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Turkey: Transfer pricing provisions and country-by-country reporting rules

Transfer pricing provisions and CbC reporting rules

A draft “transfer pricing communique” has been published in Turkey, and it generally reflects measures of the OECD’s base erosion and profit shifting (BEPS) Action 13 on country-by-country reporting and transfer pricing documentation. The amendments related to transfer pricing that aim at satisfying the BEPS Action 13 transfer pricing and reporting requirements would be regulated by a draft Council of Minister decision (2017/01), and it is expected to be effective before the end of 2017.


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The draft Council of Minister decision introduced the definition of the following terms (substantially similar to those in the OECD’s definitions) under the country-by-country (CbC) reporting rules—group; multinational enterprises; ultimate parent; reporting entity; surrogate entity; and systemic failure.

Transfer pricing rules

The draft Council of Minister decision also introduces amendments to the Turkish transfer pricing rules that would “converge” with respect to the OECD transfer pricing guidelines. The draft decision provides for:

  • A 10% threshold with respect to the definition of a “related party”
  • Recognition of the Transitional Net Margin Method (TNMM) and Profit Split Method
  • Rules for roll back of advance pricing agreements (APAs)
  • Penalty relief (i.e., relief from 50% of a tax penalty in situations when there is proper and timely documentation in place)
  • “Real persons” qualify as related parties
  • No priority (preference) for transfer pricing methods
  • Extension of the APA effective period to five years (instead of three years)
  • Requirements that APA renewal applications must  be submitted at least six months (instead of nine months) before the APA expires 
  • APA negotiations described as the evaluation of comparable transactions, function analysis, comparable search process, contract terms, transaction adjustments and other key terms
  • APA roll-backs described so that the APA would correct previous years’ tax returns (those not barred by statute of limitations); any amount of excess taxes paid in previous years would not be refundable (taxpayers could assert provisions in the tax procedure code in relation to the correction of tax failures)

Master file, Local file, CbC reporting

The draft decision includes new documentation rules that are in line with OECD BEPS Action 13 reporting and documentation requirements. With the draft decree, the transfer pricing documentation would be divided into three components—Master file, Local file, and country-by-country (CbC) reporting.

Master file: Multinational taxpayers having net sales and assets greater than 250 million TRY would be required to prepare a Master file. The first Master file would relate to the tax period 2017 and would need to be prepared within two months after the submission of corporate tax income returns and be submitted to tax authorities upon request.

Local file: The requirement is substantially the same as the former annual transfer pricing report. All taxpayers having cross-border transactions (for large corporation taxpayers both domestic and cross-border intercompany transactions) would have to prepare local transfer pricing report. In addition companies operating in free trade zones would be required to prepare transfer pricing report for their domestic intercompany transactions.

CbC reports: The CbC reporting would apply for taxpayers that belong to a multinational enterprise group having a consolidated revenue of 2,37 billion TRY (approximately €750 million). The CbC report would report the amount of profit/loss before tax, paid/accrued tax, capital, previous year losses, headcount, tangible products (excluding cash and cash equivalents), all of which are generally in line with the OECD measures. The first CbC report would cover the tax period 2016 and would be submitted by 31 December 2017. 

A notification requirement provides that the reporting entity (whether the ultimate parent company or a surrogate entity) of multinational entities covered by the CbC rules would report to the Turkish tax authorities which entity would be filing the CbC report, within three months after the effective date of the decree. For all subsequent reporting periods, this notification would need to be made by the end of March, in writing to the tax authorities.


Read a May 2017 report [PDF 200 KB] prepared by the KPMG member firm in Turkey

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