Bulgaria Publishes Law for TP Documentation Requirements and Implementation of EU Tax Dispute Directive

; posted on
August 15th, 2019

Bulgaria introduced its law for Transfer Pricing documentation requirements and implementation of EU tax dispute directive which incorporated under the Tax and Social Security Procedure Code. The main amendments include: introduction of mandatory transfer pricing documentation requirements and implementation of the EU Tax Dispute Resolution Directive.

Transfer Pricing documentation

The following persons will be obliged to prepare transfer pricing documentation:

  • Bulgarian legal entities;
  • foreign legal entities carrying on economic activities in Bulgaria through a permanent establishment; and
  • sole traders carrying on significant activities.

An exemption from the obligation to prepare transfer pricing documentation applies if one or more of the following conditions are met for:

  • companies with net sales revenue under BGN 76 million (approximately EUR 38 million) and with a net book value of assets of up to BGN 38 million (approximately EUR 19 million), or with an average number of staff not exceeding 250 persons during the reporting period;
  • entities that are not subject to corporate income tax;
  • entities that are subject to alternative tax under the Corporate Income Tax Act;
  • entities conducting transactions with individuals who are not sole traders even if they are related parties;
  • entities that perform controlled transactions only in Bulgaria; and
  • the amounts (excluding VAT and excise duties) involved for each separate transaction with a related party for the relevant year are below the following thresholds:
    • for sales of goods: BGN 400,000 (approximately EUR 205,000);
    • for other transactions: BGN 200,000 (approximately EUR 100,000); and
    • with respect to loans taken out or granted: the amount is above BGN 1 million (approximately EUR 500,000), or the accrued interest and other income/expense related to the loan are above BGN 50,000 (approximately EUR 26,000).

The local file must be prepared by 31 March after the end of the relevant tax year. The persons obliged to prepare a master file must do so not later than 1 year after the deadline for preparing the local file for the relevant year. Since the first tax year for which the transfer pricing documentation must be prepared is 2020, the deadline for this first period therefore is 31 March 2021 for both the local and the master files.

Dispute resolution directive

The Law provides for the implementation of EU directive on dispute resolution which includes measures to ensure effective resolution of disputes concerning the interpretation and application of bilateral tax treaties and the Union Arbitration Convention, and in particular, disputes leading to double taxation. The measures apply to disputes filed from 1 July 2019 in relation to tax years beginning on or after 1 January 2018.

Source: Bulgarian Parliament 

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