Transfer Pricing and Comparability Adjustments: Bulgarian Administrative Court Rules in Favor of Yazaki Bulgaria Ltd

Dated January 5, 2023

In Yazaki Bulgaria Ltd v Bulgarian Tax Authorities, the Administrative Court reviewed the tax authority’s assessment of Yazaki Bulgaria’s transfer pricing practices for FY2014-2016. The dispute arose after the tax authorities claimed that the company’s profit was outside the arm's length range due to the exclusion of certain costs, issuing an additional income assessment.

The Court ruled in favor of Yazaki Bulgaria, annulling the assessment. It determined that adjustments made for comparability—specifically the exclusion of staff and training costs—brought the company’s net profit margins within the interquartile range, consistent with applicable regulations. Finding no evidence of tax evasion, the Court concluded that the company’s profits, after proper adjustments, aligned with market values, refuting the tax authority's position.

This ruling underscores the importance of accurate comparability adjustments in transfer pricing analyses and the adherence to established regulations.

Full Link to English Translation: tpcases.com/wp-content/uploads/Bulgaria-vs-YAZAKI-BULGARIA-LTD-SAC-No-22-2022-ENG.htm