Transfer Pricing in Turkey 
Transfer Pricing Methods
Prescribed methods in the law are the traditional transaction methods described in the OECD transfer pricing guideline. These methods always have priority on the other methods, and they are:
- Comparable Uncontrolled Price Method
Arm’s length price would be set by comparing the price charged for goods or services transferred between related parties to the price charged for comparable goods or services transferred in a comparable transaction between unrelated parties under the comparable facts and circumventions.
Comparable uncontrolled price analysis must be based on;
- The nature of transfer, goods or service,
- Functional analysis,
- Macroeconomic and microeconomic environment
- Business strategies,
Comparable uncontrolled price preferably should be a fixed price. However, a price range not so wide is also acceptable.
International transfer pricing data on uncontrolled pricing would be used in setting an appropriate price method in Turkey. Considering different market environment and conditions some adjustment may be required.
Arm’s length price would be calculated by adding a reasonable and appropriate rate of gross margin on the costs of goods and services carried out between related parties. Gross Profit Margin equals to (Sales – Costs) / Costs
A reasonable gross profit margin should be calculated by comparing the gross profit margin applied for goods or services transferred among related parties to the gross profit margin applied for comparable goods or services transferred in a comparable transaction among unrelated parties.
International transfer pricing data on gross margins would be used in setting an appropriate price method in Turkey. Considering different market environment and conditions some adjustment may be required.
In case, an appropriate gross profit margin does not exist or the nature of the transaction is not eligible or sufficient for the comparison, the gross profit margin of a comparable transaction in the free market conditions of an unrelated enterprise can be used. Appropriate adjustments are allowed to eliminate any material effects sourced from any differences.
Arm’s length price would be calculated by deducting an appropriate and a reasonable rate of gross profit margin from the price determined reselling the goods or services to unrelated parties in the market. Acceptable Transfer Price equals to Resale Price / 1 + Gross Profit Margin
A reasonable or an appropriate gross profit margin covers marketing and sales expenses, other operational expenses, risks and expenses for all assets used for the transactions.
International transfer pricing data on gross margin would be used in setting an appropriate price method in Turkey. Considering different market environment and conditions some adjustment may be required.
In case, calculation of arm’s length price (acceptable transfer price) is not reasonably achievable by using traditional calculation methods (CUP, CP and RP methods), then tax payers can use the other calculation methods not cited in the law, but fully defensible to prove more accurate consequences and the best fit the nature and circumventions of the case. Such methods would be profit methods based on the nature of transactions, and self assessment methods. Any method used for calculations must allow determination of transfer prices consistently.
Profit Methods are Profit/Loss Sharing (Split) Method and Net Profit Margin Method Based on the Transactions. The method is based on splitting total operational profits or losses combined from controlled transaction(s) between related parties consistent with arm’s length principle relative to functional analysis.
In case, Profit Methods based on the nature of the transactions are used, and any problem occurred within the taxation period (i.e. a quarter of temporary corporate income tax), the method would be amended or adjusted before submitting the tax return.
Taxpayers can also use methods to be determined by themselves, other than those cited in the law, if only it is not possible to apply the methods stated therein.
There is no priority among the other methods, thus whichever method is best suitable to any given transaction should be used.
