Numara : 1
Tarih : 3.2.2009


NO: 2009/1

Subject: Deadline for Preparation of Annual Transfer Pricing Documentation Reports and Filing Requirement of the Form Regarding Transfer Pricing, Controlled Foreign Companies (CFCs) and Thin Capitalization

1. Deadline for Preparation of Annual Transfer Pricing Documentation Reports

The obligations of corporate taxpayers with respect to preparation of annual transfer pricing documentation reports (“TP Report”) based on Article 13 of Corporate Tax Law, General Communiqué No. 1 on disguised profit distribution through transfer pricing and Decree no. 2007/12888 governing transfer pricing are summarized in the Table, below:

Obligation of Corporate Taxpayers To Prepare Annual Transfer Pricing Report (TP Report)

Corporate Taxpayers Obliged to Prepare TP Report

Types of Related Party Transaction to be covered in the TP Report

TP Report Preparation Deadline

(for corporate taxpayers with accounting period on the basis of calendar year)

Corporate Taxpayers in Turkey Registered with Large Taxpayers’ Tax Office (LTTO) (so-called VIP Tax Office)

Domestic and cross-border related party transactions and transactions with related parties in Turkish Free Trade Zones (“FTZs”) (including FTZ branches and related companies operating in FTZs) during the accounting period

For 2008: April 25, 2009

All Corporate Taxpayers operating as a separate corporate entity in Turkish FTZs

Domestic related party transactions (i.e. transactions with the related parties in Turkey)

(starting from the year 2008)

For 2008: April 25, 2009

Other Corporate Taxpayers in Turkey (not registered with the LTTO but other tax offices)

Only cross-border related party transactions during the accounting period (including also the transactions with FTZ branches as well as the related parties operating in FTZs-if any)

For 2008: April 25, 2009

Those corporate taxpayers that have a special accounting period ending in 2008 (e.g: those with special accounting period ending on 31 March 2008, 30 June 2008, 30 September 2008, etc.) and that have those kinds of related party transactions as summarized in the Table above, which must be included in / analyzed through annual TP report are obliged to prepare annual TP reports by the deadline of submission of their corporate tax returns for their particular special accounting period concerned.

Accordingly, corporate taxpayers that are required to prepare annual transfer pricing documentation report each year must maintain these reports within the period of statute of limitations so as to present them to their tax office, the Turkish Revenue Authority, tax inspectors and officials, as applicable upon any official request from the Tax Authorities. It should be noted that annual transfer pricing documentation reports do not have to be submitted to tax office together with corporation tax returns.

2. Obligation to Submit the Form Regarding Transfer Pricing, CFCs and Thin Capitalization (“Appendix 2”) Together with Corporate Tax Return

According to the Section “7.1 – Annual Documentation” in General Communiqué No. 1 on disguised profit distribution through transfer pricing (“TP General Communiqué No. 1”) and Transfer Pricing Circular No.1 dated 24 April 2008, all corporate taxpayers (including those operating in Turkish FTZs) are required to file a Form Related To Transfer Pricing, CFCs and Thin Capitalization (namely, “Appendix 2 of the TP General Communiqué No. 1” or “Appendix 2” in short) together with their corporate tax returns. “Appendix 2” must include information regarding transactions with related parties during the accounting period (transfer pricing related transactions) as well as the information about foreign participations and loans obtained from related parties so as to determine Controlled Foreign Companies and assess the status of thin capitalization.

Like corporate taxpayers with calendar year - accounting period, those corporate taxpayers that have a special accounting period are also required to complete and submit Appendix 2 to their tax office every year together with their corporate tax returns.

3. Obligations To Submit Appendix 2 and Prepare Annual TP Report for the Year 2008 and Special Accounting Periods Ending in 2008 (on a comparative basis)

Tax Status

Submission Requirement for Appendix 2 to the tax office

Required Scope

for the TP Report

Corporate Taxpayers registered with the LTTO


- Domestic Related Party Transactions,

- Cross-border Related Party Transactions,

- Transactions with branch in Turkish FTZ,

- Transactions with Related Parties in Turkish FTZs

Other Corporate Taxpayers


- Cross-border Related Party Transactions,

- Transactions with branch in Turkish FTZ,

- Transactions with Related Parties in Turkish FTZs

Companies established and operating in Turkish FTZs and having both domestic and crosss-border related party transactions (regardless of whether they benefit from provisional corporate tax exemption based on their operation licenses)


- Transactions with domestic related parties (i.e. the related parties within Turkey),

(Cross-border related party transactions are not within the Scope of the TP Report in the case of companies operating in Turkish FTZs, however their cross border related party transactions must be declared in Appendix 2 to be filed together with the corporate tax return)

FTZ Branch of a Company in Turkey

The Turkish company having a branch in Turkish FTZ is required to declare its transactions with FTZ branch in Appendix 2.

FTZ branch itself does not have to prepare a TP report however, the Turkish company having FTZ branch is required to include its transactions with the FTZ branch in its TP Report.

Income Taxpayers

No obligation.

No obligation.

4. Our Recommendations for Preparation of 2008 TP Reports

4.1. Identification/Determination of All Related Party Transactions and Completion/Filing of Appendix 2

Corporate taxpayers that have an accounting period on a calendar year basis and that have had related party transactions within the scope of annual TP documentation report during 2008 must prepare their TP documentation reports by April 25, 2009. In order to start the documentation of the related party transactions for the year 2008, related party transactions should be identified by their types (e.g. sales of goods, purchase of services, cost sharing, interest payment on loan, rent etc.), their volumes as well as by type of transfer pricing method (determined/tested based on the documentation studies made for the year 2007 and/or the global transfer pricing policies, as applicable). The necessary analyses must be made in order to test the best transfer pricing method selection and if necessary the revisions/updates must be made for 2008. Depending on the results of the economic analysis, the completion of Appendix 2 must be finalized by the deadline of submission of corporate tax return (25 April 2009 with respect to the year 2008).

4.2. Minimum Technical Documentation Standards to be Considered/Applied in Preparation of Annual TP Documentation Report

As per our technical reviews of 2007 transfer pricing documentation reports prepared by corporate taxpayers themselves, we have observed that there are no transfer pricing analyses (economic analyses) in most of the self-prepared documentation reports as required by General Communiqué No. 1 on Disguised Profit Distribution through Transfer Pricing (TP General Communiqué No. 1) although an economic analysis is the key to the determination of an arm’s length price/profit range. Economic analyses should be performed and documented with sufficient supporting data based on numerical and objective facts rather than on non-numerical and subjective arguments. According to the relevant provisions of the TP General Communiqué No. 1 (as referenced below), we would recommend that those parts of the TP documentation reports (both the 2007 TP reports that must have already been prepared and the reports to be prepared for 2008 and the following years) related to “Transfer Pricing Analyses” should meet the following minimum technical standards outlined below so that the related party transactions can be properly proved by corporate taxpayers to be at arm’s length in accordance with the relevant Turkish TP legislation, which is, in principle, in line with the globally accepted OECD (the Organization for Economic Co-operation and Development) Transfer Pricing Guidelines.

Minimum Technical Standards to be considered in transfer pricing analyses (for preparation of annual TP Documentation Reports)

Reference in the Relevant Legislation

Comparability analyses must be performed from an economist’s perspective with sufficient details of proof.

TP General Communiqué No. 1 , Section 4.1. – “ a comparability analysis; the nature of the goods or services compared, the functions undertaken and risks borne by related and unrelated parties, the characteristics of the marketplace (e.g. volume, location) in which the transactions take place, the economic conditions governing the marketplace, and business strategies of the entities shall be considered.”

To the extent permitted by the availability of detailed financial data, the inter-company transactions must be analyzed on a transactional basis.

TP General Communiqué No. 1, Section 5.5. – “ the analyses to be performed, the profit attributable to a single controlled transaction between related parties shall be considered.”

The selection of the best transfer pricing method applicable to a given transaction must be done on a comparative basis (i.e. as compared to the other methods) and the arguments about the comparison must be presented/explained in detail within the TP documentation report.

TP General Communiqué No. 1 , Appendix: 3, IV – “...comparison of the selected transfer pricing method with other methods and explanation of why the selected method was the most appropriate [best method] and the relevant data, documentation, calculations, worksheet details related to the calculation supporting the best method selection...”

Financial results related to the intercompany transactions reflected in statutory books must be compared with the arm’s length range/prices to be determined based on the financial data of comparables and must be supported numerically.

TP General Communiqué No. 1 , Section 4.2. – “An arm’s length range is a series of prices established by employing a particular method to financial data corresponding to different unrelated party transactions or by employing different methods to the same set of financial data.”

A detailed discussion of the criteria used in comparable company selection and their results must be included in the report.

TP General Communiqué No. 1 , Appendix: 3, IV – “...detailed information on comparability analysis and selection criteria, ... , details related to the calculation of the arm’s length price, the calculations detailing how an arm’s length price/profit range was established.”

Since it does take considerable time and effort to conduct the economic analyses that can meet and satisfy the above-mentioned minimum technical standards as per the relevant provisions of the TP General Communiqué No. 1 which is, in principle, in line with the Transfer Pricing Guidelines issued by the OECD for Multinational Enterprises and Tax Administrations, we suggest that all corporate taxpayers who are required to prepare transfer pricing documentation report for 2008 but not yet started to work, initiate the start of the economic analyses at their earliest convenience. This is very important to ensure the harmony between Appendix 2 which is due to be submitted by 25 April 2009 and the TP documentation reports and also to properly comply with the annual TP documentation obligations on a timely basis.

Please do not hesitate to contact us should you need any further information and/or support about the annual TP documentation obligations.

Yours faithfully,

Deloitte Turkey.

Sirkülerlerimizde yer alan bilgiler belli bir konunun veya konuların çok geniş kapsamlı bir şekilde ele alınmasından ziyade genel çerçevede bilgi vermek ve yorum yapmak amacını taşımaktadır. Bu sirkülerler ile amacımız muhasebe, vergi, yatırım, danışmanlık alanlarında veya diğer türlü profesyonel bağlamda tavsiye veya hizmet sunmak değildir. Bilgileri kişisel finansal veya ticari kararlarınızda yegane dayanak olarak kullanmaktan ziyade, konusuna hakim profesyonel bir danışmana başvurmanız tavsiye edilir. Bu sirkülerler ve içeriğindeki bilgiler, oldukları şekliyle sunulmaktadır; "DRT Yeminli Mali Müşavirlik ve Bağımsız Denetim A.Ş." ve "Deloitte Touche Tohmatsu" (bir Swiss Verein'i) ve onun üye firmaları ve bunların iştirakleri ve filyalleri (bundan böyle ayrı ayrı veya birlikte "Deloitte"), bunlarla ilgili sarih veya zımni bir beyan ve garantide bulunmamaktadır. "Deloitte", söz konusu sirkülerlerin ve içeriğindeki bilgilerin hata içermediğine veya belirli performans ve kalite kriterlerini karşıladığına dair bir güvence vermemektedir. Sirkülerleri ve içeriğindeki bilgileri kullanımınız sonucunda ortaya çıkabilecek her türlü risk tarafınıza aittir ve bu kullanımdan kaynaklanan her türlü zarara dair risk ve sorumluluk tamamen tarafınızca üstlenilmektedir. "Deloitte", söz konusu kullanımdan dolayı, (ihmalkarlık kaynaklı olanlar da dahil olmak üzere) sözleşmesel bir dava, kanun veya haksız fiilden doğan her türlü özel, dolaylı veya arızi zararlardan ve cezai tazminattan dolayı sorumlu tutulamaz.