1 TRANSFER PRICING ANKARA, 07 March 2012 Ayben ÜNEL OVERVIEW OF THE TP REGULATIONS IN TURKEY

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

3  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 Contents

4 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 Scope & Applicability

5 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 Definition of Scope of Transactions

6 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) Definition of Related Parties - Article 13(2)

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

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

9 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 Documentation Requirements

10 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)  ,30 Turkish Lira (app €) for each new APA  ,75 Turkish Lira (app €) for each renewal. Advance Pricing Agreements - 1 non-refundable

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

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

13 Thank you