/943 37 00, fax: 02/943 37 07, е-mail: or at: 38, Oborishte Str., Sofia 1504.

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