Transfer pricing (TP) is increasingly becoming a hot topic for Bulgarian tax residents.
In an era of continuous globalisation where intercompany transactions have become part of the day-to-day business of all multinationals, the Bulgarian tax residents are facing an increasing scrutiny of the Bulgarian tax authorities on TP issues, local specifics of the regulatory framework and significant penalties for non-compliance.
With TP seen by the Bulgarian tax authorities as a relatively soft target, TP-related tax assessments have become more frequent and more material, the expertise of the tax administration is growing and the exchange of information with the foreign tax authorities is increasing.
At the same time, the Bulgarian regulatory framework and the practice of the Bulgarian tax authorities are marked by certain specifics and the master files might not always be sufficient to meet the local requirements.
Total tax risk related to cross border intercompany transactions may reach up to 57 percent of the amount of the transaction.
All of this has made TP a critical issue for all Bulgarian tax residents. Apart from that, more and more companies recognise that effective transfer pricing policies may go far beyond simply enabling them to comply with local rules. Addressing TP issues before transactions actually occur may turn transfer pricing policies into strategic tools for supply chain decisions, as well as for global tax planning.
