Transfer pricing regulations continue to evolve globally, with jurisdictions increasingly aligning with OECD standards while maintaining distinct local approaches to compliance and enforcement.
This article provides a comparative overview of transfer pricing frameworks in Bulgaria and Macao (China). While both jurisdictions have introduced structured documentation requirements and emphasize the arm’s length principle, their approaches differ significantly in terms of thresholds, administrative procedures, and audit focus areas. The comparison below highlights key similarities and differences relevant for businesses engaged in cross-border related-party transactions.
- Local file and Master file requirements in Bulgaria and China (Macao)
In Bulgaria, transfer pricing is a key tool for controlling related companies transactions and ensuring compliance with international tax standards. Bulgarian companies, part of a group, that fall within certain thresholds in terms of assets, revenues, personnel and amount of transactions, are required to prepare a Local file. The periodicity for drafting the documentation is on annual basis.
The Master file, prepared by the mother company, provides a global overview of the multinational group to which the taxpayer belongs. The documentation must be available in Bulgarian.
The Local file is prepared by 31 March of the year following the year to which it relates. The Master file is prepared for the ultimate parent enterprise of the multinational enterprise group no later than 12 months after the deadline for filing an annual financiail statements.
In contrast to Bulgaria’s entity-size driven approach, Macao applies a transaction-value based system, which shifts the focus from the scale of the entity to the materiality of specific intercompany transactions. Macao applies a tiered transfer pricing documentation regime based on the value of controlled transactions. Depending on the type of transaction, the financial thresholds may amount to MOP 200 million (approx. EUR 23 million) for tangible assets, MOP 100 million (approx. EUR 11.5 million) for financial transactions and intangible assets, and MOP 40 million (approx. EUR 4.6 million) for other transactions. Taxpayers may be required to prepare a Local File, a Master File, and submit a summary table of controlled transactions.
The Master File is required if total controlled transactions exceed certain thresholds or in case of cross-border transactions within a group that already prepares such documentation.
Documentation must generally be prepared within 9 months after the end of the fiscal year and submitted within 15 days upon request. Documents must be prepared in Chinese or Portuguese.
- Safe harbours and simplifications
In Bulgaria, companies are required to prepare Local and Master file documentation if they are qualified as large and only if transactions between connected parties exceed specified tresholds.
Certain taxpayers or transactions may be exempt from transfer pricing documentation requirements (tax-exempt entities, entities under alternative taxation, location transaction).
Outside these thresholds and exemptions Bulgaria does not provide explicitly defined simplified regimes for transfer pricing purposes (the so-called safe harbors) that allow taxpayers to reduce their obligations of preparation of Local and Master files.
Macao does not explicitly adopt the term “Safe harbour Provisions” in its legislation. In practice, it reduces the compliance burden on taxpayers with small-scale related-party transactions through the establishment of transaction value thresholds and simplified compliance procedures.
- Focus areas of tax audits and TP controversy
In Bulgaria, a new transfer pricing regulation No Н-3 of 7 November 2025 on the procedure and methods for applying the methods for determining arm’s length prices, which came into force on 1 January 2026, provides clear guidance on the focus area of control.
According to the provisions of the Regulation during the analysis of transfer pricing carried out in the course of a control (audit) procedure, the tax authority takes into account the conclusions of the taxable person regarding the compliance of the terms of the assessed controlled transaction with the arm’s length principle only insofar as those conclusions are presented in a timely manner and are substantiated in a way and by means that fully reflect among others:
- the economically significant characteristics of the controlled transaction;
- considerations in determining the time scope of the comparability analysis;
- considerations regarding whether two or more controlled transactions that are economically closely related shall be aggregated and evaluated as a whole where applying such an approach leads to the determination of a more reliable arm’s length outcome.
- considerations for selecting the most appropriate method for determining arm’s length prices and, depending on the method, the tested party and the financial indicator;
- considerations for selecting one or more comparable uncontrolled transactions, including with regard to adjustments;
- the financial data used in the comparability analysis and their sources.
When assessing the compliance of the terms of the controlled transaction with the arm’s length principle, the revenue authority may verify and clarify the facts and circumstances reflected in the evidence submitted by the taxable person, collect and analyse additional information other than that provided by the taxable person, not to take into account facts and circumstances, information and evidence for which were available to the taxable person, but were not presented, when the taxable person was obliged to present them.
Similarly to Bulgaria, Macao tax authorities place strong emphasis on the arm’s length principle and comparability analysis, although the level of procedural detail in Macao regulations appears more extensive.
The Macao Finance Bureau focuses on verifying compliance with the arm’s length principle. The Implementation Rules clarify the principles of controlled transaction analysis, the application rules for transfer pricing methods, and the specific requirements for comparable transactions, comparability analysis, and adjustments.
Although Bulgaria and Macao (China) both follow internationally recognised transfer pricing principles, their practical implementation reflects different regulatory priorities and administrative practices. Bulgaria places stronger emphasis on entity size and formal documentation thresholds, whereas Macao adopts a more transaction-based and procedural approach, complemented by mechanisms such as Advance Pricing Agreements (APA).
For multinational groups, a clear understanding of local requirements combined with consistent global transfer pricing policies remains key to mitigating risks and ensuring efficient tax governance across jurisdictions.
