May 2019 / Bulgaria

On 10 May 2019, changes to the Local Taxes and Fees Act were published in the State Gazette. The amendments are related to the recent decision of the Constitutional Court on the real estate tax rate for residential property in resorts and provides details on refunding/offsetting overpaid amounts of tax. The changes are effective as of 20 April 2019.

The Bulgarian Ministry of Finance initiated a public consultation on a bill for Amendment of the Tax and Social Security Procedures Code proposing obligatory transfer pricing documentation. The bill will implement obligatory transfer pricing documentation to justify the application of an arm’s length principle to related parties transactions. The documentation will be obligatory for those entities fulfilling the balance sheet criteria and the "materiality" of transactions they have undertaken. Entities concerned Entities involved in related parties transactions that satisfy the specified financial limits as at 31 December of a given year, will need to prepare specific transfer pricing documentation for:

• Balance sheet value assets exceeding BGN 8 million (EUR 4 million); and
• Net sales revenue exceeding BGN 16 million (EUR 8 million).

Transactions to be covered The following transactions exceeding the respective annual limits will need to be covered by transfer pricing documentation:

• Sales of goods exceeding BGN 400,000;
• Provision of services exceeding BGN 200,000;
• Transactions with intangible assets exceeding BGN 200,000;
• Transactions with financial assets exceeding BGN 200,000; and
• Loan transactions exceeding BGN 2 million or interest payments exceeding BGN 100,000.

Documentation Concerned entities will need to prepare a local file and a master file when part of a multinational group of companies. The local file should be prepared by 31 March of the following year while the respective master file should be made available within 12 months after the deadline for preparation of the local file. Procedure and expected application Currently, the bill is undergoing public consultation, but it is expected that the amendments will come into force for 2019 and the first master files will need be prepared by 31 March 2020.