TRANSFER PRICING

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TRANSFER PRICING
OVERVIEW OF THE TP REGULATIONSIN TURKEY
ANKARA, 07 March 2012 Ayben ÜNEL
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Turkish Regulations (with respect to OECD
Guidelines)
January 2007
Article 13 of the CITL No. 5520
November 2007
General Communiqué No.1
Cabinet Decision
December 2007
General Communiqué No.2
April 2008
April 2008
Cabinet Decision
April 2008
Circular
November 2010
TP Guidelines
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Contents

• scope of taxpayers
• comprehensive definition of related parties
• definition of arms-length principle
• comparability analysis
• definition of arms-length range
• methodologies
• APA
• documentation requirements
• penalties
• adjustments
• intangibles
• intra group services

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Scope Applicability

• Scope
• all resident and non-resident corporate
  taxpayers
• all resident and non-resident individual
  taxpayers
• both domestic and cross-border transactions
• Conditions for determination of disguised income
  profit
• via transfer pricing
• purchase or sale of a good or service
• made with related parties
• contrary to ALP

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Definition of Scope of Transactions

• Sale or purchase of goods and services include
• purchases
• sales
• manufacturing and construction
• leasing and renting
• borrowing and lending
• distribution of bonus, salary, or similar items

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Definition of Related Parties - Article 13(2)

• The following ones can be given as an example
• 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
• other relatives (including third-degree)

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Arms Length Principle - Article 13(3)
internal comparable

• in determining arms length price
• comparability analysis
• characteristics of goods or services
• functional analysis
• economic conditions
• business strategies
• When comparing the items, contractual
  terms should be taken into account as well

external comparable
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Transfer Pricing Methods
- Article 13(4)

• CUP
• C
• RPM
• Other methods
• a) PSM
• b) TNMM
• c) Method determined by the taxpayer

profit-based methods
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Documentation Requirements

• 3 types of documentation requirements
• Annual Transfer Pricing Report
• Transfer Pricing, CFC and Thin Capitalisation
  Form
• Annual APA Report
• Deadline to prepare documentation
• TP documentation report and
  supporting documents must be prepared and
  available when the corporate income tax return is
  submitted following the end of the fiscal
• Deadline to submit documentation
• submission of the TP documentation is
  required on request

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Advance Pricing Agreements - 1

• corporate taxpayers
• applicable for up to 3 years
• types of APAs
• unilateral ( first APA was signed in July,2011)
• bilateral
• multilateral
• renewing / revising / revoking
• annual APA report
• application fees (for the year 2012)
• 38.147,30 Turkish Lira (app. 16.580 ) for each
  new APA
• 30.517,75 Turkish Lira (app. 13.260 ) for each
  renewal.

non-refundable
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Advance Pricing Agreements - 2
APA Application Process

Written Application
Pre-review of application
Additional information and/or Interview with the
taxpayer
(If it is needed)
Analysis
Rejection
Signing of a formal APA (max. 3 years)
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Penalties

• no specific TP penalties,
• general rules regulating tax penalties under Tax
  Procedure Law No. 213 will be applied.

if transfer prices are not arms length
if documentation requirements are not fulfilled
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• Thank you
• aunel_at_gelirler.gov.tr