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Turkey: Country-by-country reporting, transfer pricing documentation guidance

Turkey: CbC reporting, transfer pricing documentation

A presidential decree—No. 2151 (24 February 2020)—provides guidance concerning country-by-country (CbC) reporting and transfer pricing documentation.


Related content

The decree aims to implement the OECD base erosion and profit shifting (BEPS) Action 13 recommendations regarding transfer pricing documentation and reporting requirements in Turkey.

The first CbC report and Master file will relate to the 2019 accounting period and will need to be prepared and submitted in December 2020.

Transfer pricing documentation requirements

The decree sets out new documentation rules that generally are in line with OECD BEPS 13 reporting and documentation requirements. The transfer pricing documentation requirements are separated into three items:

  • Master file—Multinational enterprises (MNEs) with net sales and assets greater than TRY 500 million are required to prepare a Master file. The first Master file will relate to the tax period 2019 and will need to be prepared by the end of the following year and must be submitted to tax authorities on request.
  • Local file—The requirements are substantially the same as the former annual transfer pricing report, and all taxpayers with cross-border transactions (for large corporation taxpayers, both domestic and cross-border intercompany transactions) must prepare a local transfer pricing report. In addition, companies operating in free trade zones are required to prepare a transfer pricing report for their domestic intercompany transactions.
  • CbC report—The CbC reporting requirements apply for taxpayers that belong to an MNE group having consolidated revenue of €750 million or more. The first CbC report will be for year 2019 and will need to be submitted by 31 December 2020.

The decree also includes rules for a CbC notification requirement. In effect, MNEs will need to provide notification of which entity will be the reporting entity (whether it will be the ultimate parent entity or a surrogate entity) as well as which entity will provide the CbC report. The CbC notification is to be provided to the Turkish tax authorities within six months after the effective date of the decree (that is, August 2020), For following reporting periods, CbC notification must be made by the end of June with a written submission provided to the tax authorities.

Other amendments

The decree also made the following amendments and additions to the existing transfer pricing rules in Turkey.

  • Reference to areas where the Turkish transfer pricing rules align with the OECD transfer pricing guidelines.
  • Changes reflecting a 10% threshold for the definition of a related party
  • Recognition of transitional net margin method and profit split method, and elimination of the hierarchy over transfer pricing methods
  • Penalty relief (from a 50%) when there is proper and timely documentation
  • Revised definition of “related party” to include real persons (individuals)

Concerning advance pricing agreements (APAs), there are rollback rules, measures increasing the APA period to five years (instead of three years), and requirements that taxpayers must submit a request for renewal of APA before six months (formerly nine months) of the expiration of the APA. The analysis terminology of the APA negotiations has been described as the evaluation of comparable transactions, function analysis, comparable search process, contract terms, transaction adjustments and other key terms.

Read a February 2020 report [PDF 370 KB] prepared by the KPMG member firm in Turkey

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