Market overview

As a founding member of the OECD, Turkey is usually a fast adopter of its recommendations. The provisions from the organisation's BEPS Project have not been the exception to this general rule.

On March 16 2016 the Turkish Tax Administration released draft Communiqué No. 3 on disguised profit distribution through transfer pricing, which had the aim of implementing BEPS Action 13 on country-by-country reporting (CbCR), which will require multinationals to prepare reports for the 2016 financial year, to be submitted in 2017.

The communiqué will also require Turkish corporate taxpayers with assets and net sales of and above 250 million Turkish lira ($85 million), to prepare a master file which will need to include details of the organisational structure of the multinational group, a description of the business activities of the group, details of intercompany financial transactions, list of intangibles owned and the financial and tax position of the group.

A variety of other TP concepts have been introduced via Communiqué No. 3, including "location savings and other local market features", "assembled workforce" and "group synergies" to be taken into consideration when undertaking TP comparability analysis. As well as new rules about cost comparability arrangements.

Broadly speaking the measures that have been introduced are in line with BEPS Actions 8-10 as well as 13, and are aimed at preventing abuse through claims that a business activities are taking place outside of Turkey, hence the references to workforces and local market features.

This raft of new TP measures will increase the compliance burden for multinationals operating in the jurisdiction, and advisers in Turkey are expecting an increase in the amount of compliance work they have to do as a result.

It is not clear yet however what the tax authorities' stance will be when it comes to enforcing these new TP rules, and whether they will allow companies time to bed in with the new requirements, or begin aggressively auditing companies and enforcing the requirements as soon as they come into force.

Tax authorities

Republic of Turkey Presidency of Revenue Administration Department of Taxpayer Services
Maliye Bakanlığı Gelir İdaresi Başkanlığı
Dikmen Cad. Merasim Sok. 06450 Çankaya / Ankara
Tel: +90 312 415 30 00
Fax: +90 312 415 28 21-22
Website: www.gib.gov.tr

Tax rates at a glance

(As of January 1 2016)

Corporate income tax rate 20%
Capital gains tax rate 20%
Branch tax rate 20%
Withholding tax
Dividends 15%
From repurchase (REPO) agreements 15%
From deposit accounts 15/12/13/15/18%
From loans 0/10%
From Turkish government bonds and bills private sector bonds 0/10%
From private sector bonds
Issued in Turkey 0/10%
Issued abroad 0/3/7/10%
Royalties from patents, know how, etc 20%
Professional fees
Petroleum-exploration activities 5%
Other activities 20%
Progress billing on long term construction and repair contracts 3%
Payments on financial leases 1%
Real estate rental payments 20%
Branch remittance tax 15%
Net operating losses (years)
Carryback 0
Carryforward 5

Source: EY 2016 Worldwide Corporate Tax Guide

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