Turkey: New transfer pricing rules enacted, aligned with OECD guidelines

Turkey: New transfer pricing rules enacted

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.

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The new law:

  • Provides a 10% threshold for purposes of defining a “related party” 
  • Removes what has been a strict hierarchy among the transfer pricing methods
  • Allows certain types of “roll back” for advance pricing agreements (APAs)
  • Provides a 50% discount on the tax penalty imposed on taxpayers satisfying the rules for timely and proper documentation 

Threshold for related-party definition

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.

Recognition of TNMM and profit split methods

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: 


ç) 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.

Roll back of APAs

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.

50% discount, tax penalty

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 | aobali@kpmg.com

Dogu Ozkaya | +90 216 681 9000 | dozkaya@kpmg.com

Basak Diclehan | +90 216 681 9000 | bdiclehan@kpmg.com

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