VDK-MIHENK System Activated at the Risk Analysis Center

The VDK-MIHENK System, developed by the Tax Inspection Board, is set to be used in centralized risk analysis activities. The system aims to identify tax risks, particularly those related to transfer pricing, the arm’s length principle, and profit shifting between related parties, by analyzing financial data, including e-documents, through artificial intelligence and big data analytics.

MIHENK will enable the comparison of a large volume of transactions involving identical or similar goods and services based on price, cost, transaction volume, and profitability indicators. Thanks to the rapid integration of e-document data into the system, current transactions can be analyzed with an estimated four-day data lag. The system will be capable of reviewing related-party transactions that are priced either above or below arm’s length benchmarks. Factors such as geographical location, business scale, sales volume, cost structure, and business characteristics may also be taken into account in comparative analyses. In a second phase, the system is expected to incorporate industry profit margin analyses.

Price or profitability differences identified by the system will not, on their own, constitute evidence of tax non-compliance. Instead, the nature of the transaction, commercial conditions, and other factors affecting comparability will be evaluated collectively.

The objective of the system is to enhance the analysis of financial data through artificial intelligence and big data technologies, improve the identification of transactions that may pose tax risks from a transfer pricing and arm’s length perspective, and support the allocation of audit resources to higher-risk areas.

What Should Companies Do?

Companies are advised to:

• Review related-party transactions in terms of pricing, volume, costs, and profitability;
• Document the commercial rationale for pricing that deviates from comparable transactions;
• Ensure consistency between e-document data and transfer pricing documentation;
• Perform up-to-date benchmarking and profitability analyses.

Our Assessment

The implementation of MIHENK is expected to make transfer pricing audits in Türkiye more current, transaction-based, and data-driven. As a result, companies should proactively assess their transfer pricing policies and documentation to ensure they are supported by robust economic analyses and consistent transactional data.