New Turkish TP Documentation Requirements as of 01 September 2020 | Gressi Benveniste | 01/09/2020

Gressi Benveniste | Deloitte Turkey, Tax Director

Following the Presidential Decree No. 2151 announced on February 25th, 2020, regulating new transfer pricing documentation rules for tax payers in Turkey, the Turkish Tax Authority announced the Transfer Pricing Communiqué No. 4 as of 1 September 2020 which was open to public consultation previously. The final Communiqué and its appendices provide guidance regarding three fold documentation requirements, important deadlines, transfer pricing specific penalties, CbCR prior-notification form and CBC report format as well as examples related to related party definitions, duration of APAs, some information regarding intercompany group charges and some limitations on transfer pricing disclosures through corporate income tax return.  

The newest arrangement in the Communiqué is with respect to the country-by-country reporting (CbCR) and CbCR prior-notification requirements which are criticized by the foreign MNEs resident in Turkey, in terms of the obligation of re-filing of the CbCR in Turkey, since CbCR information is supposed to be exchanged among tax authorities through qualifying competent authority agreements (QCAAs) based on BEPS regulations.

As of the date of announcement of the new transfer pricing regulations (September 01, 2020), Turkey is not party to any qualifying competent authority agreement (QCAA) with any jurisdiction for the exchange of CbCR information. Since Turkey is in transition period for the implementation of CbCR rules yet, the foreign MNEs resident in Turkey meeting the conditions stated in the Communiqué, would be subject to local CbCR filing with the Turkish Tax Authority (TTA). In case of conclusion of any QCAA with any jurisdiction, the TTA would announce the list of jurisdictions party to the agreements. Accordingly, the foreign MNEs resident in Turkey are required to follow Turkey’s QCAA situation attentively in order to meet their local CbCR liabilities in place.

CbCR prior-notification form:

An MNE subject to CbCR filing has to notify the TTA through a prior notification form prepared in Turkish language in electronic format with the following information:

Introductory information: 

Reporting Fiscal Year :

Name of the MNE Group :

MNE Group consolidated revenue : (Revenue in the accounting period preceding the reporting fiscal year)

Part 1: Information related to Ultimate Parent Entity (UPE) / Surrogate Entity (SE)

• Name/Title of the UPE/SE

• Tax residency of the UPE/SE (country name)

• Adress of the UPE/SE

• Tax ID of the UPE/SE

• Information on obligation of CbCR filing requirements in UPE’s/SE’s jurisdiction : Yes/No

• Information on qualifying competent authority agreement (QCAA) between Turkey and UPE’s/SE’s tax jurisdiction 

Part 2: Information related to CBC Reporting Entity in Turkey on behalf the Ultimate Parent Entity (UPE) / Surrogate Entity (SE)

• Name/Title of the Reporting Entity in Turkey

• Address of the Reporting Entity in Turkey

• Tax ID of Reporting Entity in Turkey 

Part 3: List of Entities under CbCR obligation in Turkey who are consolidated under the same UPE

• Tax ID’s of the entities under CbCR obligation

• Name/Title of the entities under CbCR obligation

Part 4: Contact Information related to the entity filing the prior-notification form

• Name/Title, Tax ID of the entity filing the prior-notification form and contact person name, e-mail address and phone number

• (If any) Prior-notification form filing entity’s local CPA’s/Sworn Financial Consultant’s contact information details

CbCR prior-notification deadline : 

The CbCR prior-notification deadline for Fiscal Year 2019 is 30 October 2020, 23:59 (Turkish time). For the following reporting years, CbCR prior- notification deadline is end of June following the end of each fiscal year.   

The MNEs whose consolidated financial statements for the previous fiscal period have not been prepared as of the Turkish notification deadline, may apply to the TTA for an additional time for notification.

If there are errors or deficiencies in the notification form submitted to the TTA, it would be possible for taxpayers to correct the form through re-filing until the end of the month following the expiry date of the notification deadline. 

CbCR prior-notification form filing entities : 

• Turkish UPEs (i.e. MNEs whose UPE is resident in Turkey) would be filing the CbCR prior-notification form on behalf of group entities,

• Foreign MNEs resident in Turkey: Where there are more than one entities of the same MNE Group that are resident for tax purposes in Turkey, the MNE Group may designate one of such entities to file the CbCR prior-notification form in Turkey on behalf of others.

CbCR prior-notification form filing platform : 

The TTA established a platform at its website for the submission of the electronic form. The taxpayers, would be able to submit the form personally, or through a local CPA with an intermediary and liability agreement, or through a Sworn Financial Advisor with a tax compliance agreement. 

Taxpayers are required to obtain a user code and relevant passwords from the tax office to which they are registered.

Transfer pricing specific penalties:

Turkey has adopted documentation-related penalties for non-compliant taxpayers. Non-filing, late-filing, incomplete or inaccurate filing of reports would be subject to procedural tax penalty under Turkish Tax Procedural Law.

As an encouragement for taxpayers a “Partial Penalty Protection Regime” applies, where a penalty reduction of 50% is eligible, on full and timely preparation of transfer pricing documentation.

The new transfer pricing documentation requirements as of 1 September 2020 are summarized in the following table:

New Turkish TP Documentation Requirements in a Nutshell – 01 September 2020 

For further information with respect to this subject, please contact:

Gressi Benveniste

Tax Director – Transfer Pricing; email: gbenveniste@deloitte.com