Turkey: local rules

Turkey applies the arm's length principle in article 13 of the Corporate Tax Law No. 5520 (CTL), called disguised profit distribution through transfer pricing. If a company buys or sells goods or services (loans, rents and pay included) with a related person at a price that is not arm's length, the profit is treated as distributed in whole or in part (art. 13(1)). Related persons include shareholders and anyone linked by management, control or capital, and ownership links need at least 10% of capital, votes or profit (art. 13(2)). Dealings with persons in places the President announces are treated as related party dealings. The detail is in Presidential Decision 2007/12888 and the General Communiqué on Disguised Profit Distribution through Transfer Pricing (Serial No. 1, changed in 2008, 2017, 2020 and 2024). A disguised distribution is treated as a dividend on the last day of the accounting period (art. 13(6)), and for two Turkish taxpayers an adjustment needs a loss to the Treasury (art. 13(7)).

The annual transfer pricing report (the local file) is prepared by the end of the corporate income tax return filing period, which in practice is the last day of the 4th month after the year end, and shown on request. It covers all related party dealings for companies at the Istanbul Large Taxpayers Tax Office and foreign related party dealings for others, with no money threshold. The master file (Genel Rapor) is prepared by the end of the next accounting period, by companies of multinational groups with total assets and net sales both at TL 500m or more in the previous year, and shown on request. A form on transfer pricing, controlled foreign companies and thin capitalization goes in with the return, and dealings with a related person below TL 30,000 a year can be left out. Documents in another language need a Turkish translation.

Companies use the method that best fits the transaction: comparable price, cost plus, resale price, or a transactional profit method (transactional net margin or profit split). If none works, the taxpayer may use its own method (art. 13(4)). A result inside a range of comparable prices is accepted, and a price outside the range is moved to the mean, mode, median or another reasonable point in the range (Communiqué section 4.2). A company can agree a method with the Revenue Administration in an advance pricing agreement for up to three years, which can cover open past years (art. 13(5)), and the President may extend this to five years (art. 13(9)).

A transfer pricing adjustment brings a tax loss penalty of 100% of the tax lost (VUK art. 344), three times that for the fraud acts in art. 359, plus late payment interest. The penalty is cut by 50% if the transfer pricing documentation was complete and on time (CTL art. 13(8)). Late, missing or wrong reports, notifications and forms are penalised under the Tax Procedure Law, usually as a special irregularity penalty (VUK repeated art. 355). For 2026 that penalty is TL 35,000, 17,000 or 8,700 depending on the taxpayer class, and it doubles if the duty is still not met after a new deadline. No penalty written specially for CbC or Pillar Two filings was found.

Law 7524 (2024) added Part 5 (additional articles 1 to 13) to the CTL. The domestic minimum top-up tax (DMTT) and the global top-up tax under the income inclusion rule (IIR) apply to accounting periods that start in 2024 or later, and the undertaxed profits rule (UTPR) to periods that start in 2025 or later. They cover groups with consolidated revenue above the Turkish lira equivalent of EUR 750m in at least two of the four prior periods. The global top-up tax return, with the GloBE Information Return attached, and the tax are due by the last day of the 15th month (18 months for 2024 and for first-time filers). The DMTT return and payment are due in the 12th month after the year end. For 2024 GİB extended the DMTT date to 28 January 2026 and the global top-up tax date to 31 July 2026. Turkish entities that are not parents file a notification form, and transitional safe harbours apply (temporary art. 17).

Thin capitalization applies when debt from shareholders or related persons exceeds three times equity at any time in the year, and interest on the excess is treated as a disguised profit distribution (CTL art. 12). Controlled foreign company income is taxed in Turkey when Turkish residents control at least 50%, passive income is at least 25% of gross revenue and the foreign tax burden is below 10% (CTL art. 7). A Turkish parent or surrogate of a group with consolidated revenue of EUR 750m or more files a CbC report within 12 months, and every Turkish group member files a CbC notification within 6 months of the year end. The law says the corporate tax return is due on the 25th of the 4th month, but since 2019 GİB has moved it to the last day of that month (VUK Circular 115). A last day on an official holiday or a weekend moves to the next working day (VUK art. 18(4); GİB treats Saturday as a holiday, for example VUK Circulars 119 and 188). Turkish laws, communiqués and circulars are free of copyright (FSEK art. 31).