Page 18 - Central and Eastern European Transfer Pricing Review

18 | CEE Transfer Pricing Review

Transfer pricing To satisfy the requirement and/or If there is no priority of methods,
disclosure overview obtain the benefts, are there any is there a best method rule?
requirements on when the transfer Not applicable.
Are disclosures related to transfer pricing study must be prepared and
pricing required to be prepared or submitted?
submitted to the revenue authority The transfer pricing Manual recommends Transfer pricing audit
on an annual basis (e.g. with the preparing transfer pricing documentation and penalties
tax return)? for a given fscal year by the date of When the tax authority requests
No. submitting the corporate tax return. a taxpayer s transfer pricing
However, there is no statutory deadline documentation, how long does
What types of transfer pricing for preparation of documentation. the taxpayer have to submit its
information must be disclosed? documentation?
Not applicable. When a transfer pricing study is
prepared, should its content follow Usually, the tax authorities submit a
What are the consequences Chapter V of the OECD Guidelines? request for provision of documents and
of failure to prepare or submit Generally yes, although Bulgaria is the taxpayer has 14 or 15 days to comply.
disclosures? not an OECD member and the OECD However, this deadline may be extended
or the tax audit procedure may be
Not applicable. Guidelines are not mandatory for suspended for up to 3 months.
taxpayers and the tax authorities.
Transfer pricing study However, the tax authorities usually If the taxpayer does not submit the
accept the principles outlined in the
documentation within the required
overview OECD Guidelines. deadline, the tax authorities may assume
Is preparation of a transfer pricing The transfer pricing Manual of the that no documentation is available and
study required i.e. can the tax authorities also refers to the may perform a transfer pricing analysis of
taxpayer be penalized for mere EU Transfer Pricing Code of Conduct their own.
failure to prepare a study? as a source for the content of transfer If an adjustment is proposed by the
No. However, general tax consequences pricing documentation. tax authority, are dispute resolution
may follow from the lack of transfer options available to the taxpayer
pricing documentation. Does the tax authority require an outside of competent authority?
advisor/tax practitioner to have
Other than complying with a specifc designation in order The decision of the tax authorities may
requirement per the previous to prepare or submit a transfer be appealed at the administrative level
question, describe the benefts, if pricing study? (before a regional appeal directorate) and
any, of preparing and maintaining No. subsequently at the judiciary level (before
a transfer pricing study? a court).
By preparing transfer pricing Transfer pricing methods If an adjustment is sustained, can
documentation, taxpayers may penalties be assessed? If so, what
mitigate the risk of additional tax and Are transfer pricing methods rates are applied and under what
administrative penalty liabilities, which outlined in Chapter II of the OECD conditions?
in the worst case scenario can amount Guidelines acceptable? An administrative penalty of 20 percent
to 57 percent of the value of the Yes. may be applied where an expense
transaction. charged by a related party is deemed
Is there a priority among the
If taxpayers provide transfer pricing acceptable methods? to be hidden distribution of profts.
documentation, the tax authorities tend There is a priority among the methods
to review its conclusions and accept in the following order: To what extent are transfer pricing
them if no inconsistencies are found. If penalties enforced?
no documentation is available or if major CUP method The extent of enforcement cannot be
inconsistencies are found, the authorities monitored in detail as tax proceedings
are allowed to assess the transfer prices resale price and cost plus methods are not public until the court appeal
under their own analysis. transactional net margin and proft phase. Nevertheless, in recent years
split methods. KPMG in Bulgaria have observed a

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