Judgment summary
The Supreme Administrative Court, Eighth Division, dismissed a cassation appeal by 'КАМЕНИЦА' АД against a judgment of the Administrative Court – Plovdiv (Решение № 2966/13.03.2026 г., adm. d. № 50/2025 г.), which had rejected the company's challenge to a revision act imposing additional corporate tax for 2014, 2015 and 2016.
The dispute concerned the price paid by Kamenitza AD in 2014 to acquire the 'Каменица' trademark from a related party, StarBev Netherlands B.V., and whether that price corresponded to market conditions under chl. 15 ЗКПО (Corporate Income Tax Act) and Naredba № Н-9/2006.
The court confirmed that the revenue authorities correctly used a 2009 comparable transaction between independent parties and a functional analysis to conclude that the agreed price did not reflect arm's length terms, and upheld the first-instance decision in full.
Background
The revision act, РА № Р-29002919008230-091-001/30.12.2021 г., issued by revenue officers of ТД ГДО at ЦУ на НАП, established corporate tax liabilities for 2014, 2015 and 2016 totalling 460 154,84 лв, plus interest for late payment totalling 253 403,79 лв. It was confirmed by Решение № 1009/27.06.2022 г. of the director of Дирекция ОДОП София.
The revision was ordered by ЗВР № Р-29002919008230-020-001/13.12.2019 г. The revenue authorities examined structural changes within the corporate groups of CVC Capital Partners and Molson Coors Brewing Company in 2009 and 2012, relevant to transfers of rights in the 'Каменица' trademark.
In 2014, Kamenitza AD acquired ownership of the trademark under a Purchase Agreement of 10.09.2014 г. with StarBev Netherlands B.V., at a price of 40 100 000 euro (BGN equivalent 78 428 783 лв), payable in 15 annual instalments. The company had determined the present value of the trademark at 56 153 thousand лв, using a discount factor of 4,5% and future interest expenses of 22 276 thousand лв.
Through Ревизионен доклад № Р-29002919008230-092-001/11.11.2021 г., the revenue authorities proposed increases to the company's accounting financial result under chl. 15 ЗКПО of 582 610,89 лв for 2014, 1 961 068,63 лв for 2015 and 2 057 868,88 лв for 2016.
This was the second round of litigation: an earlier decision, Решение № 670/10.04.2023 г. по adm. d. № 2060/2022 г. of АС – Пловдив, was partially set aside by Решение 21/06.01.2025 г. по adm. d. № 6818/2023 г. of ВАС, with the case remanded for fresh consideration by a different panel.
Core dispute
The central question was whether the price of 40 100 000 euro agreed in the 2014 Purchase Agreement between related parties, Kamenitza AD and StarBev Netherlands B.V., corresponded to conditions that independent parties would have agreed in ordinary commercial or financial relations, as required under chl. 15 ЗКПО and Naredba № Н-9 от 14 август 2006 г.
Kamenitza AD argued that the lower court failed to conduct its own factual and legal analysis, and that it was impermissible to use a 2012 valuation (the 'Оценка на някои идентифицирани материални и нематериални активи към 15.06.2012 г.', dated 09.08.2013 г.) or the OECD Guidelines in their 2017 edition when assessing a transaction concluded in 2014, when the 2010 edition of the OECD Guidelines was the relevant framework.
The company also contended that the DEMPE functions concept, which post-dates the transaction, had been improperly applied, and that reliance should instead have been placed on income-based valuation approaches such as МСО 210 'Нематериални активи'.
Court findings
The court held that the trademark transaction was between related parties and therefore required assessment against the arm's length principle. It found that the 2009 acquisition of the intangible asset by the Dutch company, concluded between independent parties, was properly used by the revenue administration as a comparable transaction for determining the market price under the 2014 Agreement.
The court noted that the 2012 valuation had set the trademark's value at 25,5 million euro, whereas the 2014 transaction valued it at 40,1 million euro, a difference attributable to differing economic assumptions on projected sales, royalty rate and discount rate. A comparative analysis of the methodology applied by Ernst & Young LLP revealed an average annual rate of return of approximately 10,32%, several times higher than the risk-free rate of 2,576%.
The court considered the economic substance of the transaction and the functions performed, assets owned and risks assumed by the parties, as well as their role in creating and maintaining the value of the intangible asset, to be relevant. It found that the 2012 valuation contained no analysis of the functions performed by the parties or their contribution to the asset's value, and that no evidence showed the legal owner of the trademark had carried out development activities on the asset in the relevant period.
The court concluded that the price agreed between the related parties did not correspond to conditions that independent parties would have agreed, and that the effect was to shift economic profit within the group. This conclusion was held consistent with the principles in the OECD Transfer Pricing Guidelines applicable at the time of the transaction, the 2010 edition. The 2017 edition of the Guidelines was found to have been used only as an interpretive tool assisting application of the criterion in Naredba Н-9/2006, not as a binding norm.
The court further held that although the DEMPE functions concept was formally introduced in October 2015 through the final BEPS Actions 8–10 report, this did not mean that, before that date, analysis of legal ownership of an intangible asset and the allocation of functions, assets and risks under the arm's length principle was inapplicable, referring to Chapter VI, §6.13, and Chapter I, D.1.2.2, §§1.42-1.49, of the 2010 edition of the OECD Guidelines.
Expert findings before the court showed that a 'relief-from-royalty' method had been used to value the intangible asset, but that this did not establish the market character of the agreed price given the material discrepancy between the parties' economic contribution and the profit realised from the transaction.
Outcome
The Supreme Administrative Court upheld (остави в сила) Решение № 2966/13.03.2026 г. of the Administrative Court – Plovdiv, dismissing the cassation appeal of 'КАМЕНИЦА' АД.
The court ordered 'КАМЕНИЦА' АД to pay the National Revenue Agency legal fees (юрисконсултско възнаграждение) for the cassation proceedings in the amount of 200 (двеста) euro.
The decision is final (окончателно).
Tp method highlighted
The revenue authorities and the courts assessed the arm's length nature of the 2014 trademark transfer under chl. 15 ЗКПО and Naredba № Н-9/2006, using a 2009 transaction between independent parties as a comparable uncontrolled transaction.
A functional analysis was applied, examining the functions performed, assets owned and risks assumed by the parties and their role in creating and maintaining the value of the trademark, an approach the court considered consistent with the arm's length principle in Chapter I and Chapter VI of the 2010 edition of the OECD Transfer Pricing Guidelines, even though the DEMPE functions terminology was only formally introduced later, in October 2015, via the BEPS Actions 8–10 final report.
Expert evidence identified use of the 'relief-from-royalty' valuation method for the intangible asset, and a comparative analysis of the Ernst & Young LLP methodology showed an average annual rate of return of approximately 10,32%, against a risk-free rate of 2,576%. The 2017 edition of the OECD Guidelines was treated as an interpretive aid rather than a binding source of law for the 2014 transaction.
Major issues / areas of contention
- Whether the 2012 valuation of the trademark could properly be used as a comparable for determining the market price of the 2014 transfer.
- Whether the OECD Transfer Pricing Guidelines in the 2017 edition could be applied, even as an interpretive tool, to a transaction concluded in 2014 under the 2010 edition.
- Whether the price agreed between Kamenitza AD and StarBev Netherlands B.V. under the 2014 Purchase Agreement reflected arm's length conditions under chl. 15 ЗКПО.
- Whether functional analysis concepts later systematised as DEMPE could be applied to a transaction predating the formal introduction of that terminology in October 2015.
- Whether the first-instance court had conducted an independent factual and legal analysis as required by the binding instructions given on remand under chl. 224 АПК.
- The extent to which the 'relief-from-royalty' valuation method and the Ernst & Young LLP methodology justified the market character of the agreed price.