If you purchase goods or services, take loan or credit, pay license, brand or patent fees or get exposed to different cost charge-outs from your organization’s branch, main shareholder, group firms, main distributor, owner of the organization and/or relatives of the managerial staff; YOU HAVE RELATED PARTY TRANSACTIONS!

If you have transactions with related parties, you must declare them in the Corporate Income Tax (CIT) declaration and prepare the necessary explanations, evidences, analysis and documentation for explaining that at those transactions, you have used prices that are in line with the market and with the prices of other unrelated companies.

False. Domestic or foreign, any related party transaction’s explanation, analysis and related evidences may be asked by the Tax Office. Any kind of foreign and free trade zone related party transactions must be within the related TP report. In case of domestic related party transactions, the concept of Treasury Loss will be examined and investigated.

The prices that are used within your related party transactions should be in line with the ones in the market, in line with precedents and in line with the prices used at unrelated party transactions.

The main objective of the Transfer Pricing Legislation is to prevent Base Erosion and Profit Shifting (BEPS), preventing any kind of Disguised Profit Transfer and ensuring every organization to pay the deserved amount of taxes at the right time and at the place, where the profit is earned.

Your company’s refrainment from disguised profit shifting is not enough alone. According to the Transfer Pricing Regulation, you must prove this fact with proper/required documentation and demonstrate that the organization comply with the TP regulations

The communiqués define different, various pricing methods. If there is not a comparable price, profitability rates should be compared..

Each country demands the Annual TP Report and the strategy in accordance with their TP legislation. In Turkey, A SEPARATE REPORT WHICH MUST BE IN TURKISH must be prepared in accordance with Communiqués of the Ministry of Finance.

When the officials request the TP report, they do not only wish to see that year’s report but asks for a completion of PAST 5 YEARS’ and the time sequence to share these 5 years’ report is just 15 DAYS IN TOTAL. TP reports, as its nature requires, are COMPREHENSIVE, has LOGICAL INTEGRITY and should be CONSISTENT with each other. On the other hand, these reports are the organizations’ own declaration to the Tax Office, the only document that can defend the organizations’ style of making business. When the report is requested by the officials, the given time will definitely be too short and it will be too late to prepare a good, strong report.

The Tax Office houses experienced professional on the subject of Transfer Pricing. Therefore, reports with inadequate disclosures and poor evidences will and can easily be REJECTED. As a result of this rejection, the Tax Office, itself will define and calculate how the related party transactions’ pricing should be and eventually the organization will face TAX PENALTIES and also will pay the accumulated INTEREST RATE. At the end, the organization might probably be exposed to a GENERAL INVESTIGATION by the Tax Office, this time they will be investigating the whole transactions and financials of the organization.