New Qualified Service Center (QSC) Corporate Tax Exemption in Türkiye and Its Transfer Pricing Implications

Türkiye has recently introduced the Qualified Service Center (QSC) regime (Nitelikli Hizmet Merkezi) which is designed to encourage multinational enterprises (MNEs) to establish service hubs in Türkiye. A QSC is a Turkish company established to provide intra-group services to multinational group entities located outside Türkiye. There are several key qualification criteria that must be met in order to benefit from the corporate tax incentives, such as the Multinational Group Requirement, Foreign Revenue Threshold and the type of Eligible Services (e.g. finance and accounting, IT services, HR services, procurement support, legal and compliance functions, and administrative support). The qualifying income may benefit from significant corporate tax exemptions, potentially reaching 95% or even 100% in specific circumstances.

Under the new framework, multinational groups may establish centralized service entities in Türkiye to provide shared services such as finance, accounting, human resources, procurement, IT, legal support, engineering, and other back-office functions to overseas group companies. While the tax incentive is significant, transfer pricing remains central to the sustainability of the regime. The exemption does not eliminate the requirement to comply with the arm’s length principle under Article 13 of the Turkish Corporate Tax Law and the OECD Transfer Pricing Guidelines. Rather, the regime increases the importance of accurately delineating intra-group services, determining the service center’s functional profile, and supporting service charges with robust transfer pricing documentation.

Although the income of the service center may be fully or partially exempt from corporate taxation, the QSC remains a related-party service provider. In addition, if the QSC does not apply the arm’s length principle, the non–arm’s-length portion will be treated as profit distributed through transfer pricing, and dividend withholding tax will be imposed.

Many activities performed by shared service centers resemble the OECD concept of Low Value-Adding Intra-Group Services (LVAS). Under OECD Chapter VII, a simplified cost-plus approach may be available for such activities. Although Türkiye has not adopted a Low Value-Adding Intra-Group Services (LVAS) safe harbour, in order for the QSC regime to be particularly attractive for groups seeking to centralize low-risk support functions while applying a simplified transfer pricing framework, we strongly recommend that Türkiye adopt the Low Value-Adding Intra-Group Services (LVAS) concept.

For MNEs that receive services from a QSC located in Türkiye, both transfer pricing and economic substance considerations are relevant.

A successful QSC should demonstrate Personnel Substance (qualified employees, relevant expertise, and actual decision-making capacity), Operational Substance (physical office facilities, local management, technology infrastructure) and Commercial Substance (genuine service activity, real business purpose, documented operational workflows).

Given the increasing relevance of BEPS and substance requirements, Türkiye’s QSC regime should not be viewed merely as a tax incentive, but as a platform requiring real operational activity. For large MNE groups subject to OECD Pillar Two (EUR 750 million consolidated revenue threshold), the practical benefit of the QSC exemption requires careful analysis.

In summary, the Qualified Service Center (QSC) regime recently introduced in Türkiye may attract direct investment into the country and may provide benefits to multinationals seeking to centralize their services with a low effective tax rate. Nevertheless, it should be noted that Turkish transfer pricing rules continue to apply and OECD principles remain relevant. Transactions must comply with the arm’s length principle, and documentation obligations remain unchanged. Furthermore, we strongly recommend that the Turkish Revenue Administration introduce and adapt simplified transfer pricing approaches to support and document the arm’s length nature of the services provided by a Qualified Service Center.