A proposal for amendment and supplementation of the Tax and Social Security Procedure Code with rules regulating transfer pricing documentation is open for public discussion from Nov. 5 to Dec. 5, 2018. The first year for which transfer pricing documentation shall be prepared is 2019.

Pursuant to the suggested amendments, the 2019 local files should be prepared no later than March 31, 2020. Bulgarian obliged parties that are part of multinational enterprise group should be provided with master file of the ultimate parent company for its 2019 financial year no later than March 31, 2021.

The proposal reads that the local legal entities, sole traders and Bulgarian permanent establishments of foreign companies are obliged to prepare and maintain local file on an annual basis if certain conditions are met. If part of multinational group, the respective obliged party shall also be under the obligation to have available master file prepared by the ultimate parent company or another subsidiary group. Both files should have specific content as envisaged in the proposed amendments. 

The most common group of obliged parties are those having balance sheet value of assets exceeding BGN 8,000,000 and net income from sales exceeding BGN 16,000,000. Even if such thresholds are met the obliged party shall prepare a local file for the respective category of transactions only if the following thresholds are exceeded:

• BGN 400,000 for sale of goods (VAT and excise duty, if applicable exempted from calculation);• BGN 200,000 for provision of services (VAT if applicable, exempted from calculation);• BGN 200,000 for IP transactions (VAT if applicable, exempted from calculation);• BGN 200,000 for transactions with financial assets (VAT if applicable, exempted from calculation);• BGN 2,000,000 of total loans received or provided;• BGN 100,000 of total accrued interest or other loan related incomes or expenses.

The above thresholds refer to the total value of transactions with all related parties. Upon calculation of the thresholds under the above categories only transactions of one and the same type shall be taken into account, either transactions in which the entity is recipient of remuneration, or payer.