Turkey: Transfer pricing documentation requirements, implementation update

Turkey: Transfer pricing documentation requirements

A draft communique provides detailed information relating to the country-by-country reporting and transfer pricing documentation requirements in Turkey.


Related content

The public comment period for the draft communique opened 16 April 2020.

The draft communique is intended to implement provisions announced by a presidential decree (No. 2151, February 2020)—read TaxNewsFlashand generally indicates that Turkey will follow the OECD recommendations in implementing the base erosion and profit shifting (BEPS) Action 13 reporting requirements.

Reporting or documentation requirements

The transfer pricing documentation rules in Turkey focus on three areas:

  • Master file
  • Local file
  • Country-by-country (CbC) report

  • Master file: Multinational taxpayers with net sales and assets greater than 500 million TRY are required to prepare a Master file. The first Master file will relate to the tax period 2019, must be prepared with regard to the following year-end, and will be required to be submitted to the tax authorities upon request. The contents required for the Master file are explained by the draft communique (and in general, is substantially similar to the OECD’s Master file standards).
  • Local file: The Local file requirement is substantially similar to the former annual transfer pricing report requirement. All taxpayers that have cross-border transactions must prepare a Local file (a local transfer pricing report). For “large” corporate taxpayers, the requirement applies for both domestic and cross-border intercompany transactions. In addition, companies operating in free trade zones are required to prepare transfer pricing reports about their domestic intercompany transactions. The content is similar to that under the OECD standard, but with certain additional information required.
  • CbC report: A CbC report is required of taxpayers that are members of a multinational enterprise (MNE) group that has consolidated revenue of €750 million or more. The first CbC report will be for the tax year 2019 and will be required to be submitted by 31 December 2020. The format of the CbC report is substantially similar to the OECD’s CbC reporting format. In Turkey, the CbC report will be filed by means of an electronic platform. The draft communique does not provide details about the electronic filing system, but states that the rules for electronic filing will be provided in a future announcement. The draft communique also includes measures about CbC notification—that is, which company of an MNE group will be the reporting entity for CbC purposes (these measures are described below).

Turkey has not signed the Multilateral Competent Authority Agreement (MCAA). Accordingly, in the event that Turkey does not have an qualifying agreement that would allow for the automatic exchange of CbC reports by the end of 2020, local (Turkish) subsidiaries of MNE groups may be required to file a CbC report in Turkey.

CbC notification requirement

CbC notification requirements have been introduced, and provide that for qualifying MNEs, the reporting entity—whether the ultimate parent entity or a surrogate entity—will notify the Turkish tax authorities of the identity of the entity that will be responsible for filing the CbC report. This CbC notification is to be made within six months after the effective date (August 2020) of the rule. For subsequent notification periods, CbC notification is to be made by the end of June, in a written filing made with the tax authorities.

The draft communique further states that if more than one company of an MNE group is operating and conducting business in Turkey, then only one of these companies is to make the CbC notification.

The format of a sample CbC notification letter is provided as an annex to the draft communique.

Other measures

The draft communique provides:

  • Examples for determining the 10% threshold for the definition of “related party”
  • Explanations related to recognition of the Transitional Net Margin Method (TNMM) and Profit-Split Method

For more information, contact a tax professional with KPMG’s Global Transfer Pricing Services practice in Turkey:

Başak Diclehan | bdiclehan@kpmg.com

Read an April 2020 report [PDF 710 KB] prepared by the KPMG member firm in Turkey

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