The world is struggling with Covid 19 pandemic.
Each day, there are good and bad news related to this outbreak. However, many
of countries are trying to get normalized and relaxing the restrictions taken
earlier. Turkey is one of the countries which has weakened its restrictions as
of June 1. Hopefully, people will adopt to this new normal and learn to live
with this pandemic truth.
As a result of steps taken to be normalized,
businesses are getting back to their new routines. There are pending tasks to
be performed and obligations to be considered. Taxpayers are trying to draw
their roadmaps and strategies along with post covid and also new developments.
One of the new rules which were introduced
early 2020 was related to BEPS 13 related transfer pricing documentation
requirements in Turkey. The new requirements were not fairly focused by
taxpayers since they are announced in the days where the Covid 19 pandemic has newly
Since we are getting so called “normal”, it is
time to understand what exactly BEPS 13 rules in Turkey are and how MNEs in
Turkey must react and get prepared for this. There are not any postponements in
BEPS 13 deadlines due to pandemic so far, so taxpayers should be well prepared.
In a nutshell, BEPS 13 related transfer pricing
documentation rules introduce 3 tiered documentation approach which are mainly Country
by country reporting, Masterfile and local file. Most of the jurisdictions have
adopted OECD BEPS 13 model to their domestic law and started to implement new
rules starting from 2016. On the other hand, some countries like Turkey have
published draft bills, however they postponed the implementation of draft bills
until 2020 since 2020 is considered as deadline for OECD peer review.
Turkey has adopted the new rules with 2151
Presidency Decree in February 2020. Based on the new rules, taxpayers in Turkey
are obliged to new filing requirements in Turkey. The new requirements are as
Country by Country Reporting (CBCR):
Multinational Enterprises (MNEs) with consolidated revenue exceeding 750
mil euro as of 2018 are required to file 2019 CBCR until the end of 2020. Under
normal conditions, the Ultimate Parent Entity (UPE) is required to file CBCR
for the Group or surrogate entity which is assigned by UPE will file the CBCR.
Afterwards, the Tax Authority which receives the report will exchange it with
the Tax Authorities where the MNE operates. This methodology enables MNEs just
to file in one jurisdiction while the burden of transmitting the data rests
with Tax Authorities. The automatic exchange is realized through CBCR
Multilateral Competent Authority Agreement (MCAA). The MCAA is currently signed
by 85 countries. For automatic exchange between countries; the MCAA should be
In order to track the reporting entities, Each
MNEs will notify their respective Authorities related to the information of UPE
or reporting entity of the Group in order to make Tax Authorities follow who
reports to whom. This is called
In Turkey, there are notification requirements. Each eligible MNEs operating in Turkey are required to make notification in Turkey to their tax office through electronic platform. The notification will be made until 31 August 2020 for the first year and for following years it will be made until the end of June. The notification form includes the detailed information of UPE of the Group, the Reporting Entity of the Group and Turkish entity.
With respect to filing of the CBCR ; In case
UPE of the MNE is in Turkey; then Turkish Company will file the CBCR to Turkish
Revenue Administration. In case UPE of the MNE is outside Turkey; then UPE or
surrogate entity will file the CBCR to its respective Authority. As of today,
Turkey has not signed CBCR MCAA yet. As far as known, the procedures related to
MCAA are almost completed, however it is still not signed. Therefore in case
Turkey will not sign the MCAA which will enable it to exchange information,
then Turkish entities of MNEs may be required to file CBCR to Turkey as well,
or in case UPE is Turkish entity, the local subsidiaries of Turkish MNEs may be
required to secondary file CBCR in their jurisdictions. In all cases, it is
important to note that Turkish reporting formats are similar to OECD model
To sum up, all MNEs operating in Turkey and
having a consolidated revenue greater than 750 million Euro should be ready to
file their CBCR notification to tax office until 31 August 2020. For MNEs which have more than one Company in
Turkey; one selected Group Company can make the notification on behalf of
MNEs which have Turkish UPE should file CBCR to Turkish Revenue Authority. MNEs which have UPE outside Turkey but have local entity in Turkey should be ready to file CBCR as a secondary filing in case Turkey does not sign/activate MCAA until the end of 2020.
Turkish taxpayers which are multinationals or belonging
to a MNE and have net sales and assets greater than 500 mil TRY as of 2018 are
required to prepare MF. The first MF will be related to period 2019 and must be
prepared until following year-end. The MF shall be submitted to Tax Authorities
upon request. The content of the MF is same as OECD MF content.
MNEs in Turkey should understand and review
whether their asset size and net sales for FY 2018 exceed 500 mil TRY.
Taxpayers will look at their corporate tax return income statements. If that
criteria holds, then as a second step they will check whether their MNE has a
MF and if yes, whether MF includes information related to Turkish business. In case
MF of the MNE do not cover any information related to Turkish business, then an
adoption of the MF should be required. For taxpayers which are Turkey based, MF
should be prepared for the Group as well.
The MF should be in Turkish language, therefore
in case Group MF is another language, it should be translated to Turkish. For
MNEs which have Turkish UPE; Turkish MF should be translated to other languages
as well since MF will be submitted to other tax authorities as well through
local subsidiaries of the Group.
Local File (LF)
The LF requirement is same as the former annual transfer pricing report and all taxpayers which have cross border transactions (for large corporation taxpayers both domestic and cross border intercompany transactions) haveto prepare local transfer pricing report. In addition, companies operating in free trade zones are required to prepare transfer pricing report for their domestic intercompany transactions. The MF content is similar to OECD MF content with some additional information required.
The BEPS 13 related requirements are explained
in detailed. As said, Turkey has implemented rules as of 2020 with the 2151
Presidency Decree. Although it is a late implementation, it is very valuable
since it will allow Turkey to automatically exchange information with other
countries which will enable transparency and build trust.
Written by Başak Diclehan (Partner, Global Tax Advisory
Services), Burak Döş (Senior Manager, Global Tax Advisory Services)