Primetax Guide: Transfer Pricing in Türkiye: Compliance and Risk Management

Introduction

Transfer pricing is a core corporate tax issue for groups operating in Türkiye. Turkish rules apply where related parties enter into transactions on terms that do not reflect the arm's length principle and the result is a transfer of taxable profit. The regime is therefore relevant not only to cross-border transactions but, depending on the taxpayer and transaction, also to domestic related-party dealings.

For multinational groups, the practical challenge is usually broader than selecting a transfer pricing method. The pricing must be consistent with the functions actually performed, risks actually controlled and assets actually used in Türkiye, and the supporting contracts, invoices, accounting records and transfer pricing documentation should tell the same story.

Legal Framework and the Arm's Length Principle

The principal rule is Article 13 of Corporate Income Tax Law No. 5520. Where a company buys or sells goods or services with a related party at a price or consideration that is not consistent with the arm's length principle, the resulting profit transfer may be treated as a disguised distribution of profit through transfer pricing.

The concept of a sale or purchase of goods or services is interpreted broadly. It includes manufacturing and construction, leasing, lending and borrowing, and payments such as bonuses, salaries and similar remuneration. The rules may therefore apply to intercompany management charges, royalties, financing, guarantees, cost allocations, asset transfers and a wide range of other intra-group arrangements.

Turkish transfer pricing rules are broadly aligned with the OECD approach, but the domestic legislation, Presidential Decree and Turkish administrative guidance remain the primary sources for local compliance. A group policy prepared for another country should therefore be localised before it is relied upon in Türkiye.

Who Is a Related Party?

The related-party definition is broad. It includes shareholders, persons or entities connected with the company or its shareholders, and persons or entities that are directly or indirectly linked through management, control or capital. Certain family members of shareholders are also included.

Where the relationship arises through ownership, voting rights or rights to profits, a 10% threshold is relevant. A direct or indirect shareholding of at least 10%, or a direct or indirect right to at least 10% of votes or profits even without a formal shareholding, may bring the parties within the related-party rules. The relevant percentages are considered collectively for related persons.

The 10% threshold should not be read as the only route to related-party status. Management, control and influence relationships can create a related-party relationship independently of a qualifying shareholding. Transactions with persons resident in jurisdictions designated under the statutory harmful-tax-competition rule are also addressed separately in Article 13.

Transactions Covered

The transfer pricing analysis should begin with a complete inventory of related-party transactions rather than only the largest cross-border invoices. Typical categories include purchases and sales of goods, contract manufacturing, distribution, management and support services, research and development, royalties and other payments for intangibles, intercompany loans, cash pooling, guarantees, leases, employee secondments, business restructurings and transfers of shares or other assets.

A transaction does not become acceptable merely because it is supported by an intercompany agreement. The agreement should reflect the actual conduct of the parties, and the price should be supported by an analysis that is appropriate to the economic characteristics of the transaction.

Selecting the Transfer Pricing Method

Turkish legislation recognises the comparable uncontrolled price method, the cost plus method and the resale price method as traditional transaction methods. It also recognises the transactional net margin method and the profit split method as transactional profit methods.

The appropriate method is the one that provides the most reliable arm's length result for the transaction under review. Internal comparables should be considered where reliable comparable uncontrolled transactions exist. Where traditional methods cannot produce a reliable result, transactional profit methods may be used.

If none of the recognised methods can produce an arm's length result, the taxpayer may use another method that is appropriate to the transaction, provided that the method itself is consistent with the arm's length principle. The analysis should explain why the selected method is more reliable than the alternatives.

Functional and Comparability Analysis

A robust transfer pricing analysis starts with the commercial facts. The taxpayer should identify the functions performed by each party, the economically significant risks assumed and controlled, the assets used, the contractual terms, the characteristics of the goods or services and the economic circumstances in which the transaction takes place.

Benchmarking should follow from that analysis, not replace it. A database search cannot compensate for a mismatch between the tested party described in the report and the way the Turkish business actually operates. Where comparables differ materially, the effect of those differences should be considered and, where reliable, appropriate adjustments should be made.

Documentation Framework

Türkiye applies a multi-layered transfer pricing documentation framework. The principal elements are the transfer pricing disclosure form attached to the corporate income tax return, the Annual Transfer Pricing Report, the General Report commonly referred to as the Master File, the Country-by-Country Report and the Country-by-Country Reporting Notification Form.

Transfer Pricing, CFC and Thin Capitalisation Form

Corporate income tax taxpayers must complete the Transfer Pricing, Controlled Foreign Corporation and Thin Capitalisation Form and submit it as an attachment to the annual corporate income tax return where the relevant conditions are met. For the transfer pricing section, transactions with a particular related party do not need to be reported where the annual total net amount of purchases and sales with that related party is below TRY 30,000.

The TRY 30,000 threshold is a reporting threshold for the form. It is not a safe harbour from the arm's length principle and does not remove the underlying obligation to price related-party transactions appropriately.

Annual Transfer Pricing Report (Local File)

The Annual Transfer Pricing Report must be prepared by the corporate income tax return filing deadline for transactions within the reporting scope. It is not routinely filed with the return, but must be available for submission to the Turkish Revenue Administration or tax inspectors after the preparation deadline if requested.

Taxpayers registered with the Istanbul Defterdarlığı Large Taxpayers Tax Office must include both domestic and foreign related-party transactions. Other corporate income taxpayers generally prepare the report for foreign related-party transactions. Corporate taxpayers operating in free zones have additional rules for domestic related-party transactions, and transactions with foreign branches and related parties in free zones also require specific attention.

The fact that a domestic transaction is outside the mandatory Annual Transfer Pricing Report for a particular taxpayer does not remove the obligation to comply with the arm's length principle or to retain supporting information that may be requested in a tax examination.

General Report (Master File)

A Turkish corporate income taxpayer that belongs to a multinational enterprise group must prepare a General Report where both its total assets and net sales, as shown in the corporate income tax return for the preceding fiscal year, are TRY 500 million or more. Both tests must be met.

The General Report must be prepared by the end of the fiscal year following the fiscal year to which it relates and is submitted upon request after that deadline. It covers the group's organisation, business activities, intangibles, intra-group financing and financial and tax position.

The TRY 500 million thresholds have not been indexed for inflation under the current rules. As a result, significantly more Turkish entities may fall within the Master File requirement than when the threshold was first introduced.

Country-by-Country Reporting

Country-by-Country Reporting applies where the multinational enterprise group's consolidated revenue for the fiscal year preceding the reporting year is EUR 750 million or more. A Turkish-resident ultimate parent entity or surrogate parent entity within scope must prepare and electronically submit the Country-by-Country Report by the end of the twelfth month following the end of the reporting fiscal year.

Where the ultimate parent or surrogate parent is outside Türkiye, a Turkish group member may have a local filing obligation in specified circumstances, including where the foreign jurisdiction does not require Country-by-Country Reporting, there is no effective qualifying exchange arrangement with Türkiye, or a systemic failure prevents the exchange.

In-scope group members must also submit a Country-by-Country Reporting Notification Form. Following the 2024 amendment, the notification deadline is the end of the sixth month following the end of the reporting fiscal year. This rule is particularly important for groups using a special accounting period.

2026 Compliance Dates for Calendar-Year Taxpayers

For a Turkish company with a 31 December year-end, the principal 2026 transfer pricing dates relating to the 2025 fiscal year are:

• 30 April 2026: the 2025 corporate income tax return is due. The transfer pricing disclosure form is filed with the return, and the 2025 Annual Transfer Pricing Report should be prepared by the same deadline where required.

• 30 June 2026: the Country-by-Country Reporting Notification Form for the 2025 reporting period is due for in-scope multinational group members.

• 31 December 2026: the 2025 General Report (Master File) should be prepared where the applicable TRY 500 million asset and net-sales tests, based on the preceding period, are met.

• 31 December 2026: the 2025 Country-by-Country Report is due for a Turkish reporting entity where the EUR 750 million threshold and other conditions are met.

Special accounting period taxpayers should apply the statutory deadlines by reference to their own fiscal year-end rather than using the calendar-year dates above.

Intra-Group Services and Management Fees

Management and support charges remain a recurring transfer pricing risk. The Turkish company should be able to show that a service was actually provided, that the service created or was expected to create a commercial or economic benefit, and that an independent enterprise would have been willing to pay for the service in comparable circumstances.

The analysis should distinguish chargeable services from shareholder activities, duplicated services and costs that do not benefit the Turkish entity. Where costs are allocated among several group companies, the allocation key should have a reasonable relationship with the expected benefit from the service.

A group-level cost allocation policy is useful but is not sufficient on its own. The Turkish file should contain evidence of the services, the cost pool, allocation methodology and mark-up, together with the local tax analysis for withholding tax and VAT where relevant.

Royalties and Intangibles

Royalty arrangements require more than benchmarking the percentage rate. The taxpayer should identify the intangible being used, the legal and economic basis for the payment, the functions performed by the parties and the value received by the Turkish business.

Particular care is required where the Turkish company performs significant local marketing, market-development or other value-creating functions while also paying substantial royalties abroad. The commercial relationship between those activities and the royalty should be capable of explanation and should be consistent with the broader group transfer pricing policy.

Intercompany Financing

Intercompany loans, cash pooling, guarantees and other financing arrangements must be priced at arm's length. The analysis should consider the currency, term, repayment profile, security, borrower credit quality, purpose of the financing and other economically relevant features rather than relying on a group-wide interest rate without adjustment.

Transfer pricing should be considered separately from the thin capitalisation rules. Under Corporate Income Tax Law Article 12, related-party debt exceeding three times the shareholder equity may create thin capitalisation consequences, subject to the statutory rules and exclusions. A loan can therefore be within the thin-capitalisation limit and still have a non-arm's-length interest rate, or vice versa.

Distributors, Manufacturers and Persistent Losses

Entities characterised as limited-risk distributors or routine manufacturers are often benchmarked using a one-sided profit method. The label used in the intercompany agreement is not determinative. The expected return should be consistent with the functions actually performed, the risks controlled and the assets employed by the Turkish company.

Persistent losses do not automatically prove that transfer pricing is incorrect, particularly during start-up periods or genuine market downturns. However, a company described as performing routine functions with limited risks should be able to explain why it continues to incur material losses and whether independent parties in comparable circumstances would have accepted the same commercial outcome.

Year-End Transfer Pricing Adjustments

Groups frequently use year-end adjustments to bring a tested margin within an arm's length range. Such adjustments should not be treated as a purely spreadsheet exercise. The legal basis for the adjustment, the relevant invoices or credit notes, VAT and withholding tax consequences, foreign-exchange effects and, where imported goods are involved, possible customs implications should be reviewed before the adjustment is posted.

A late adjustment that is inconsistent with the intercompany agreement or with the way the parties actually operated during the year can itself create questions. The preferred approach is to monitor results during the year and document the adjustment mechanism in advance.

Advance Pricing Agreements

An Advance Pricing Agreement (APA) may be used to obtain certainty on the transfer pricing method for future related-party transactions. Turkish rules permit unilateral, bilateral and multilateral approaches, depending on the circumstances and the relevant treaty relationship.

The maximum APA term is five years. The agreement may also, subject to the statutory conditions, be applied to non-time-barred prior periods where the parties agree and the relevant voluntary-disclosure conditions can be satisfied. During the APA term, the taxpayer must submit an annual APA report by the corporate income tax return filing deadline.

APAs are most useful where transaction values are significant, the methodology is expected to remain stable and the cost of uncertainty is high. They are not a substitute for maintaining accurate underlying financial data and monitoring critical assumptions.

Adjustments, Penalties and Double Taxation

Where a transfer pricing adjustment is made, the non-arm's-length amount may be added back to the Turkish tax base. The amount treated as a disguised distribution is also deemed, at the end of the relevant fiscal year, to be a dividend or, for a non-resident head office situation, a remittance to head office, which can create further tax consequences depending on the recipient.

The counterparty adjustment mechanism is intended to prevent the same profit from being taxed twice within the Turkish system, but the corresponding adjustment generally depends on the tax assessed on the profit-distributing company becoming final and being paid. In cross-border cases, treaty relief and the Mutual Agreement Procedure may also need to be considered.

Timely documentation has a direct penalty benefit. Where the transfer pricing documentation obligations have been fulfilled fully and on time, the tax loss penalty attributable to a transfer pricing adjustment is applied at a 50% reduction, except for cases involving the tax-evasion offences specified in the Tax Procedure Law.

Failure to prepare or provide required reports, forms or information can also lead to procedural penalties under the Tax Procedure Law. Documentation should therefore be viewed as part of the tax-control framework rather than a report prepared only after an audit begins.

Practical Risk Management

An effective Turkish transfer pricing process should operate throughout the year. In practice, the following controls are among the most useful:

• Maintain a complete related-party transaction inventory and reconcile it to the general ledger, tax return disclosures and statutory accounts.

• Check the 10% ownership, voting-right and profit-right tests, but also consider management and control relationships that may create related-party status independently.

• Prepare the Annual Transfer Pricing Report contemporaneously and ensure that contracts, invoices and financial results are consistent with the functional analysis.

• Test the Master File threshold annually; both prior-year assets and net sales must be TRY 500 million or more.

• Track Country-by-Country Reporting and notification deadlines separately, particularly for groups with a non-calendar fiscal year.

• For management fees and shared services, retain evidence of benefit, allocation keys, cost pools and any mark-up applied.

• For financing, document borrower credit risk and the commercial terms of the instrument in addition to checking thin capitalisation.

• Monitor tested margins during the year rather than relying exclusively on a large year-end adjustment.

• Review the Turkish tax consequences of any adjustment, including VAT, withholding tax and customs where relevant.

• Consider an APA or Mutual Agreement Procedure where recurring material transactions create a significant risk of double taxation.

Conclusion

Transfer pricing in Türkiye is not only a documentation requirement. The core issue is whether the economic outcome of a related-party transaction is consistent with what independent parties would have agreed under comparable circumstances.

The Turkish documentation framework has also become materially more structured. For 2026, the TRY 500 million Master File threshold, the EUR 750 million Country-by-Country Reporting threshold, the revised six-month Country-by-Country notification deadline and the transaction-level disclosure form should all be incorporated into the annual compliance calendar.

The strongest risk-management approach is to align the legal agreement, operational conduct, accounting treatment and transfer pricing analysis before the tax return is filed. Where those elements are consistent, the documentation becomes evidence of the commercial reality rather than an explanation prepared after the event.