BEPS Actionspoint 13: Implementation status in Turkey

The process of implementation of BEPS Action 13 in national law is progressing worldwide, including in Turkey. Already in March 2016, a draft of the Regulation No. 4 on hidden profit distribution was published in Turkey. Further steps towards a full implementation were expected since then. The Presidential Decree No. 2151 was published in the Official Journal of 25 Februray 2020. Based on the Presidential Decree, Turkey will adopt transfer pricing documentation standards in line with the recommendations of OECD BEPS Action 13 “Base Erosion and Profit Shifting” in its national law. As regards this legal act, the Regulation was published – after a long delay – in the Official Journal on 1 September 2020 and finally entered into force on that date.

According to this Decree, a master file for the fiscal year 2019 will be prepared for the first time by the end of 2020 at the latest. This applies to taxpayers whose net revenue and balance sheet total in the previous fiscal year exceeded TRY 500 million (approximately EUR 66 million). The master file must be submitted at the request of the tax office. It must be prepared in Turkish. 

The local file corresponds to the already known transfer pricing report. Here, all cross-border related-party transactions entered into during the fiscal year that exceed TRY 30,000 per year per related party must be documented. The report should be prepared within the deadline for filing the CIT return in a given year. The local file must be submitted upon request of the tax office.

In addition, Regulation No. 4 on hidden profit distribution states that a Country-by-Country Report (CbCR) must be prepared by the parent entity if the company is part of a group and the consolidated group revenue exceeded EUR 750 million in the preceding fiscal year. In such a case, a CbC report must be submitted by the end of the fiscal year following the reporting year. Therefore, it should be first verified whether the threshold of EUR 750 million was exceeded in the fiscal year 2018. If this is the case, a CbC report must be prepared for the fiscal year 2019 and submitted by the end of 2020. Furthermore, a notification requirement applies, which must be fulfilled for the first time by 30 October 2020 and by the end of June for the following years. 

In the event that Turkey does not sign the MCAA for the automatic exchange of CbC reports by the end of 2020, the companies will be required to submit CbC reports using the secondary filing mechanism. Also the surrogate filing mechanism, under which a Turkish subsidiary - as a surrogate parent entity being resident in the jurisdiction - may file a CbC report in Turkey instead of the foreign ultimate parent entity, has been implemented.

These newly adopted regulations will bring the existing transfer pricing provisions into line with the OECD regulations used worldwide. Despite the harmonisation of the regulations, it is also necessary to navigate the specific and national requirements which additionally apply in some countries.