New law (no. 6728), effective 9 August 2016, provides new rules related to transfer pricing. The provisions make changes to article 13 of Turkey’s corporate tax law (no. 5520) to align Turkish transfer pricing rules to OECD transfer pricing guidelines.
The new law:
A provision (article 59) of law no. 6728 adds a new clause to the second paragraph of article 13 of law no. 5520. An unofficial English translation of the clause is as follows:
In order for a case to be deemed as a disguised profit distribution through a direct or indirect shareholder relationship, at least a 10% shareholder relationship, voting or dividend rights must be present. In certain circumstances when there is at least a 10% direct or indirect voting or dividends right present without a shareholding relationship, the parties will also be deemed to be affiliated. With regards to related parties, these percentage ratios will be considered collectively.
With respect to transfer pricing methods, clause (ç) of the fourth paragraph has been revised, and clause (d) has been added. An English translation provides the following:
c) Transactional profit methods: Refers to the methods based on profits arising from the transactions between related parties in designation of arm’s length price or return. These methods consist of the transactional net margin method and profit split method. The transactional net margin method [TNMM] is based on the examination of an established net profit margin realized by the taxpayer resulting from a controlled transaction on certain relevant and appropriate basis such as costs, sales or assets. Profit split method refers to the arm’s length split of total operating margin or loss between related parties realized from one or more related-party transactions with regards to the functions performed and risks borne by each party.
d) In circumstances when an arm’s length price or remuneration could not be identified via one of the methods mentioned above, another method that is consistent with the nature of the related-party transaction and defined by the taxpayer can be used.
The following clause has been added to the fifth paragraph with respect to the rollback of APA provisions:
The taxpayer and the Ministry are permitted to implement the designated method for previous tax periods if not barred by statue of limitations by including the method in the agreement scope, given that the practice of repentance and correction precepts of the Tax Procedure Law are applicable and the agreement conditions are valid for the listed periods.
A paragraph (an English translation provided below) has been added following the seventh clause and the present eight paragraph have been continued as such.
(8) In circumstances when transfer pricing documentation obligations are fulfilled completely and timely, the loss of tax penalty relating to under-assessed or past-due taxes by reason of a disguised profit distribution will be imposed with a 50% discount (excluding the states that give rise to the loss of tax revenue through actions pursuant to the 359th clause of the Tax Procedure Law).
For more information, contact a tax professional with KPMG’s Global Transfer Pricing Services practice in Turkey:
Aylin Obali | +90 216 681 9000 | firstname.lastname@example.org
Dogu Ozkaya | +90 216 681 9000 | email@example.com
Basak Diclehan | +90 216 681 9000 | firstname.lastname@example.org
© 2017 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.