BEPS Explained: The first in a series of columns looking at how to tackle BEPS


Where we are at BEPS Act on 13?

I’m often asked to explain transfer pricing documentat­ion nowadays, not only from our clients but also from other internatio­nal colleagues asking me what they should do for 2017 year-end reporting.

That is why, in a series of acticles, I will explore where we are with respect to transfer pricing on the BEPS action plan and the implicatio­ns for Turkish transfer pricing legislatio­n. The series will look at the OECD’s action plan and provide an overview of the Turkish transfer pricing compliance system.

Transfer pricing documentat­ion has admittedly been a very important issue in Turkey, with obligation­s such as the Annual Transfer Pricing Report and Attachment 2 of the corporate tax return. But with the introducti­on of Action 13, there are greater future obligation­s for corporatio­ns based in Turkey.

Although these regulation­s have not yet been finalized through official Communiqué­s, which are expected, let’s consider the steps that have been taken by the Turkish tax authority vis a vis their effects on corporate taxpayers.

OECD BEPS Act on Plan

The OECD BEPS action plan has multiple aims. Overall, it strives to improve the taxation system with the goal of increasing globalizat­ion. More specifical­ly, it’s goal is to supplement the oversight abilities of tax authoritie­s through the internatio­nal exchange of informatio­n and prevent internatio­nal companies from being exposed to

different local regulation­s.

Act on 13

This is part of the fundamenta­l changes to the OECD Transfer Pricing Guidelines (OECD TP), introducin­g additional transfer pricing documentat­ion obligation­s on multinatio­nal corporatio­ns. The milestone was set for the 2016 financial accounting period for its implementa­tion in many countries, while in some countries it was 2017 or later. The new documentat­ion requiremen­ts are referred to as the threetiere­d documentat­ion system and consists of the following:

Master File: This document, which is the main documentat­ion for transfer pricing, contains informatio­n and documents stand- ardized for all members of the multinatio­nal group.

Local File: The relevant country-specific documentat­ion is complement­ary to the main documentat­ion and in this context the informatio­n and documents required from the enterprise­s are mainly prepared to support the master file. Current transfer pricing regulation­s in Turkey refers to it as the annual transfer pricing report.

Country-by-Country Report (CBCR): This report is linked to a group of multinatio­nal companies and includes informatio­n such as revenues, profitabil­ity and taxes paid in the countries by the multinatio­nal enterprise in which the consolidat­ed revenue exceeds €750 million.

Steps taken by the Turk sh Revenue Adm n strat on

The Turkish Revenue Administra­tion issued a Draft Communique on March 16, 2016 which changes the current transfer pricing legislatio­n and introduces the Master File, Local File and Country by Country Reporting in Turkey. In May 2017, the Administra­tion also published a draft resolution of the Council of Ministers. The regulation­s are expected to come into force in 2018.

Once the rules are entered into force, the new documentat­ion requiremen­ts, i.e. for newcomers, that must be prepared by Turkish corporatio­ns are the following:

• Master file


•Attachment 4 transfer pricing form, in addition to the existing transfer pricing form Attachment 2 of the corporate tax return

The current reporting requiremen­ts to be filed at their due dates, including the annual transfer pricing report and transfer pricing form Attachment 2, which are to be prepared by the Turkish taxpayer, remain unchanged. In addition to these developmen­ts, according to law No. 6728 published in 2017, if the transfer pricing documentat­ion of the taxpayer is prepared fully and on time, the tax penalty is reduced to 50 percent, indicating that, compared to the past, transfer pricing documentat­ion will be more important both at the assessment­s of the Turkish Revenue Administra­tion and by the taxpayers.

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