Turkiye – Transfer Pricing (2025)

Legal framework and scope

Turkey’s domestic transfer pricing framework is founded on the Corporate Income Tax Law No. 5520 (CITL). The arm’s length principle is expressly set out in Article 13(3) of the CITL, which defines the arm’s length principle as “the price or consideration which would have been occurred in the absence of such a relationship” between related parties. The legal basis for Article 13 states that transfer pricing rules were prepared taking into account international developments, particularly the OECD Transfer Pricing Guidelines. In practice, the statutory provisions are implemented and detailed in Transfer Pricing General Communiqué No.1, which provides operational definitions, selection of methods, comparability analysis, documentation and administrative procedures.

Arm’s length principle and the role of the OECD Guidelines

The CITL (Article 13) embeds the arm’s length principle and explicitly indicates that the domestic transfer pricing framework has been drafted considering the OECD Transfer Pricing Guidelines. The Communiqué elaborates guidance consistent with OECD principles, explicitly aligning with Section I.D.I and generally with Chapter III for comparability analysis. Consequently, the OECD Guidelines function in Turkey as an interpretative and practical guide for applying Article 13 of the CITL and for detailed administrative practice set out in the Communiqué.

Definition of related parties

The domestic definition of related parties for transfer pricing purposes appears in CITL Article 13(2) and is further elaborated in Section 3 of Transfer Pricing General Communiqué No.1. In summary, related parties include the shareholders of the corporation; individuals or legal entities related to the corporation or its shareholders; those who control the corporation directly or indirectly in terms of management, supervision or capital; entities controlled directly or indirectly by the corporation in terms of management, supervision or capital; spouses of shareholders; and relatives of shareholders or their spouses in the ascending and descending line up to the third degree by blood or marriage. Article 13(2) also contains a rule of equivalence: after considering tax capacity of the source jurisdiction and exchange of information, all transactions with persons located in jurisdictions or regions announced by the President will be deemed to have been made with related parties. This creates an administrative presumption for transactions with entities in designated jurisdictions.

Methods and criterion for application

CITL Article 13(4) provides for transfer pricing methods and refers to Section 5 of the Transfer Pricing General Communiqué No.1 for details. The methods available include Comparable Uncontrolled Price (CUP), Resale Price, Cost Plus, Transactional Net Margin Method (TNMM), Profit Split and provision to use other appropriate methods where these methods cannot determine the arm’s length price. There is no statutory hierarchy of methods; instead taxpayers must select the “most appropriate method” according to the nature of the transaction. This approach follows OECD practice: the taxpayer should justify the method chosen as the most suitable given the facts and circumstances and use alternative approaches only if necessary in practice.

Comparability and ranges

Section 4 of the Transfer Pricing General Communiqué No.1 sets out a comparability analysis aligned with OECD guidance. Turkey reports that it follows the comparability framework including functions, assets and risks analysis, contractual terms, economic conditions and other relevant factors, consistent with Section I.D.I and generally with Chapter III of the OECD Guidelines. There is no legal preference for domestic comparables over foreign comparables; the most appropriate comparables are selected based on the facts. The use of secret comparables is not specifically prohibited and thus is not excluded by domestic law. Statistical measures and arm’s length ranges are permitted: the Communiqué allows use of interquartile ranges, other percentiles, weighted averages, medians and multi-year data, and comparability adjustments when necessary to reflect material differences between tested parties and comparables.

Documentation and reporting requirements

Turkey maintains a comprehensive documentation regime described in Section 7 of the Transfer Pricing General Communiqué No.1. Six types of documentation and reporting obligations are identified: Master File, Local File (Annual Transfer Pricing Report), Country-by-Country Report (CbCR), the Notification Form related to CbCR, the Transfer Pricing, Controlled Foreign Corporations and Thin Capitalisation Form, and the Annual APA Report where applicable.

The Master File must be prepared by corporate income taxpayers affiliated to a multinational enterprise group where both the balance sheet total (asset size) and net sales amount reported as an attachment to the prior fiscal year’s annual CIT return are equal to or exceed 500 million Turkish Lira. The Master File should be prepared by the end of the fiscal year following the relevant fiscal year and, after that period, must be submitted if requested by the Turkish Revenue Administration or other competent tax authorities.

The Local File (Annual Transfer Pricing Report) must be prepared by all corporate income taxpayers by the deadline for filing the annual corporate income tax return and, upon request, submitted to the Turkish Revenue Administration or tax auditors.

Country-by-Country Reporting applies where the ultimate parent entity (UPE) or surrogate parent entity resident in Turkey has consolidated group revenue equal to or exceeding EUR 750 million in the consolidated financial statements for the fiscal year preceding the reporting year. The CbCR must be prepared by the end of the twelfth month after the reporting fiscal year and filed electronically with the Turkish Revenue Administration.

The Notification Form related to CbCR requires members of the MNE group in scope to inform the Turkish Revenue Administration whether they are the UPE or surrogate parent and which entity will file the CbCR on behalf of the group. This notification must be submitted electronically via the Internet Tax Office by the end of the sixth month after the reporting fiscal year.

All corporate income taxpayers must complete the Transfer Pricing, Controlled Foreign Corporations and Thin Capitalisation Form and attach it to the annual CIT return. However, when the total transaction volume with each related party does not exceed TRY 30,000, filling out the transfer pricing section of this form is not mandatory.

Taxpayers with an APA must prepare an Annual APA Report each year during the term of the APA and submit it to the Turkish Revenue Administration prior to filing the annual corporate tax return. Procedurally, tax authorities or auditors are expected to allow taxpayers a minimum of fifteen days to provide written information requested, and transfer pricing documentation should be prepared in Turkish; if documents are in a foreign language, a Turkish translation is required.

Transfer pricing penalties and compliance incentives

There are no transfer-pricing-specific penalties distinct from general tax procedural penalties. The provisions of the Tax Procedural Law No.213, article 355, concerning irregularity penalties apply. Importantly, CITL Article 13(8) provides a compliance incentive: if transfer pricing documentation requirements are fulfilled timely and properly, tax penalties that would otherwise arise from assessments due to non-arm’s length pricing are reduced by 50%.

Exemptions from documentation obligations

All corporate taxpayers are required to prepare transfer pricing documentation; individuals (personal income taxpayers) are not required to prepare full TP documentation but must provide information regarding related-party transactions upon request by tax authorities. Additionally, the practical exemption for not completing the transfer pricing section of the combined form when per-counterparty transaction volume does not exceed TRY 30,000 functions as a simplification.

Safe harbours and other simplification measures

Turkey does not currently provide safe harbours or other sectoral simplification measures beyond the documentation exceptions already described. No general safe harbours are reflected in the Communiqué.

APAs and MAP procedures and timing

Turkey operates a formal APA program under which unilateral, bilateral and multilateral APAs may be concluded (CITL Article 13(5) and Section 6 of the Communiqué). There is no statutory filing deadline for an APA request. APAs can be entered into for a maximum period of five years. The Turkish APA program permits roll-back for bilateral APAs in appropriate cases: roll-back is possible for fiscal years still open under Turkey’s domestic statute of limitations when the relevant facts and circumstances are the same in earlier years. Turkey also participates in Mutual Agreement Procedures (MAP) and provides MAP guidance and a MAP profile via the Turkish Revenue Administration.

Other legislative or administrative considerations: year-end adjustments, secondary adjustments, financial transactions and PEs

Year-end adjustments are permitted under the domestic framework (CITL Article 13(6) and Section 9 of the Communiqué); the administrative position indicates that year-end adjustments are allowed (rather than universally mandated). Secondary adjustments are provided for: where a related-party transaction is found to be non-arm’s length, resulting profit can be treated as a “constructive dividend” (disguised profit distribution) under CITL Article 13(6).

Regarding financial transactions, the Transfer Pricing Communiqué does not contain detailed specific rules equivalent to Chapter X of the OECD Guidelines; however, the arm’s length principle applies to financing. Separately from the TP Communiqué, Corporate Income Tax Law No. 5520 (CITL) Article 11 clause 1(i) imposes a limitation on the deductibility of certain financial expenses for periods beginning on or after 1 January 2021: where an enterprise’s foreign liabilities exceed its equity, 10% of the total expenses and cost elements related to foreign liabilities (such as interest, commission, maturity differences, dividends, interest deductions, other financial payments and related exchange differences), excluding amounts capitalised as part of the cost of an investment, are not deductible in computing corporate earnings. Credit institutions, financial institutions, financial leasing and factoring companies are excluded from this rule. Thus, Turkey has thin-capitalisation-like limitations that interact with transfer pricing analysis for intra-group financing.

On the attribution of profits to permanent establishments (PEs), most of Turkey’s tax treaties retain the pre-2010 version of Article 7 of the OECD Model Tax Convention; Turkey indicates that 92 treaties contain the pre-2010 wording. For treaties containing Article 7 as it read before 2010, Turkey does not apply the Authorized OECD Approach (AOA). The country profile does not provide domestic guidance specifically following the AOA for PE profit attribution.

Conclusion

Turkey’s transfer pricing regime rests on CITL Article 13 and the Transfer Pricing General Communiqué No.1, with explicit reference to the OECD Guidelines as interpretative guidance. The regime requires use of the most appropriate method, permits arm’s length ranges and statistical techniques, mandates comprehensive documentation (Master File, Local File, CbCR and associated forms) with clear thresholds and timing rules, and offers formal APA and MAP mechanisms. There are no broad safe harbours, and Turkey applies limits on financial expense deductibility under CITL Article 11(1)(i) that interact with TP analysis. The profile does not provide domestic guidance applying the AOA for PE attribution.

References

For the Turkey country profile and consolidated information, see the OECD transfer pricing country profiles page: https://www.oecd.org/en/topics/sub-issues/transfer-pricing/transfer-pricing-country-profiles.html