Amendments of the Tax and Social Security Procedure Code (TSSP) related to the automatic exchange of country by country reports

The Bulgarian Parliament adopted the draft amendments to the TSSPC regarding the automatic exchange of country by country reports (CbC reports) of multinational groups of undertakings (MGU), operating within several EU member states. The amendments are effective as of 04.08.2017. From 2017 the Bulgarian National Revenue Agency (NRA) will exchange information about MGU with the other tax administrations in the EU.

One group of data will concern transfer pricing agreements and binding opinions. The changes of the TSSPC are implementing the regulations of Council Directive (EU) 2015/2376 of 8 December 2015. In Bulgaria this legal measure would affect mainly foreign groups operating through their local subsidiaries or production units in the country, provided that the foreign parent undertaking or other foreign head office of the group has concluded a transfer pricing agreement with foreign tax authorities and that this agreement influences the price levels of the group in Bulgaria.

Another change in this direction is the introduction of automatic exchange of CbC reports of multinational groups of undertakings, operating within several EU-member states, between tax administrations in the EU. This requirement is introduced by Council Directive (EU) 2016/881 of 25 May 2016. Only MGU which, according to their consolidated financial statements, have total income exceeding EUR 750 000 000 (BGN 1,466,872,500) for the tax year preceding the reporting tax year, are obliged to submit such information.
The first country report, and namely for the tax year 2016, has to be submitted by 31.12.2017. The CbC report shall be provided to the Executive Director of NRA by an ultimate parent company of the respective MGU, which is a resident of the Republic of Bulgaria for tax purposes. This ultimate parent company is a composite enterprise which meets the following criteria:
• Has an obligation under the accounting law to prepare consolidated financial statements for the revenues of the group;
• There is no other enterprise of the respective MGA, which directly or indirectly exercises control in the aforesaid composite enterprise.
In certain cases, when the ultimate parent company is not a tax resident person in Bulgaria, the CbC report has to be submitted by a substitute parent company or a composite enterprise of the group. If the consolidated income of the MGU exceeds EUR 750 000 000 and the CbC report will be submitted by the ultimate parent company, which is a resident of an EU-member state for tax purposes, the respective composite enterprise, which is a tax resident in Bulgaria, is under the obligation (according to art. 143y of the TSSPC) to notify the Executive Director of the NRA of the reporting undertaking and the respective member state, respectively the jurisdiction of this undertaking as a resident for tax purposes. The notification for the financial year 2016 has to be submitted by 31.12.2017.
The following administrative sanctions are stipulated by the TSSPC:
• In case of failure to submit the CbC report within the time limit prescribed by law – a penalty in the amount of BGN 100 000 to BGN 200 000.
• In case of not stating or stating incorrect or incomplete data or circumstances in the CbC report – a penalty in the amount of BGN 50 000 to 150 000, and in case of repeated violation – BGN 100 000 to 250 000.
• In case of non-fulfillment of the obligation for notification under art. 143y of the TSSPC – penalty in the amount of BGN 50 000 150 000, and in case of repeated violation – BGN 100 000 to 200 000.

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