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TRANSFER PRICING

TRANSFER PRICING. OVERVIEW OF THE TP REGULATIONS IN TURKEY. ANKARA, 07 March 2012 Ayben ÜNEL. Turkish Regulations (with respect to OECD Guidelines). January 2007. Article 13 of the CITL No. 5520. November 2007. General Communiqué No.1. Cabinet Decision. December 2007.

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TRANSFER PRICING

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  1. TRANSFER PRICING OVERVIEW OF THE TP REGULATIONSIN TURKEY ANKARA,07 March 2012Ayben ÜNEL

  2. Turkish Regulations(with respect to OECDGuidelines) January 2007 Article 13 of the CITL No. 5520 November 2007 General Communiqué No.1 Cabinet Decision December 2007 General Communiqué No.2 April 2008 April 2008 Cabinet Decision April 2008 Circular November 2010 TP Guidelines

  3. Contents • scope of taxpayers • comprehensive definition of related parties • definition of arm’s-length principle • comparability analysis • definition of arm’s-length range • methodologies • APA • documentation requirements • penalties • adjustments • intangibles • intra group services

  4. Scope & Applicability Scope : • all resident and non-resident corporate taxpayers • all resident and non-resident individual taxpayers • both domestic and cross-border transactions Conditions for determination of disguised income profit via transfer pricing: • purchase or sale of a good or service • made with related parties • contrary to ALP

  5. Definition of Scope of Transactions Sale or purchase of goods and services include : • purchases • sales • manufacturing and construction • leasing and renting • borrowing and lending • distribution of bonus, salary, or similar items

  6. Definition of Related Parties - Article 13(2) The following ones can be given as an example : • shareholders of the corporation • individuals or legal entities related to the corporation or its shareholders • individuals or legal entities which control the corporation directly or indirectly in terms of management, supervision or capital • individuals or legal entities which are controlled by the corporation directly or indirectly in terms of management, supervision or capital • other relatives (including third-degree)

  7. Arm’s Length Principle - Article 13(3) • in determining arm’s length price • comparability analysis • characteristics of goods or services; • functional analysis • economic conditions • business strategies * When comparing the items, “contractual terms” should be taken into account as well internal comparable external comparable

  8. Transfer Pricing Methods -Article 13(4) • CUP • C+ • RPM • Other methods a) PSM b)TNMM c) Method determined by the taxpayer profit-based methods

  9. Documentation Requirements 3 types of documentation requirements : • Annual Transfer Pricing Report • Transfer Pricing, CFC and Thin Capitalisation Form • Annual APA Report Deadline to prepare documentation : TP documentation report and supporting documents must be prepared and available when the corporate income tax return is submitted following the end of the fiscal Deadline to submit documentation : submission of the TP documentation is required on request

  10. Advance Pricing Agreements - 1 • corporate taxpayers • applicable for up to 3 years • types of APAs • unilateral ( first APA was signed in July,2011) • bilateral • multilateral • renewing / revising / revoking • annual APA report • application fees (for the year 2012) • 38.147,30Turkish Lira (app. 16.580 €) for each new APA • 30.517,75 Turkish Lira (app. 13.260 €) for each renewal. non-refundable

  11. Advance Pricing Agreements - 2 APA Application Process Written Application Pre-review of application Additional information and/or Interview with the taxpayer (If it is needed) Analysis Rejection Signing of a formal APA (max. 3 years)

  12. Penalties • no specific TP penalties, • general rules regulating tax penalties under Tax Procedure Law No. 213 will be applied. if transfer prices are not arm’s length if documentation requirements are not fulfilled

  13. Thank you aunel@gelirler.gov.tr

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