TürkiyeTürkiye

Legal ReferenceCorporate Income Tax Law No. 5520 (CITL) Article 13(3)

Under Article 13(3) of Corporate Income Tax Law (CITL), it is stated that “Arm’s length principle means that the price or consideration charged for the purchase or sale of goods or services between related parties should be the price or consideration which would have been occurred in the absence of such a relationship between them.”

Legal ReferenceCorporate Income Tax Law No. 5520 (CITL) Article 13 Rationale

The legal ground for Article 13 of the CITL states that transfer pricing legislation is prepared by taking into account international developments, particularly the OECD Transfer Pricing Guidelines.

Legal ReferenceCorporate Income Tax Law No. 5520 (CITL) Article 13(2); Details are provided in Section 3 of Transfer Pricing General Communiqué No.1

In general, related party refers to: • Shareholders of the corporation, • Individuals or legal entities related to the corporation or its shareholders, • Individuals or legal entities which control the corporation directly or indirectly in terms of management, supervision or capital, • Individuals or legal entities which are controlled by the corporation directly or indirectly in terms of management, supervision or capital, • Shareholder’s spouses, • Relatives of the shareholders or their spouses including upper and lower lineage with third degree relationship by blood or marriage. Article 13(2) also states that “By considering whether the taxation capacity of the source jurisdiction’s tax system is the same as that of Türkiye and considering the exchange of information, all transactions made with persons located in jurisdictions or regions to be announced by the President will be deemed as if they were made with related parties”.

Legal ReferenceCorporate Income Tax Law No. 5520 (CITL) Article 13(4); Details are provided in Section 5 of Transfer Pricing General Communiqué No.1

The most appropriate method shall be selected to determine the arm’s length price in transactions with related parties. However, if it is not possible to determine the arm’s length price by using these methods, taxpayers may use other methods which are appropriate to the nature of the transactions.

• CUP (provided)
• Resale Price (provided)
• Cost Plus (provided)
• TNMM (provided)
• Profit Split (provided)
• Other (provided)

Legal ReferenceCorporate Income Tax Law No. 5520 (CITL) Article 13(4); Details are provided in Section 5 of Transfer Pricing General Communiqué No.1

There is no hierarchy of methods. Taxpayers must use the method which is most appropriate to the nature of the transaction. Türkiye follows the OECD TPG.

• Hierarchy of methods (not selected)
• Most appropriate method (selected)
• Other (if so, please explain) (not selected)

Türkiye’s domestic transfer pricing framework does not contain specific guidance on commodity transactions.

Legal ReferenceDetails are provided in Section 4 of Transfer Pricing General Communiqué No.1

Transfer Pricing General Communiqué No.1 includes a clear explanation of the comparability analysis which is in line with Chapter I D.I of the OECD TPG. There is no clear reference to Chapter III of the OECD TPG, however, the implementation of transfer pricing rules is generally in line with Chapter III of the OECD TPG.

There is no explicit prohibition against the use of foreign comparables. Depending on the facts and circumstances of the controlled transaction, the most appropriate comparables are preferred.

There is no specific prohibition of using secret comparables.

Legal ReferenceDetails are provided in Section 4 of Transfer Pricing General Communiqué No.1

Depending on the facts and circumstances of the controlled transaction, the use of both arm’s length range and other statistical tools (interquartile range, weighted average, median, multiple year data etc.) are allowed.

Legal ReferenceDetails are provided in Section 4 of Transfer Pricing General Communiqué No.1

Comparability adjustments are required depending on the facts and circumstances of the case, if necessary.

Legal ReferenceDetails are provided in Section 10 of Transfer Pricing General Communiqué No.1

The arm’s length principle also applies to intangibles. Section 10 of Transfer Pricing General Communique includes specific provisions involving intangibles.

Legal ReferenceDetails are provided in Section 11 of Transfer Pricing General Communiqué No.1

The arm’s length principle also applies to intra-group service transactions.

Türkiye’s domestic transfer pricing framework does not contain specific provisions to financial transactions. However, the arm’s length principle also applies to financial transactions.

Legal ReferenceCorporate Income Tax Law No. 5520 (CITL) Article 11 clause 1(i)

To be applied to the income of the taxation period starting from 1 January 2021 and onwards, the enterprises whose foreign liabilities exceed their equity, 10% of the total expenses and cost elements related to the foreign liabilities used in the enterprise under the names of interest, commission, maturity difference, dividend, exchange difference and similar items related to the foreign liabilities used in the enterprise, excluding those added to the cost of the investment, are not considered as deduction in determining the corporate earnings. Within the scope of the Article, credit institutions, financial institutions, financial leasing, and factoring companies are excluded.

Legal ReferenceDetails are provided in Section 7 of Transfer Pricing General Communiqué No.1

• Master file consistent with Annex I to Chapter V of the TPG (selected)
• Local file consistent with Annex II to Chapter V of the TPG (selected)
• Country-by-country report consistent with Annex III to Chapter V of the TPG (selected)
• Specific transfer pricing returns (separate or annexed to the tax return) (selected)
• Other (specify) (selected)

Legal ReferenceDetails are provided in Sections 6 and 7 of Transfer Pricing General Communiqué No.1

There are currently six types of documentation requirements: 1. Master File (threshold 500 million TL); 2. Annual Transfer Pricing Report (Local File); 3. Country-by-Country Reporting (threshold 750 million Euro); 4. Notification Form Related to CbCR; 5. Transfer Pricing, Controlled Foreign Corporations and Thin Capitalisation Form; 6. Annual APA Report. Documentation should be prepared in Turkish; if in a foreign language, a Turkish version is required. Tax administration provides at least 15 days for submission upon request.

Legal ReferenceArticle (repetitive) 355 of the Tax Procedural Law No.213; Corporate Income Tax Law No. 5520 (CITL) Article 13(8); Details are provided in Section 8 of Transfer Pricing General Communiqué No.1

There are no specific transfer pricing penalties regarding transfer pricing documentation. The provisions of Tax Procedural Law regarding irregularity penalties apply. According to Article 13(8) of the CITL, if the transfer pricing documentation requirements are fulfilled timely and properly, tax penalties in case of a tax assessment due to the application of non-arm’s length prices will be reduced by 50%.

Legal ReferenceDetails are provided in Section 7 of Transfer Pricing General Communiqué No.1

All corporate taxpayers have to prepare the transfer pricing documentation. Personal income taxpayers (individuals) do not have to prepare the transfer pricing documentation. However, upon the request of the tax administration or tax inspectors, personal income taxpayers also have to provide information involving related party transactions. Regarding the Transfer Pricing section of the “Transfer Pricing, Controlled Foreign Corporations and Thin Capitalisation Form”, when the total transaction volume for each related party does not exceed TL 30 000, filling out this section of the form is not mandatory.

Legal ReferenceCorporate Income Tax Law No. 5520 (CITL) Article 13(5); Details are provided in Section 6 of Transfer Pricing General Communiqué No.1; Türkiye’s MAP Guideline; Türkiye’s MAP Profile

Türkiye has a formal APA programme in place under which it is allowed to enter into unilateral, bilateral and multilateral APAs. There is no timeline for the filing of an APA request. APAs are entered into for a period of a maximum of five years. Türkiye’s APA programme also includes a roll-back for bilateral APA requests in appropriate cases. In addition, Türkiye’s MAP guidance is available at the Turkish Revenue Administration’s official website.

• Rulings (not selected)
• Enhanced engagement or cooperative compliance programmes (not selected)
• Advance Pricing Agreements (APA) (selected)
• Mutual Agreement Procedures (selected)

N/A: Türkiye is currently working on this issue.

Legal ReferenceCorporate Income Tax Law No. 5520 (CITL) Article 13(6); Details are provided in Section 9 of Transfer Pricing General Communiqué No.1

Legal ReferenceCorporate Income Tax Law No. 5520 (CITL) Article 13(6); Details are provided in Section 9 of Transfer Pricing General Communiqué No.1

In case of a non-arm’s length-related party transaction, profits arising from that transaction are considered “constructive dividend” (disguised profit distribution).

Türkiye reserves the right to use the previous version of Article 7, i.e. the version that was included in the Model Tax Convention immediately before the 2010 update of the Model Tax Convention.

• Article 7 as it read before 2010. (selected)
• Article 7 as it reads after 2010. (not selected)

Legal ReferenceTurkish Taxation System

Türkiye is a member of the Convention on Mutual Administrative Assistance in Tax Matters (MAAC) and one of the signatories of the Multilateral Competent Authority Agreement on the Exchange of Country-by-Country Reports (CbC MCAA).