Transfer Pricing in Bulgaria — Rules, Documentation and VAT Aspects (2026)

What transfer pricing is and when the NRA applies it

Transfer pricing is a mechanism through which the tax authorities adjust the taxable result of companies that have concluded transactions on terms departing from market terms. At its core lies the arm’s length principle: transactions between related parties must be concluded on the same terms that independent parties would agree in a comparable situation.

In Bulgarian law, transfer pricing rests on two provisions of the Corporate Income Tax Act (CITA):

• Art. 15 CITA — the general rule for transactions between related parties. Where such parties carry out their commercial and financial relations on terms different from market terms, the tax financial result is determined as if the terms had been at arm’s length.
• Art. 16 CITA — the rule on tax avoidance. It is broader and may also cover transactions between parties that are not related, where the transaction is concluded with the aim of circumventing taxation.

In practice, the NRA applies transfer pricing during an audit in three steps: it identifies a transaction concluded, in the administration’s view, on non-market terms; it determines the market terms for that transaction; and it applies those terms to adjust the parties’ tax base. The transaction that gives rise to such an adjustment is called a controlled transaction.

Related parties and controlled transactions

Which parties are related is defined in § 1, item 3 of the supplementary provisions of the Tax and Social Security Procedure Code (TSSPC). The circle is wide and covers considerably more than the obvious case of a company and its sole owner. Related parties include, for example:

• parties one of which directly or indirectly participates in the management, control or capital of the other;
• parties whose activity is directly or indirectly controlled by a common third party;
• partners, as well as a company and its partners;
• parties linked by family ties — spouses, relatives in the direct line, in the collateral line and by marriage up to a certain degree;
• employer and employee.

A tip from our practice: if you are unsure whether a transaction is between related parties, in most cases the answer is yes. We therefore recommend checking relatedness at the start of any more significant intra-group transaction, rather than after a tax audit order has been received.

A controlled transaction is one between related parties (and, under Art. 16 CITA, also between unrelated parties) that affects the tax base and is concluded on terms different from market terms. It is precisely controlled transactions that are subject to documentation and to a possible adjustment.

Transfer pricing documentation

Since 2020, the TSSPC has contained a separate Chapter Eight “a”, which introduces the obligation to prepare transfer pricing documentation. Its purpose is to enable taxable persons to demonstrate that their intra-group transactions were concluded on market terms. The documentation consists of two parts:

• Local file — contains information about the company’s activity, the controlled transactions and the methods applied to determine market prices.
• Master file — prepared by entities that are part of a multinational group of enterprises. It describes the group, its organisational structure, its activity, the controlled transactions and the transfer pricing policy applied.

Who must prepare a local file

The obligation covers resident legal entities, foreign legal entities with a permanent establishment in Bulgaria, and sole traders carrying out controlled transactions. However, it does not apply where the person:

• is exempt from corporate tax;
• is subject to an alternative tax under the CITA;
• does not exceed the accounting thresholds for a large enterprise (by balance-sheet value of assets, net sales revenue and average headcount);
• carries out controlled transactions solely within the country.

Materiality thresholds

Even an obligated person prepares a local file only for those controlled transactions whose annual value exceeds certain thresholds. The thresholds are calculated separately for each controlled transaction:

Where a person carries out two or more comparable controlled transactions with one or more related parties, the thresholds are calculated for the aggregate value of those transactions.

Deadlines

The local file is prepared by 31 March of the year following the year to which it relates — a deadline aligned with that for filing the annual tax return under Art. 92 CITA. The master file must be available when the revenue authorities request it. It is important to stress that the file is not filed automatically — it is presented upon request by the NRA in the course of an audit or inspection.

Methods for determining market prices

The TSSPC recognises five methods for determining whether a controlled transaction complies with the arm’s length principle. The choice of method depends on the nature of the transaction and the availability of comparable data.

The choice and justification of the method are among the most important elements of the file — this is precisely where disputes with the NRA are most frequent, since the administration often has access to different comparable data than the company does.

New for 2026: VAT and transfer pricing — the ruling in the Stellantis case

Until recently it remained an open question whether transfer pricing adjustments also produce VAT consequences. On 13 May 2026 the Court of Justice of the European Union (CJEU) handed down its judgment in the Stellantis Portugal case (C-603/24), which brings important clarity.

What the dispute was about

Stellantis Portugal — a national distribution company within an international automotive group — purchased vehicles from manufacturers in the group and resold them to independent dealers. Under an intra-group agreement, the transfer prices of the vehicles were adjusted at the end of the period so that the distributor achieved a predetermined profit margin. The tax administration took the view that those adjustments constituted consideration for a service and were subject to VAT.

What the Court ruled

The CJEU held that a transfer pricing adjustment made in order to achieve a predetermined profit margin does not automatically constitute consideration for a separate supply of services within the meaning of the VAT Directive. For a taxable supply to exist, there must be a direct link between an identifiable service and consideration, based on reciprocal legal obligations. In the case at hand, the Court found no such direct link — the connection between the activities carried out by the distributor and the adjustments was at most indirect.

For Bulgarian groups the practical takeaway is clear: when drafting intra-group agreements, both corporate tax and VAT aspects must be taken into account simultaneously. For details on the VAT regime, see our VAT guide for Bulgaria.

Penalties for missing or inaccurate documentation

Failure to prepare transfer pricing documentation — or the submission of incomplete data — is backed by financial penalties:

A local file is also deemed not to have been prepared where it is not presented to the revenue authority within the period set by it. In practice this means that the formal existence of a file is not enough — it must be capable of being presented promptly and in full.

Practical recommendations

To manage the risk of adjustments and penalties, we recommend the following approach:

1. Make an inventory of intra-group transactions — identify all transactions with related parties and assess which exceed the documentation thresholds.
2. Assess relatedness early — check whether the parties are related under § 1, item 3 TSSPC before concluding the more significant transactions.
3. Prepare the documentation on time — the local file must be ready by 31 March of the following year, together with the annual tax return.
4. Justify the choice of method — document why the chosen method is the most appropriate and what comparable data you used.
5. Align contracts with the VAT regime — for intra-group agreements with an adjustment mechanism, also account for the possible VAT consequences in light of the ruling in the Stellantis case.
6. Keep comparable data up to date — market conditions change, so comparability analyses should be reviewed periodically.

Frequently asked questions