Topic is : Recent Regulation of Transfer Pricing for Domestic Subsidiaries of Multinational Corporates
Related parties: Corporate shareholders, penetrable corporates or real person, partner of shareholders, children, lineal kinship of partner and partner of shareholders, collateral kinship, kinship by marriage or transactions between the countries announced by Turkish government.
Main entity: Main entity is the legal entity who have to declare its own consolidated financial statements.
Proxy corporate: Local corporate or entity of international main entity or subsidiary of main entity.
If a domestic subsidiary of multi-national main entity has a transaction defined as transfer pricing process then the domestic subsidiary of multi-national main entity have to fill “transfer pricing and penetrated corporate and hidden capital form” at the attachment of every corporate tax declaration till end of April of every fiscal year.
A country distributors is assumed of related party of a corporate. But otherwise, transactions ensured on dealer contract between a distributor and a dealer is not subject to transfer pricing. Non-ensured other transactions on the dealer contract have to been reported on “annual transfer pricing report”.
Also, a domestic subsidiary of multi national main entity have to prepare an “annual transfer pricing report” by itself for every financial period until the end of next April. This second report type should be prepared by subsidiary of multi-national main entity itself. Because only subsidiary of multi-national main entity knows detailed pricing policies and its business strategies that’s why we suggests.
A subsidiary of multi-national main entity have to prepare annual transfer pricing report for its over-seas transactions but Domestic subsidiary of multi-national main entity have to deliver the report in fifteen days if tax office demands it. Also, the report don’t have to contain domestic transactions but documents of the domestic transactions have to kept by the domestic subsidiary of multi-national main entity in case of tax office demands it.
The difference between transaction price and value of equal have to be negative to claim hidden profit sharing via transfer pricing. The negative difference between transaction price and value of equal means hidden profit sharing. The hidden profit sharing/negative differences are subject to local dividend taxing regulations.
On the other hand, every transaction between the countries announced by president of republic is subject to annual transfer pricing report.
Salary excluded transactions between the domestic subsidiary of multi-national main entity and employees are subject to transfer pricing report.
To check a sample transfer pricing report, click here.
An annual transfer pricing report includes a comparability analysis. A comparability analysis covers below articles.
- Goods and service qualifications,
- Risk analysis,
- Economics condutions,
- Business strategies,
- Price range of value of equal,
If you don’t have inner equal transaction to find out value of equal then look outside equal transations. All working paper have to been kept due to tax investigations and other inquires. Transfer pricing report have to be prepared annual basis at the end of April of next fiscal year.
Transfer pricing report could be prepared in a foreign language but Turkish translation is mandatory to deliver tax office. There is no obligation to report employee transations but the report have to been delivered to tax office in case of tax office demands it.
Cost plus method is usable if there is not usable comparable price. If there is no usable method then corporate could be create itself statics method.
A corporate loss is mandatory to claim a hidden profit sharing. The loss should be evaluated on each transation basis instead of bottom result.
According to 2151 numbered president decree new regulation changes implements new two reports which standardised with OECD regulations such as general report and country basis report . There was already regulation for “annual transfer pricing report” from 2007.
This report is mandatory if a domestic subsidiary of multi-national main entity has 500 Million TRY asset and 500 Million TRY net sales altogether. The report have to been prepared at the end of next fiscal year as annual basis. First general report is going to be prepared for 2019 fiscal year. General report have to cover such as:
- organisation structure of multi-national corporate from the point of main entity,
- activity definations,
- owned intangible rights,
- intragroup financial transaction definations,
- fiscal and taxing statements,
A main entity who its consolidated assets and annual net sales are higher than 750 Million Euro have to prepare and deliver country basis report electronically to tax office till end of next fiscal year. The domestic subsidiary of multi-national main entity have to prepare country basis report as proxy instead of main entity if its country of main entity does not exchange tax infomations with Republic of Turkey according to a multi-national double tax prevent agreement. International double taxation agreements have to been evaluated to obtain the domestic subsidiary of multi-national main entity of responsibilities. If there is a obligation to report it then domestic subsidiary of multi-national main entity have inform tax office in six months. Country basis report contains below requirments as summary.
- Financial statements includes income, loss/profit report before taxing, paid income/corporate taxes, accrued income/corporate taxes, capital, deffered profits, employee numbers, cash statement, cash exempt other tangible assets,
- Country basis local entity name/business name,
- Avarage of previous year before reporting year Turkish central bank purchase foreign currency rates have to been used to exchange to report the country basis report Euro if main entity financial statements prepared different than Euro.
- Turkish language is mandatory.
Preparing this report is mandatory from 2008 fiscal year for corporates. Annual tranfer pricing report have to be prepared at the end of April next fiscal year. Delivering the annual transfer pricing report to tax office is mandatory if tax office demands it. The report have to prepared for every fiscal year as annual basis. Annual transfer pricing report covers below requirments;
- General information about domestic subsidiary of multi-national main entity,
- General information about related persons,
- Transation details between related persons,
- Detailed analysis for the transations are subject to annual transfer pricing report.
Please click here to see a detailed official sample annual transfer pricing report.
- A domestic subsidiary of multi-national main entity have to prepare its annual transfer pricing report at the end of every next April with guideline of its CPA and its consultants.
- A domestic subsidiary of multi-national main entity don’t have to prepare general report if its financial assets volume and net sales amounts are lower than 500 Million TRY. Vice versa,
- A domestic subsidiary of multi-national main entity does not have to prepare country basis report because there is an ensured international double taxation prevent agreement between Republic of Turkey and country of main entity. Vice versa,
- A domestic subsidiary of multi-national main entity must not perform any transaction with its dealers which are not subject to dealer contracts. Otherwise the transactions which excludes dealer contracts have to been reported on annual transfer pricing report.
- A domestic subsidiary of multi-national main entity must not perform any transactions with its employees excludes salary payments. Inherently, contrary situtations have to been reported.
- Preparing annual transfer pricing report is team-play. Because it needs local accounting/financial knowladge, detailed global pricing policy and global and local business strategies informations.https://www.facebook.com/muhasebebilenlertoplulugu/
CPA Intern/ Aday Meslek Mensubu