Transfer Pricing compliance overview of Bulgaria

Executive Summary

General Requirements

• Transfer pricing is governed by the Corporate Income Tax Act and the Tax and Social Insurance Procedure Code, which strictly enforce the arm’s length principle.
• The framework applies to transactions where commercial or financial terms differ from those between independent parties, leading to mandatory tax base adjustments.
• Compliance obligations apply to both domestic and cross-border transactions, although purely domestic groups are generally exempt from formal documentation preparation.
• Related parties are defined broadly by management participation, common control, or a direct or indirect capital holding exceeding 25%.

Documentation Requirements

• Large enterprises meeting specific size thresholds are required to prepare both a Master File and a Local File on an annual basis.
• Multinational groups with consolidated revenues exceeding EUR 750 million must submit a Country-by-Country Report and an annual notification.
• The Local File must provide detailed transactional analysis, while the Master File must describe the global group’s business, intangibles, and financial activities.
• Documentation must be finalized by specified deadlines and submitted within 30 days of a formal request by tax authorities during an audit.

Results of Non-Compliance

• Failure to provide a required Local File during an audit can trigger penalties of up to 0.5% of the total value of undocumented transactions.
• Non-submission or absence of a Master File carries a monetary sanction ranging from BGN 5,000 to BGN 10,000 per violation.
• Failure to file a Country-by-Country Report results in significant administrative fines between BGN 100,000 and BGN 200,000.
• Taxpayers involved in “hidden profit distribution” face a 20% administrative sanction on the related expense plus a 5% withholding tax.

Country Specific Information

• Bulgarian regulations mandate a specific hierarchy of methods, prioritizing the Comparable Uncontrolled Price method over all others.
• Revenue authorities may perform their own benchmarking using secret comparables if the taxpayer’s analysis does not prioritize local market player data.
• New legislation introduces Public Country-by-Country Reporting for fiscal years starting on or after June 22, 2024, for large multinational groups.
• Interest limitation rules restrict the deduction of net borrowing costs exceeding 30% of EBITDA or EUR 3 million, whichever is higher.

Compliance Table

Document	Deadline	Language	Thresholds, Scope & Penalties
Local File	30 June of the following year.	Bulgarian.	Mandatory for entities meeting 2 of 3 limits: Assets > BGN 38m; Sales > BGN 76m; Employees > 250. Covers cross-border and certain domestic transactions. Penalty: up to 0.5% of transaction volume.
Master File	12 months after the Local File deadline.	Bulgarian or English (translation required upon request).	Required if Local File criteria are met and the entity is part of an MNE group with a presence abroad. Penalty: BGN 5,000 – 10,000.
CbC Notification	Last day of the reporting fiscal year.	Bulgarian or English.	Mandatory for all constituent entities of groups with consolidated revenue $\ge$ EUR 750m. Penalty: BGN 50,000 – 150,000 for failure to notify.
CbC Report	12 months after the end of the reporting fiscal year.	Bulgarian or English.	Mandatory for UPEs or designated entities in groups with consolidated revenue $\ge$ EUR 750m. Penalty: BGN 100,000 – 200,000.
Other (CIT Return Annex)	30 June of the following year.	Bulgarian.	Standardized disclosure of transactions exceeding BGN 400k (goods), BGN 200k (services), or BGN 1m (loans). Penalty: BGN 1,500 – 5,000 for incorrect/incomplete data.

Disclaimer: This information is obtained from secondary sources and is included for informative purposes. It should be confirmed by a local advisor.