Transfer pricing plays a vital role in ensuring tax compliance and preventing base erosion in economies integrated into the global market. Turkey has closely followed international developments in this area and incorporated them into its domestic legal system, providing clear rules and obligations for taxpayers.
This article outlines the legal basis, key regulations, and international alignment of Turkey’s transfer pricing framework.
1. Primary Legal Basis: Article 13 of the Corporate Income Tax Law
The fundamental legal source for transfer pricing in Turkey is Article 13 of Corporate Income Tax Law No. 5520, which came into effect in 2006.
According to this article:
- If transactions between related parties are not conducted at arm’s length, the resulting profit may be considered disguised profit distribution through transfer pricing.
- Such transactions must be priced according to the arm’s length principle and appropriately documented.
- If the pricing deviates from market standards, the tax base may be adjusted, and the difference is subject to corporate income tax.
2. Secondary Regulations and Guidelines
In addition to the law, the following regulations and guidelines further detail implementation:
- General Communiqué on Disguised Profit Distribution via Transfer Pricing (Series No. 1)
- Annexes and practical examples included in the Communiqué
- Relevant provisions of the Tax Procedure Law (regarding documentation and reporting)
These clarify the required documentation, acceptable methods, and reporting obligations for taxpayers in Turkey.
3. International Alignment: OECD Guidelines & BEPS Action Plan
As a member of the OECD, Turkey has adopted the OECD Transfer Pricing Guidelines and incorporated them into its domestic tax framework.
Under the BEPS (Base Erosion and Profit Shifting) Action Plan, Turkey has implemented key international documentation standards, including:
- Country-by-Country Reporting (CbCR)
- Master File
- Local File
4. Documentation Obligations
Taxpayers subject to transfer pricing rules in Turkey are required to prepare and maintain the following documents:
- Annual Transfer Pricing Report
- Master File (for multinational groups with consolidated turnover ≥ TRY 3 billion)
- Local File
- CbCR (Country-by-Country Report) – for large multinational groups exceeding thresholds
These documents must be made available to the Turkish Revenue Administration (GİB) upon request.
5. Consequences of Non-Compliance
Failure to comply with transfer pricing rules in Turkey may result in:
- Tax penalties due to underreported income
- Procedural fines for late or inaccurate declarations
- Direct fines for missing documentation
At ÖzbekCPA, we provide professional support to ensure that all processes are managed in full compliance with Turkish transfer pricing regulations.
USEFUL ARTICLES
