Transfer Pricing Rules for Multinational Companies in Türkiye

As Türkiye continues to position itself as a regional hub for international investment, multinational companies operating within the country face increasing scrutiny from tax authorities—particularly in relation to transfer pricing. Transfer pricing rules in Türkiye are closely aligned with OECD standards and are rigorously enforced by the Turkish Revenue Administration.

At Finlexia Turkish Accounting Firm, we have advised domestic and international investors on Turkish company formation, corporate governance, and tax compliance since 2017. Our company formation lawyers team provides a detailed and practical overview of transfer pricing rules for multinational companies in Türkiye in 2026, highlighting key legal requirements, documentation obligations, audit risks, and strategic considerations.

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Understanding Transfer Pricing in the Turkish Context

Transfer pricing refers to the pricing of transactions between related parties, such as parent companies and subsidiaries, or between sister companies within the same corporate group. Turkish tax authorities closely scrutinize these transactions to prevent profit shifting and tax base erosion, ensuring that companies pay appropriate taxes on income generated within Turkish borders.

The Turkish transfer pricing regime is primarily governed by Article 13 of the Corporate Tax Law and implementing regulations issued by the Ministry of Treasury and Finance. These provisions require that all transactions between related parties be conducted at arm’s length, meaning the terms should reflect what independent parties would agree upon under similar circumstances.

1. The Core Principle: The Arm’s Length Standard

The cornerstone of Türkiye’s transfer pricing legislation, enshrined in Article 13 of the Corporate Tax Law (CTL) No. 5520, is the Arm’s Length Principle.

Defining the Principle

The principle mandates that all intercompany transactions between related parties must be priced as if they were conducted between independent, unrelated parties under similar circumstances.

• Related Parties: For Turkish TP purposes, related parties include a corporation’s own shareholders, or any real or legal person related to the shareholder through a direct or indirect shareholding, with a minimum 10% shareholding ratio or the existence of direct or indirect control.
• Consequence of Non-Compliance: If a taxpayer engages in intercompany transactions at prices inconsistent with the Arm’s Length Principle, the related profits are deemed to be a “disguised profit distribution through transfer pricing.” This amount is added back to the Turkish company’s tax base, denied as a deductible expense, and can be subject to corporate tax and potential withholding tax (typically 15% on the deemed dividend).

Acceptable Transfer Pricing Methods

Turkish regulations, heavily influenced by OECD guidelines, recognize the following primary methods for determining an arm’s length price:

1. Comparable Uncontrolled Price (CUP) Method: Compares prices or margins of controlled transactions to those of comparable uncontrolled transactions.
2. Resale Price Method: Subtracts an appropriate gross profit margin from the resale price to an unrelated third party.
3. Cost-Plus Method: Adds an appropriate gross profit mark-up to the cost incurred by the supplier in the controlled transaction.
4. Transactional Net Margin Method (TNMM): Compares the net profit margin realized by a related party from a controlled transaction to the net profit margin earned by an independent enterprise from comparable transactions.
5. Profit Split Method: Divides the combined profits or losses from controlled transactions between related parties based on their relative contributions.

The chosen method must be the one that most appropriately reflects the Arm’s Length Principle based on a detailed functional analysis (Functions performed, Assets used, and Risks assumed—FAR analysis).

2. The Modern Compliance Framework: OECD’s Three-Tier Documentation

In a significant move to align with BEPS Action 13, Türkiye adopted the Three-Tier Transfer Pricing Documentation Model in 2020. This structure requires multinational enterprise (MNE) groups to provide a complete and consistent view of their global operations and transfer pricing policies.

A. The Master File

The Master File provides a high-level overview of the MNE group’s global business and its overall TP policies.

• Who Must Prepare: Corporate taxpayers who are part of a multinational enterprise group and whose year-end balance sheet assets and net sales revenue in the preceding fiscal period both amount to TRY 500 million and above are required to prepare a Master File.
• Content: It details the group’s organizational structure, a description of the business (including key drivers of profit and value creation), the MNE’s overall TP policy, the group’s intangibles, and intercompany financial activities.
• Submission: It must be prepared by the end of the second month following the filing deadline for the corporate tax return (typically by the end of June) and submitted to the Turkish Tax Authority upon request.

B. The Local File (Annual Transfer Pricing Report)

The Local File focuses specifically on the Turkish entity’s related-party transactions and why those transactions are considered to be at arm’s length.

• Who Must Prepare:
  • Large Taxpayers (registered with the Large Taxpayers Office) and those operating in Free Trade Zones: Must prepare an annual report for both domestic and cross-border related-party transactions.
  • All Other Corporate Taxpayers: Must prepare an annual report for their cross-border related-party transactions only.
• Content: It includes specific details on the local company’s management structure, a detailed FAR analysis for the local entity, information about controlled transactions, the TP method selected and applied, and a benchmarking analysis (comparability study).
• Submission: The Local File must be prepared before the deadline for filing the annual Corporate Income Tax Return (typically April 25th for a calendar year), and must be submitted to the tax authorities upon request.

C. Country-by-Country Reporting (CbCR)

CbCR provides tax authorities with an aggregated, country-level view of an MNE’s allocation of revenue, profit, tax paid, and certain indicators of economic activity.

• Who Must File: The ultimate parent entity of a multinational enterprise group resident in Türkiye must electronically submit a CbCR if the group’s total consolidated group revenue in the preceding fiscal period exceeded EUR 750 million (or its Turkish Lira equivalent).
• Content: It includes key financial and tax information for each jurisdiction where the MNE operates, such as revenues, profit/loss before income tax, income tax paid, and number of employees.
• Submission: The CbCR must be submitted electronically by the end of the twelfth month following the end of the relevant fiscal year.

3. Additional Compliance & Risk Mitigation

Compliance for multinational companies in Türkiye extends beyond the three-tiered documentation to include statutory forms and strategic risk mitigation tools. Successfully managing your tax registration and filing obligations is paramount.

Transfer Pricing, Controlled Foreign Corporation, and Thin Capitalization Form

All corporate taxpayers engaging in related-party transactions exceeding a total transaction volume of TRY 30,000 must electronically submit a comprehensive form (Transfer Pricing, Controlled Foreign Corporation, and Thin Capitalization Form) as an attachment to their annual Corporate Income Tax Return. This form requires disclosing information on related parties, transaction volumes, and the TP method used.

Advance Pricing Agreements (APAs)

To achieve certainty and prevent protracted disputes, MNEs can enter into an Advance Pricing Agreement (APA) with the Turkish Revenue Administration (RA).

• Purpose: An APA is an agreement that pre-determines the appropriate transfer pricing method and its application to specified future related-party transactions over a fixed period.
• Scope: APAs are limited to cross-border related-party transactions and can be unilateral (involving only the Turkish RA), bilateral (involving the Turkish RA and a foreign tax authority), or multilateral.
• Benefit: Successfully obtaining an APA can save significant time and resources by preemptively resolving potential TP disputes, offering long-term tax security.

Penalties and Reductions

While there are no specific transfer pricing penalties for non-submission of the documentation itself, the Turkish Tax Procedural Law’s general irregularity penalties apply. Crucially, if the Turkish tax authorities assess additional tax due to the application of non-arm’s length prices:

• Penalty Reduction: If the Master File and Local File requirements are fulfilled timely and properly, the tax penalty imposed will be reduced by 50%. This serves as a powerful incentive for rigorous documentation.

4. Strategic Importance for Foreign Investors

For foreign investors planning their presence in Istanbul or anywhere else in the country, understanding the nuances of TP rules is a fundamental component of effective corporate governance from the outset.

Whether your MNE chooses a limited liability company formation or a joint stock company formation, the complexity of intercompany transactions involving capital, services, and technology dictates that robust TP planning must be integrated into your initial setup and ongoing management.

A smooth company formation in Türkiye process, including the submission of all required documents for company formation, is inextricably linked to subsequent tax compliance success.

Engaging experienced Turkish company formation lawyers is essential not only for establishing the company’s legal framework but also for drafting intercompany agreements and preparing the mandatory three-tiered TP documentation.

Contact us for Expert Transfer Pricing Guidance in Türkiye

Navigating Türkiye’s transfer pricing regulations requires specialized expertise in both Turkish tax law and international taxation principles. Since 2017, Finlexia Turkish Accounting Firm has provided multinational companies with comprehensive transfer pricing advisory services, helping clients achieve compliance while optimizing their operational structures.

Our multilingual team of experienced professionals understands the challenges facing international businesses operating in Türkiye. We offer end-to-end support, from initial company formation and structuring advice to ongoing transfer pricing documentation, APA applications, and representation during tax audits.

Contact Finlexia Turkish Accounting Firm today to discuss how we can support your transfer pricing compliance and strategic planning objectives in Türkiye. Our deep understanding of Turkish regulations, combined with our international perspective, ensures that your business n