As {News-2020-09-03/A/7-previously reported}, Turkey has published amendments to the General Communiqué on Disguised Profit Distribution via Transfer Pricing, including new transfer pricing documentation requirements. Further to the new documentation requirements, the amendments also clarify other transfer pricing changes in relation to the definition of related parties, acceptable transfer pricing methods, and advance pricing agreements.

Definition of Related Parties

The definition of related parties is clarified to include a minimum direct or indirect ownership of 10% in the capital, voting rights, or dividend rights of a company. Parties are also considered related for the purpose of the transfer pricing rules regardless of the 10% threshold where there is a direct or indirect affiliation or influence in terms of management, control, or capital. To clarify the determination of related parties, several examples are provided, including where there is a chain of ownership between companies X, Y, and Z, where X is a 20% shareholder in Y and Y is an 80% shareholder in Z. In this case, X would be considered a related party of Z give that 16% (20% x 80%) meets the 10% condition.

Acceptable Transfer Pricing Methods

It is clarified that there is no longer a hierarchy among the transfer pricing methods and that the most appropriate method should be used. However, where multiple methods are equally applicable, traditional transaction methods are preferred over transactional profit methods.

Advance Pricing Agreements

The maximum duration of an advance pricing agreement (APA) was increased from three years to five years. In this respect, it is clarified that APAs are effective within the period and conditions specified in the APA from the date of signature. For example, if an APA is concluded and signed on 31 August 2020, the APA can be applied for the 2020, 2021, 2022, 2023, and 2024 accounting periods or, alternatively, the APA may be applied starting from the 2021 accounting period.