On 31 July 2019, the National Assembly approved at second (final) reading amendments to the Tax and Social Security Procedure Code (TSSPC), which introduced the new transfer pricing (TP) documentation requirements.
New rules for TP documentation:
The local file will be prepared each year for related party transactions exceeding the following annual thresholds:
- 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.
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.
New rules for Penalties:
The law also provides for administrative sanctions 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.
New rules for tax dispute resolution
The new amendments also introduce rules on tax dispute resolution between Bulgaria and other EU Member States, and are based on the principles set out in the EU arbitration convention. The rules will be applied to tax disputes related to the interpretation and application of both:
- Income tax treaties for the avoidance of double taxation; and
- The EU arbitration convention on the elimination of double taxation in connection with the adjustment of profits of associated enterprises.
