Legal Regulation

In Turkey, based on OECD standards, the institution of “implicit gain” in the Corporate Tax Law No. 5422 was redefined under the name of “Distribution of implicit earnings through transfer pricing” with Article 13 of Corporate Tax Law No. 5520, and a parallel regulation was included in Article 41/5 of the Income Tax Law No. 193.

Within the framework of the regulations mentioned above and the Transfer Pricing application that entered into force as of 01.01.2007; If institutions buy or sell goods or services with related persons at a price or price they have determined contrary to the principle of conformity with precedents, the gain shall be deemed to be distributed implicitly through transfer pricing, in whole or in part.

On the gross amount of the earnings deemed implicitly distributed through transfer pricing, there may be a punitive Corporate Tax/Income Tax (Value Added Tax, Customs Duty, as the case may be), a penalty Income Tax Withholding date depending on the distribution of profits, and a penalty Income Tax assessment depending on the situation in the case of the partner deemed to have received the final dividend.

Preparations That Taxpayers Should Make

» Taxpayers should first analyze their operating processes and economic data, carry out benchmarking studies (Benchmarking Analysis) studies for the trade they are conducting with related persons, create transfer pricing strategies, and periodically revise their established strategy by taking into account the commercial structural changes in the market and the changes in the function or organizational structure of the company, and work with the related persons. They need to make the documentation to prove that the trade is made at the right price or price to the peers.

» Corporate taxpayers are required to fill out a “form on transfer pricing, controlled foreign entity and covered capital” about the purchase or sale of goods or services made by related persons within an accounting period and to send it to the tax office attached to the corporate tax return.

» Taxpayers registered with the Large Taxpayers Tax Department shall prepare an “annual transfer pricing report” until the filing of the corporate tax return in respect of their domestic and international transactions with related persons within an accounting period and other corporate taxpayers with related persons within an accounting period and after the expiry of this period, to the Administration or to those authorized to conduct tax examinations they must submit it.

Our Services for Transfer Pricing

Our Company, with its expert staff who have received special training on the overseas applications of the Transfer Pricing arrangement, which is considered very new for Turkey, and who have deep technical knowledge, with more than 40 years of service experience in the field; It provides the following services to identify the financial risks that its customers may encounter due to the Transfer Pricing application and to minimize the risks identified:

» Preparation of the Annual Transfer Pricing Report.

» Reviewing and evaluating the reports prepared by the companies within their bodies.

» “Risk Analysis Report,” where current transfer pricing policies or existing reports are analyzed, and findings are evaluated

» Transfer Pricing Planning Study (Master File) for taxpayers who do not currently have a Transfer Pricing Policy

»Evaluation of restructuring in Business Models in terms of transfer pricing and creation of a transfer pricing strategy by methods such as related planning studies, company process, function analysis studies, and formal comparison studies using the unique TP Catalyst program Moody’s Analitics database, etc.

» Preparation of financial benchmarking studies for financial transactions such as intra-group lending using the advanced lending margin module supported by Moody’s Analytics RiskCalc™, the dedicated TP Catalyst program.

» Current and historical license and service agreement data for TP analytics, royalty rate module supported by KtMINE, access to license/service agreement data in a powerful search and analysis interface for various analytical purposes

» Loans database powered by CUFT analytics Over 15,000 loan margins and interest rates, third-party top credit facilities, structured and searchable terms and conditions, access to full core agreements, and access to current and historical top loan agreement data for credit margin analysis

» With the commodity module supported by TPRD, 380 commodity prices are updated daily, 100 types of commodity agreements, 20 commodity exchanges, 8.5 million daily commodity prices until 2013, structured and searchable terms and conditions, access to basic commodity contracts from commodity exchanges, and access to current and historical commodity price data for transfer pricing analysis.

» Consultancy services related to completing the Form Relating to Transfer Pricing, Controlled Foreign Institution, and Covered Capital, which is the annex to the Corporate Tax Return.

» Evaluation and control of intra-group service contracts, identification of risks, and association of agreements with the annual Transfer Pricing Report.

» Defense services to resolve disputes that may arise due to the Ministry of Finance criticizing Corporate Taxpayers’ transfer pricing policies.

» Preparing the request of the taxpayers who have hesitation about the method to be applied to the Ministry of Finance for theAdvance Pricing Agreement with the necessary information and documents and managing the preliminary agreement process for a certain period.

TP Catalyst,the Moody’s Analyticsoftware we use, was awarded the RegTech award in 2018.