Invoicing between your Bulgarian company and your company abroad: related-party pricing rules

Every invoice between your Bulgarian EOOD and a company you own abroad must carry a price that independent businesses would agree on. If the price shifts profit out of Bulgaria, the tax authority (NRA) recalculates the Bulgarian tax base at market value under Art. 15 of the Corporate Income Tax Act. Most small EOODs do not have to prepare a formal transfer pricing file — but they still need evidence that their prices are arm’s length.

Current as of October 2026. Since 1 January 2026 market prices are tested under Ordinance No. N-3 of 2025, which replaced the 2006 Ordinance N-9 and aligned Bulgarian rules with the 2022 OECD Transfer Pricing Guidelines. Bulgaria uses the euro (1 € = 1.95583 BGN). This is general information, not tax advice for a specific group.

Who is a related party?

Bulgarian law uses a broad list in § 1(3) of the Tax and Social Security Procedure Code. For a foreign-owned EOOD the relevant ones are almost always:

• the company and any person holding more than 5% of its voting shares — so you personally, and your foreign holding company;
• companies under common control — your Bulgarian EOOD and your operating company at home;
• persons where one takes part in the management of the other — for example, you are managing director of both;
• employer and employee, and spouses and close relatives.

For the transfer pricing documentation rules the ownership threshold is 25% instead of 5%, but the pricing rule itself applies from 5%.

The three set-ups we see most often

1. The Bulgarian EOOD works for your company abroad

This is the typical “Bulgarian development centre” model. The EOOD employs the team and invoices the foreign company. The usual method is cost plus: the EOOD’s full costs plus a markup that reflects what an independent provider of similar services would earn.

An illustrative example. The EOOD’s total costs for the year are €180,000 (salaries, social security, office, software). It invoices the foreign company €185,000 — a 2.8% markup — and pays €500 corporate tax. If a comparison with independent providers of similar services supports, say, a 10% markup, the NRA can set the revenue at €198,000. The extra €13,000 is taxed at 10%: €1,300 of additional corporate tax, plus late-payment interest. The markup percentage here is only an illustration — the right figure depends on the functions, risks and comparables of your case.

For VAT, services to a business customer established in another country are supplied where the customer is established (Art. 21(2) VAT Act), so the invoice is issued without Bulgarian VAT under the reverse-charge mechanism.

2. Your foreign company charges the EOOD a fee

Management fees, IT charges or brand royalties from the parent are where the NRA looks hardest, because they reduce Bulgarian profit. Ordinance N-3 sets a clear test: the service must give the Bulgarian company an actual or reasonably expected economic benefit. Charges for things the EOOD did not need, duplicated services, or costs of the shareholder’s own oversight fail that test.

Three consequences stack if the fee is too high or not substantiated:

1. the excess is not deductible for the EOOD (Art. 26(11) and § 1(5) of the Corporate Income Tax Act);
2. the excess paid to a shareholder is a hidden profit distribution, treated as a dividend and subject to 5% withholding tax — and the exemption for dividends to EU and EEA parent companies expressly does not apply to hidden distributions (Art. 194(3));
3. if it was not disclosed in the annual return, a penalty of 20% of the amount applies (Art. 267).

Separately, management and control fees, technical services and royalties paid to a non-resident are Bulgarian-source income (Art. 12(5)), normally subject to 10% withholding tax unless a double tax treaty reduces it. How that tax is declared and relieved is explained in our guide to withholding tax on payments abroad.

3. Loans between the companies

A loan from you or your holding company to the EOOD should carry market interest if interest is charged at all, with a written agreement, term and repayment schedule. Interest to a non-resident lender is also subject to 10% withholding tax, and if the loan has at least three of four equity-like features (it exceeds the EOOD’s equity, has no fixed term, depends on profits, or ranks behind other creditors or dividends) the interest itself is treated as a hidden profit distribution. The choice between a loan and a capital increase is covered in putting money into your Bulgarian company.

Do you need a transfer pricing file?

Articles 71a–71e of the Tax and Social Security Procedure Code require a local file only from companies that exceed at least two of three thresholds at 31 December of the previous year:

Even above those thresholds, a file is needed only for controlled transactions over BGN 400,000 (≈ €204,517) for goods, BGN 200,000 (≈ €102,258) for other transactions, and for loans over BGN 1,000,000 (≈ €511,292) or with interest over BGN 50,000 (≈ €25,565). The file is due by 30 June of the following year; failing to produce it on request can cost up to 0.5% of the transactions’ value.

The practical point for a small EOOD: being exempt from the file does not mean exempt from the rule. In an audit you will still be asked why the price is what it is.

What to keep for each related-party arrangement

• a signed intercompany agreement describing the services, pricing method and invoicing cycle;
• the cost base and markup calculation for each year, reviewed annually;
• evidence the services were actually delivered — reports, tickets, timesheets, correspondence;
• quotes or public price lists showing what independent parties charge, where they exist;
• board or owner decisions for loans and their repayment.

Related-party pricing is also the main thing that decides how much profit stays in Bulgaria to be paid out later — the options for getting it out are compared in extracting profits as a non-resident owner. If you want the intercompany invoicing and year-end review handled for you, see our accounting services.

Would rather not deal with this yourself? See how we handle it and what it costs.