The Bulgarian transfer pricing rules apply to transactions between related parties and are generally in line with the OECD Transfer Pricing Report. In certain cases the rules may be applied to unrelated party transactions as well.
The prices charged in related party transactions may be adjusted for tax purposes, if such transactions are made on terms that differ from the terms set in unrelated party transactions. It is not possible to have an Advance Pricing Agreement in Bulgaria.
Bulgaria’s National Revenue Agency (NRA) has now released for the first time guidelines on transfer pricing documentation that it expects to receive whenever making inquiries about transfer pricing during the course of tax audits and other reviews.
The new guidelines include the possibility to aggregate similar transactions. Though each related party transaction should nominally have its own paperwork, similar transactions can be aggregated under certain conditions. The guidelines apply the "arm’s length" principle, which stipulates that a transfer price should be the same as if the corporate entities involved were independent and not part of the same corporate structure.
Companies are required to keep their documentation updated and to retain it for at least five years after the expiry of the statute of limitations for the relevant tax year. The NRA may require certified translations of documents not in Bulgarian.
The new guidelines could be applied retrospectively to past periods with the burden of proof the responsibility on the taxpayer.
Finally the definition of a related party is different for tax and accounting purposes. A five per cent shareholding relationship is sufficient to be classified as a related party for Bulgarian tax purposes.