2025 TRANSFER PRICING GUIDE

Overview

Centrum Türkiye is the network member firm of Taxand & ETL in Türkiye. Centrum specializes on tax, international tax, independent audit, management consultancy, internal control - internal audit and fractional CFO services as a strategic financial consultant from an end-to-end perspective.

After its establishment in 2015, Centrum has become one of Türkiye’s fastest-growing strategic consulting companies within only 9 years. At present, the company serves more than 650 customers with 6 partners, and employes more than 85 staff at 4 separate offices in Istanbul, Ankara, Izmir and Bursa.

Being the first company in Türkiye to specialize in international tax consultancy and transfer pricing has provided Centrum with a unique place in the sector.

Centrum can provide the following transfer pricing services in two major areas.

1. Transfer pricing documentation services: Our transfer pricing documentation services are designed to meet all your documentation needs. We offer transfer pricing documentation solutions suitable for both Türkiye and all other countries where you operate. Documentation services include, Master File, Annual Transfer Pricing Report (Local file), Country-by-Country Reporting, benchmarking studies and transfer pricing form studies.
2. Transfer pricing consultancy services: In addition to our documentation services, we offer solutions to all your problems related to transfer pricing with our consultancy services. Consultancy services include, transfer pricing due diligence, transfer pricing Check-Up service, risk analysis services, transfer pricing restructuring services, transfer pricing policy studies, intragroup service analysis and benefit tests, transfer pricing review and settlement Services, APAs, Transfer pricing and customs valuation services.

Transfer Pricing Framework

Transfer pricing regulations are part of Corporate Income Tax Law numbered 5520 (Article 13 of the CITL) and applied since 2007. The transfer pricing legislation is prepared by taking into account international developments and particularly the OECD Transfer Pricing Guidelines.

According to the transfer pricing regulations in Türkiye, transactions between related parties must be carried out in line with the arm’s length principle. Accordingly, “fair market values” should be considered during commercial and non- commercial transactions between related parties.

If a taxpayer enters into intercompany transactions with related parties, where the prices are not set in accordance with the arm’s length principle, then related profits are deemed to be distributed in a disguised manner through transfer pricing. Such disguised profit distributions through transfer pricing are not accepted as deductible from the corporate income tax basis.

To implement the transfer pricing rules, there must be a minimum 10 percent shareholding ratio in the existence of a direct or indirect shareholder relationship. (In cases where there is at least 10% voting or dividend rights directly or indirectly without any shareholding relation, parties shall still be treated as related parties).

Transfer Pricing General Communiqués No.1, No.2, No.3 and No.4 are the guidance on how to apply the transfer pricing methods, documentation requirements, Turkish APA programme and the other principles stated in Article 13 of the Turkish CIT Law.

Accepted Transfer Pricing Methodologies

When engaged in related party transactions, Turkish taxpayers should apply the best appropriate transfer pricing method, and their results should be in line with the arm’s length result.

Acceptable transfer pricing methods include:

• Comparable uncontrolled price method (“CUP method”),
• Resale price method,
• Cost-plus method,
• Transactional net margin method,
• Profit split method.

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 intercompany transactions.

Transfer Pricing Documentation Requirements

There are comprehensive transfer pricing documentation requirements in Türkiye.

1. Master file: Prepared by corporate income taxpayers that has 500 million Turkish Lira or more net sales and asset size in its balance sheet. It must be prepared until the end of the fiscal year following the relevant fiscal year. It must be submitted to Turkish Tax Authorities upon request.
2. Annual transfer pricing report (Local file): Prepared by corporate income taxpayers (no thresholds apply) that are registered with Istanbul Larger Taxpayers Tax Office for their cross-border and domestic transactions and for all other Taxpayers for cross-border transactions. Taxpayers in Free Trade Zones are also under the scope of annual transfer pricing report for their domestic transactions. It must be submitted to Turkish Tax Authorities upon request.
3. Transfer pricing information form: The name of the form is Transfer Pricing, Controlled Foreign Corporation and Thin Capitalization Form. It must be electronically submitted to the relevant tax office as an attachment to the annual electronic CIT return. The threshold as a total transaction volume is TL 30,000.
4. Country by Country reporting and notification: All multinational enterprises resident in Türkiye with total consolidated group revenue exceeding 750 million Euro should report their CBCR until the end of the twelfth month after the relevant fiscal year. CBCR is reported in xml schema format and is given electronically. The members of the multinational enterprise should also inform the Turkish tax authorities whether they are the ultimate parent or surrogate parent or which entity of the Group will be reporting the CBCR on behalf of the Group and its fiscal year. The notification should be provided electronically on an annual basis on Internet Tax Office until the end of June of the year after the reporting fiscal year.

As a general rule, Turkish tax authorities provide 15 days to file once they ask for the transfer pricing documentation. The transfer pricing documentation should be prepared in Turkish language.

Local Jurisdiction Benchmarks

There are no specific details related to benchmarking studies in the Turkish transfer pricing legislation. Using of foreign comparables is not prohibited. In practice, Pan- European comparables are used in the absence of local comparable data unless the tested party is located outside the European region.

Limited local comparables data are available in certain databases.

Turkish tax inspectors tend to compare the tested parties with secret/hidden comparables. They ask information from other taxpayers on profit rates or royalty rates on an anonymous basis and use those analysis in their tax inspection reports.

Advance Pricing Agreement “APA”/Bilateral Advance Pricing Agreement “BAPA” Overview

Türkiye has in place a formal APA programme under which it is allowed to enter into unilateral, bilateral and multilateral APAs.

There are no fees for the filing of an APA request. The scope of APAs is limited to cross-border related party transactions. APAs are entered into for a period of a maximum five years. The APA programme also includes a roll-back for bilateral APA requests in appropriate cases.

A roll-back of a bilateral APA is possible for those fiscal years that are still open under domestic statute of limitation

(where the relevant facts and circumstances in the earlier tax years are the same).

Transfer Pricing Audits

Transfer pricing is a commonly inspected audit subject. In general, the risk of tax inspection is around 2-4% in Türkiye. However, a wave of investigations may start, if a specific industry or professional practice gets negative attention by public.

Transfer Pricing Penalties

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%.

Local Hot Topics and Recent Updates

Transfer pricing is a common subject of all tax investigations in Türkiye, claiming all sorts of payments to foreign entities are made as a disguised profit payment by way of transfer pricing, subject to dividend withholding tax of 15% (w/o a double tax treaty). Although Türkiye applies the OECD Transfer Pricing Guidelines to a general extent, Turkish tax inspectors still see transfer pricing as a way of abnormal benefits that can easily be received from the Turkish entity, directly affecting the taxable basis of the Turkish entity.

Tax inspectors write very long-formal tax assessment reports. The common matters they investigate are intragroup services received by the foreign HQs, high management fee or license fee payments to foreign entities, continuously loss-making companies for multiple years, etc. Due to tax amnesties applied in the past, there is a lack of strong case law.

Therefore, transfer pricing criticism continues to be a well- known risk for the companies operating in Türkiye.

Documentation Threshold

Submission Deadline

Penalty Provisions