Bulgaria

Market overview

Bulgarian transfer pricing requirements follow the OECD in general, but the country has yet to apply the hierarchy of methods abolishment, which was included in the OECD's 2010 rules. Rules at present also do not specifically address business restructuring.

"The market has not changed that much in the past year," said partner Valentine Savov, from Savov & Partners. "We see more instances of tax authorities challenging transfer pricing cases. There are more external experts providing their opinion on pricing, including some very high-value cases."

Within the Bulgarian TP market, like in most jurisdictions covered in World TP, BEPS actions and implementation are the 'hot topics'. BEPS will be turned into concrete legislation within the coming year, and Bulgaria signed the multilateral convention (MLI) in June 2017.

As a consequence, tax officials have started to develop their awareness of TP transactions when carrying out audits and checks.

The country has become an attractive location for outsourcing businesses across diverse sectors, predominantly within the areas of IT and communications.

"I think full compliance will continue as a trend," said Savov. "The world is getting smaller, tax authorities are gaining more information. Transfer pricing and compliance are the future of our professional services."

As a member state of the European Union, Bulgaria is obliged to implement country-by-country reporting (CbCR) into domestic legislation from 2017. This will affect companies with revenue of €750 million ($884 million) or more. The first year report will be prepared for the financial year of 2016 and must be submitted by December 31 2017 to the National Revenue Agency.

The aim of CbCR is to discourage multinationals from exploiting aspects of tax systems or differences between alternative systems, minimising tax liabilities. Legislation to implement public CbCR is also underway in the EU. Should reports of how much tax a company is paying in each jurisdiction in which it operates become public, as the EU proposes, companies will be subject to greater public scrutiny on their taxes than ever before.


Tax authorities

Ministry of Finance
102, G.S. Rakovski str
Sofia, 1040
Tel: +359 2 9859 2027
Email: feedback@minfin.bg
Website: www.minfin.bg

National Revenue Agency
52 Dondukov Blvd
Sofia, 1000
Tel: +359/2 9859 6801
Website: www.nra.bg


Tax rates at a glance

(As of July 2017)

Corporate income tax rate 10%
Capital gains tax rate 10%
Branch tax rate 10%
 
Withholding tax
Dividends 0% to 5% (a)
Interest 10% (b)
Royalties 10% (b)
 
Branch remittance tax
 
n.a.
 
Net operating losses (years)
Carryback 0
Carryforwards 5

  1. Dividends paid to companies and other entities that are residents of EEA country are exempt from withholding tax.
  2. The rate on interest/royalties paid to an EU related party is 5% in certain cases. As from January 1 2015, Bulgaria must fully implement the EU interest and royalties directive and exempt interest and royalties paid to an associated company of another member state or to a PE of an associated company situated in another member state.

Source: Deloitte