Gressi Benveniste | Deloitte Turkey, Tax Director

As an OECD member, Turkey has committed to implement country-by-country reporting (CbCR), as set out in the BEPS Action 13 Report “Transfer Pricing Documentation and Country-by-Country Reporting”. Accordingly, a Presidential Decree No. 2151 has been announced on February 25th, 2020, regulating new transfer pricing documentation rules for tax payers in Turkey. Following the Decree, a Draft Communiqué has been announced on April 16th, 2020 explaining the details of the new transfer pricing documentation requirements and introducing country-by-country report (CbCR) template together with CbCR prior notification form. The Decree is open to public consultation by May 1st, 2020 on Turkish Revenue Authority’s website.

Based on the new rules, a foreign multinational entity (MNE) resident in Turkey (whose ultimate parent entity’s (UPE’s) annual consolidated group revenue equal to or higher than EUR 750 million in the preceding fiscal year), is required to file a local CbCR on behalf of the group with the Turkish Tax Authority, if one of the following conditions applies:

a) the Ultimate Parent Entity (UPE) of the MNE Group is not obligated to file a CbCR in its jurisdiction of tax residence; or,

b) the jurisdiction in which the UPE is resident for tax purposes has a current International Agreement with Turkey, but does not have a Qualifying Competent Authority Agreement in effect for the exchange of CbCR information; or,

c) there has been a Systemic Failure in exchange of information.

Where there are more than one entities of the same MNE Group that are resident for tax purposes in Turkey, and one or more of the conditions set out above apply, the MNE Group may designate one of such entities to file the local CbCR in Turkey. The deadline for filing the CbCR is by no later than 12 months after the last day of the foreign MNE’s reporting fiscal year. The first reporting period would be 2019. The CbCR would be filed electronically through Turkish Revenue Authority’s BTRANS system.

Given the above information, as of the date of announcement of the new transfer pricing regulations (February 25, 2020), Turkey is not party to any qualifying competent authority agreement (QCAA) with any jurisdiction for the exchange of CbCR information. Since Turkey is in transition period for the implementation of CbCR rules yet, the foreign MNEs resident in Turkey meeting the above conditions, would be subject to local CbCR filing with the Turkish Tax Authority (TTA). In case of conclusion of any QCAA with any jurisdiction, the TTA would announce the list of jurisdictions party to the agreements. Accordingly, the foreign MNEs resident in Turkey are required to follow Turkey’s QCAA situation attentively in order to meet their local CbCR liabilities in place.

An MNE subject to CbCR filing, has to notify the TTA through a prior notification form in electronic format as to:

  • whether it is the UPE or the surrogate entity of an MNE group that is required to file a CbCR, 
  • the identity and tax residence of the entity filing the CbCR on behalf of the MNE group (where the MNE is not the UPE or surrogate entity).

The CbCR prior notification deadline is determined as end of August 2020 for the first CbCR period.

Turkey has adopted documentation-related penalties for non-compliant tax payers. Non-filing, late-filing, incomplete or inaccurate filing of reports would be subject to procedural tax penalty under Turkish Tax Procedural Law.

As an encouragement for tax payers a “Partial Penalty Protection Regime” applies, where a penalty reduction of 50% is eligible, on full and timely preparation of transfer pricing documentation.

In conclusion, Turkey’s situation in signing the QCAA with any jurisdiction in terms of exchange of CbCR information should be followed by foreign MNEs qualified for local CbCR in Turkey, since there is a short deadline to meet CbCR filing and prior notification liabilities. Based on relevant transfer pricing regulations in effect, the TTA has the authority to change the first reporting period as 2020, or postpone CbCR requirements for foreign MNEs. Accordingly, current developments with respect to transfer pricing should be followed closely.