19 November 2018 Bulgaria publishes draft mandatory transfer pricing documentation bill for consultation On 5 November 2018, Bulgaria published for consultation a bill proposing new mandatory transfer pricing documentation requirements and a penalty for non-compliance of up to 1% of the value of the undocumented transactions. The proposed changes are in line with the requirements of the OECD's1 BEPS2 Action 13. A proposed change to the Tax Procedures Code requires preparation of ? local transfer pricing (TP) file. The local file needs to be available upon request by 31 March of the year following the year to which it relates. Members of multinational enterprises should also be prepared to present the master file of the group upon request. The master file needs to be ready within 12 months from the end of the fiscal year of the group's ultimate parent entity. (i) Has annual net revenue exceeding BGN16m or assets with a balance sheet value exceeding BGN8m, and (ii) Is engaged in related-party transactions, exceeding certain annual thresholds (e.g., BGN400k for goods and BGN200k for intragroup services/intangibles). For loans, the obligation arises when the loan principal granted or received exceeds BGN2m or a total interest income/expense above BGN100k has been accrued. While the master file and local file need to be updated each year, the bill proposes that applicable benchmarks must be updated every three years. It is expected that TP documentation will be requested during tax reviews or audits. The draft bill proposes a penalty for failure to provide TP documentation ranging from 0.5 to 1% of the volume of the related-party transactions that should have been documented. Failure to present the TP file may also lead to other negative tax consequences, including that the penalties proposed may end in significant liability. The proposed changes aim to bring Bulgaria's TP documentation requirements in line with countries that follow the recommendations of the OECD and the European Union Joint Transfer Pricing Forum. The pubic consultation will last until 5 December 2018. The bill will subsequently proceed through the legislative process and is highly likely to enter into force as of 1 January 2019.
Document ID: 2018-2322 |
