Page 19 - Central and Eastern European Transfer Pricing Review

Bulgaria | 19

signifcant increase in the number and What level of interaction do tax May a taxpayer go to competent
materiality of transfer pricing issues authorities have with customs authority before paying tax?
being identifed by tax authorities. authorities? There are no formal rules. A taxpayer
Moderate, but currently increasing. may submit a request for guidance from
What defenses are available with the tax authorities on specifc issues.
respect to penalties? Are management fees deductible? However, receiving an answer from
The established way of substantiating Yes, subject to proper documentation the tax authorities does not guarantee
related party transactions is by the and beneft for the recipient. consistent treatment of the issues in
preparation of a local transfer pricing fle future.
covering the Bulgarian market. Are management fees subject to
withholding?
In a limited number of cases, transfer Advance pricing
prices may be defended by building up Yes, subject to tax treaty provisions. arrangements
arguments based on pricing policies,
cost allocation methodologies, Are year-end transfer pricing What APA options are available,
market analyses etc. However, such adjustments permitted? if any?
an approach highly depends on the Yes, subject to substantiation with No APAs or advance rulings of any kind.
specifc circumstances of the case and documents, budgets and a transfer
its success may not be guaranteed. pricing study. Is there a fling fee for APAs?
Not applicable.
What trends are being observed Other unique attributes?
currently? None. Does the tax authority publish APA
As noted, there is an increasing data either in the form of an annual
interest in transfer pricing issues Other recent report or through the disclosure of
by both taxpayers and the tax developments data in public forums?
administration. It has been noted Not applicable.
in transactions involving goods Tax authorities have recently issued
that the authorities generally seek rulings with guidance on the transfer Please provide some information
price adjustments but in services pricing aspects of: on how successful the APA program
transactions they tend to focus on cash pooling schemes is and whether there are any known
the actual provision of the services. diffculties?
selling goods at prices under market Not applicable.
Special considerations levels under certain conditions.

Are secret comparables used by tax Tax treaty/double tax Language
authorities? In which language or languages can
Tax authorities have indicated in informal resolution documentation be fled?
discussions that they may use secret What is the extent of the double Based on the TSSPC, all documentation
comparables. However, the feasibility of tax treaty network? must be submitted to the tax authorities
this approach is not yet certain. Extensive. About 70 tax treaties are in Bulgarian. If submitted in another
in force. language, the authorities are allowed
Is there a preference, or to translate it at the expense of the
requirement, by the tax authorities If extensive, is the competent taxpayer.
for local comparables in a authority effective in obtaining
benchmarking set? double tax relief?
Yes, the authorities require a With respect to the usual application
benchmarking study to start its search of tax treaties frequently. KPMG in Bulgaria
from the Bulgarian market.
With respect to MAPs only one MAP Kalin Hadjidimov
Do tax authorities have has been initiated so far and is not yet Tel: +359 2 969 77 00
requirements or preferences complete, noting that it was initiated by Email: khadjidimov@kpmg.com
regarding databases for a foreign tax administration.
comparables?
When may a taxpayer submit an As email addresses and phone numbers
No. However, Amadeus is generally adjustment to competent authority? change frequently, please email us at
accepted. transferpricing@kpmg.com if you are unable
No experience. to contact us via the information noted above.

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