The Communiqué with Serial No. 4 which amends the General Communiqué on Disguised Profit Distribution through Transfer Pricing (Serial No. 1) has been published in the Official Gazette dated September 1, 2020.
With the communiqué, Country by Country Reporting and Master File certification obligations within the scope of the OECD Base Erosion and Profit Shifting (BEPS) project Action 13 were explained in detail.
With the Communiqué, the Country by Country Report format and notification format are shared and presented to the taxpayers.
Specific to the first year, Country by Country Report Notification Period has been extended until 23:59 on October 30, 2020. Country by Country Report notification period for the upcoming years will be the end of June. Country by Country report for the 2019 accounting period will be submitted to the Tax Administration until 31.12.2020.
Within the scope of the detailed explanations made with the Communiqué, it has been understood that Country by Country Report and Master File applications will be based on the OECD model.
As it is known, with the Presidential Decree No. 2151 dated 24.02.2020, the definition of related party in Article 13 of Corporate Tax has changed; the hierarchy among transfer pricing methods were removed, penalty reduction was granted to taxpayers which fulfill transfer pricing documentation requirements and Advance Pricing Agreements are allowed to be effective retrospectively. Likewise, within the scope of the Presidential Decree, the section of transfer pricing documentation was rearranged and sections of the master file, local file and country by country report were added. The Communiqué also explains with examples how to determine the 10 percent indirect and direct shareholder relationship so that will be considered for the parties to be considered as related parties within the scope of transfer pricing.
The Country by Country Report format and notification format are shared and presented to the taxpayers. Within the scope of the detailed explanations made with the Communiqué, it has been understood that Country by Country Report and Master File applications will be based on the OECD model.
Other highlights within the scope of the Communiqué are presented below.
— First CBCR report will be for year 2019 and will be delivered until the end of 2020. The MNEs which has consolidated revenue equal or more than 750 mil Euro are required to file CBCR. In case the ultimate parent entity or surrogate entity of such MNE is in Turkey, CBCR will be filed to Turkish Administration.
— In case the ultimate parent entity or surrogate entity is located outside Turkey, it is expected that Turkish taxpayers belonging to a such MNE will not locally file CBCR in Turkey if Turkey has an Qualifying Agreement with such country and other conditions hold.
— As of now, Turkey has not signed CBCR MCAA, therefore in case Qualifying Agreement will not be signed and activated before the end of December, Turkish subsidiaries of a MNE will be required to locally file CBCR in Turkey.
— In the Communiqué, it is stated that Ultimate Parent Entity of a MNE located in Turkey may assign surrogate entities abroad Turkey. However it is still mandatory for such MNE to file CBCR to Turkish Administration as well. With this description, it has been noted that even the ultimate parent company of a multinational entity group is in Turkey, it may still appoint surrogate entity in a different jurisdiction to be able to make its CBCR automatically exchanged with other Authorities in the lack of a signed Qualifying Agreement for the first year of implementation.
— Specific to the first year, Country by Country Report Notification Period has been extended until 23:59 on October 30, 2020. In case of the ultimate parent company of the multinational entity group is a resident in Turkey, notification on behalf of the multinational entity is only to be done by the ultimate parent company.
— Once the notification is submitted within time, taxpayers still have chance to correct if necessary their notification until the end of the following month of the submission.
— Country by Country Reporting will be delivered to the Administration in xml format over the BTRANS system. The schema check of the transmitted XML files will be done during the BTRANS file upload, and incorrect files will be rejected.
— Taxpayers must complete their BTRANS applications before the first data transmission date.
— According to the Communiqué, the "notification form for country by country reporting" and "country by country report" can be sent by the taxpayer, as well as a certified public accountant with a consultancy agreement, or a sworn tax accountants with an income or corporate tax return compliance agreement (Tax Compliance Agreement) for the relevant period.
— Country by country report notification form, country by country report, transfer pricing form and transfer pricing report have been specified as documentation requirements for transfer pricing for taxpayers. As known; taxpayers who fulfill transfer pricing documentation requirements benefit 50 percent penalty reduction. In order to benefit from penalty reduction, taxpayers are also required to fulfill CBCR related requirements.
— Additionally, there will be a threshold for the amounts to be included in the Annual Transfer Pricing Form (Annex 2) which is attached to the Corporate Income Tax Return . Related parties with a limit exceeding 30.000 TL for each purchase or sale of goods or services within the related accounting period will be included in the form.
For detailed information on the subject, you can reach the Communiqué from the link below.