Transfer Pricing in Turkey

International business taxation and transfer pricing is at the top agenda of taxation for not only multinational companies, but also governments. Governments need to ensure that the taxable profits of multinationals reflect the economic activities of multinationals, and the profits are not distributed in a disguised manner via transfer pricing. In the contrary of this, multinationals are often faced with risks of double taxation sourced from the determination of arm’s length remuneration for their cross-border transactions with related enterprises. Due to audit scrutiny and increased knowledge sharing and harmonisation studies among the national tax authorities; it is crucial to multinational companies, holding companies and group companies to implement accurate, consistent and fully defensible optimal transfer pricing/advance pricing policies and procedures along with an effective tax planning, valuation and risk management complied with not only transfer pricing rules but also other taxation rules.

As a “complex tax rate optimisation work” at the core, transfer pricing always exposures financial risks which may lead to rather costly domestic and/or cross-border disputes with national and/or world-wide tax authorities.

The Turkish Transfer Pricing Rule is set by Article 13 of the Corporate Income Tax Code No: 5520 effective from 01 January 2007. The rule is based on OECD Transfer Pricing Guidelines which were approved by the OECD Council.

The profit distributed in a disguised manner via transfer pricing can be reclassified as dividends distributed, and other tax calculations can be adjusted for the party receiving the deemed dividends. In order to make such adjustments in this respect, the procedures of tax assessment for the company distributing dividends in a disguised manner must be ended and assessed taxes must be paid.



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