Transfer Pricing in Bulgaria: Documentation and Compliance 

Transfer pricing regulations play a central role for anyone wishing to open a company in Bulgaria engaged in related party transactions. The framework is built on the arm’s length principle, which requires that all intra-group dealings — such as sales of goods, service agreements, royalties, loans, or cost-sharing arrangements — be valued as if they occurred between independent enterprises.

Bulgarian transfer pricing rules are established by the Corporate Income Tax Act, complemented by the Tax and Social Security Procedure Code and detailed provisions in the Transfer Pricing Ordinance. These laws define both the obligation to maintain supporting documentation and the acceptable methods for determining market-based prices.

The system operates on the principle of self-assessment: companies are responsible for evaluating their intra-group transactions, ensuring that they comply with the arm’s length standard, and preparing adequate documentation to support their transfer pricing policies.

Transfer Pricing in Bulgaria: Documentation requirements and compliance obligations

Companies that meet specific financial thresholds are required to prepare a Local File and a Master File in line with international best practices. The obligation applies if, by the end of the preceding year, the entity exceeds at least two of the following criteria: total assets of BGN 38 million, net sales of BGN 76 million, or an average workforce of 250 employees.

The Local File must cover all material related-party transactions, including goods, services, financial transactions, and intellectual property transfers. The law also defines minimum transaction thresholds above which documentation becomes mandatory, depending on the nature and value of the activity.

Transfer pricing documentation is not submitted automatically with the annual tax return but must be readily available for inspection. Upon request by the tax authorities, it must be provided within fourteen days. Maintaining complete and up-to-date records is therefore essential to demonstrate compliance and reduce exposure to penalties.

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Methods and comparability analysis

The Bulgarian legislation recognizes the internationally accepted methods for determining transfer prices: the Comparable Uncontrolled Price (CUP) method, Resale Price Method, Cost-Plus Method, Transactional Net Margin Method (TNMM), and Profit Split Method. The selection of the most appropriate method depends on the functions performed, the risks assumed, and the economic characteristics of the transaction.

When reliable comparable data is available, the CUP method is generally preferred. However, in practice, profit-based approaches such as TNMM are often used, especially when detailed market comparables are difficult to obtain.

The comparability analysis remains one of the most critical steps in transfer pricing documentation. It involves identifying similar independent transactions, assessing financial indicators, and ensuring consistency between related-party terms and market conditions. Accurate benchmarking studies are therefore a key element of compliance.

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Penalties, risks and best practices

Because transfer pricing operates under a self-assessment regime, non-compliance carries significant risks. The absence of documentation or the use of non-arm’s-length prices can lead to tax adjustments, reassessments of profits, and monetary penalties. Fines may also apply for incomplete, inaccurate, or missing Local or Master Files upon request.

Beyond financial exposure, inadequate transfer pricing policies can create reputational and operational risks, especially for multinational groups operating across multiple jurisdictions.

To mitigate these risks, businesses should adopt a consistent and transparent transfer pricing strategy, supported by regular updates, reliable comparability analyses, and clear economic reasoning for each transaction. Proper documentation not only demonstrates compliance but also provides a defensible position in case of audit.

For professional support in preparing compliant transfer pricing documentation, managing audits, and optimizing intra-group pricing policies, contact Accountancy Bulgaria, bookkeeping in Bulgaria.