By 30 June 2021 the obliged taxpayers must have available a local file for 2020
The first year for which a mandatory transfer pricing documentation has to be prepared is 2020, whereby pursuant to the amendments to the Tax and Social Security Procedure Code (TSSPC) from 8 December 2020, the deadline for preparing a local file for 2020 is 30 June 2021.
In case of an amending corporate income tax return for 2020, leading to changes in the information provided in the local file, the local file needs to be updated within a 14 days-term following the submission of the amending return but not later than 30 September 2021.
Which taxpayers are obliged to prepare a local file?
Under the provisions of the TSSPC, obliged to prepare а local file for 2020 are taxpayers which, as of 31 December 2019 exceed at least two of the following thresholds:
The TSSPC further outlines the scope of the controlled transactions which the obliged taxpayers should document in the local file. Aggregation rules are applicable, depending on the scope of the transactions and the conditions under which they are carried out.
Entities which are part of a multinational group of companies and have the obligation to prepare a local file must also have available a master file. The deadline for preparing a master file for 2020 is 30 June 2022.
Based on the Bulgarian tax legislation all taxpayers, even if not exceeding the above thresholds, have a general obligation to prove the arm’s length nature of their related party transactions, which is done by preparing a transfer pricing documentation.
The TSSPC imposes the following administrative sanctions for noncompliance with the requirements for preparation of local file andmaster file:
Specific considerations with regard to the transfer pricing analysis and KPMG assistance
In recent years transfer pricing has become a major focus of the Bulgarian tax administration, often leading to discussions with the taxpayers and additional tax assessments.
In addition, the Bulgarian legislation and the practice of the revenue authorities have imposed certain specifics in the preparation of the transfer pricing analyses, e.g. in relation to the related party threshold criterion, the hierarchy of the transfer pricing methods; the geographical screening, etc.
In view of this, the preparation of a transfer pricing documentation may be challenging for taxpayers, and in case transfer pricing analyses are prepared on a Group level, it is often necessary to perform an additional review and localization in accordance with the specific local rules and the practice of the Bulgarian revenue authorities.
KPMG in Bulgaria has experienced team in the field of transfer pricing and licenses for access to specialized databases allowing to conduct complex analyses of commercial and financial transactions, royalties, etc.
We would be glad to answer your questions and to offer assistance in the remaining short terms.
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