By judgment of 19 January 2021, the Administrative Court upheld an assessment for FY 2012-2017 issued by the tax authorities on the determination of the arm’s length income resulting from related party transactions.
The tax assessment resulted from disallowed deductions for
- Intra group services provided under a general administrative, legal and financial assistance contract of 22 October 2012
- Costs invoiced for the preparation of consolidated accounts
- Expenses related to “Technical services” for which no explanations had been provided
An appeal was filed by Central Hydroelectric de Bulgari EOOD with the Supreme Administrative Court in which the company stated that the decision of the Administrative Court was incorrect.
Judgement of the Supreme Administrative Court
The Supreme Administrative Court partially upheld the decision of the Administrative Court.
“The present Court of Cassation finds the judgment of the ACGC valid and admissible. The argument of the applicant that the same is inadmissible is unfounded in the part in which the RA was confirmed concerning the increase of its financial result for 2012 by an expense of BGN 188 924.92 for the reason “MECAMIDES technical services”, as well as by an expense of BGN 19 724.92 for a technical expertise under invoice No 13519637/12.04.2012 issued by EDF, France. By its appeal to the ACGC, CENTRAL HYDROELECTRIC DE BULGARI EOOD has appealed against the RA in the part confirmed by the decision of the adjudicating authority. Since the act was confirmed in its entirety in the part of the established corporate tax and interest liabilities for 2012 by the decision No 367/09.03.2020 of the Director of the EITD Directorate – Sofia, the first instance court correctly held that the appeal was also lodged against this part of the RA. The appellant has not explicitly specified the amount of the corporate tax liability and interest established by the RA as a result of the above-mentioned increases in the financial result for 2012 and has not stated that it does not contest the act in this part.
The arguments in the cassation appeal that the administrative court committed material breaches of the rules of court procedure, consisting, according to the appellant, in the absence of its own reasoning and failure to consider the material breaches of the administrative procedure rules in the audit proceedings alleged in the appeal, are also unfounded.“
“The decision of the ACCC contains sufficiently substantial and detailed grounds to ensure effective cassation review and to enable the party adversely affected by it to defend itself. The fact that the court considered the defendant’s legal conclusions to be correct does not mean that it did not state its own reasons.”Bulgaria Case SAC nr. 8331