Our comprehensive services are based on the assessment, planning and management of fiscal risks of multinationals, holding and group companies of all sizes. GRANIT assists its clients in documenting transfer pricing policy in accordance with the standards contained in not only the Turkish Transfer Pricing Rules but also OECD Transfer Pricing Guideline and local country transfer pricing regimes.
Our transfer pricing services are structured on the overall value chain as
“Company and Industry Analysis”
* Functions performed, risks assumed and asset employed,
* Analysis of responsibility centers, expense centers, cost centers, revenue centers, profit centers and investment centers,
* Analysis of business processes; procurement, intake and trading, processing, marketing and sales, logistics,
* Tangible Assets and Intangible Assets (IP)
* Risks of product liability, operating, warranty, market, currency, inventory, credit, capacity, liquidity, logistics and environmental
“Transfer Pricing Policy”
* Price settings, price and/or profit checking,
* Transfer price calculation
* Selection of the most appropriate TP method
* Comparables search,
* Selection of comparables and database,
* Financial analysis, inter-quartile range and other statistical methods
* Analysis of comparable company results for an arm’s lenghts compensation
The Turkish TP Rules
In Turkey, transfer pricing regulations introduced by The Turkish Corporate Income Tax Code on the basis of OECD Transfer Pricing Guideline.
If a taxpayer enters into transactions regarding sale or purchase of goods and services with related parties, where the prices are not set in accordance with arm’s length principle, then related profits are considered to be distributed in a disguised manner through transfer pricing. Such disguised profit distributions through transfer pricing are not accepted as tax deductible for corporate income tax purposes.
The expression “purchase or sale of goods or services” is used in a broad sense and includes all economic, commercial or financial transactions and employment relations between related parties.
In the text of the Code, related parties are defined as:
• Companies’ own shareholders and corporations and individuals that are related with those shareholders; and,
• Corporations and individuals who are directly or indirectly controls or controlled by the company via management, supervision or capital.
Additionally, spouses of the shareholders, siblings and ancestors of the shareholders and up to third decree (inclusive) natural and in-law relatives of the shareholders are considered as related parties in the new law.
Transactions with parties resident in the countries or regions which are deemed to cause harmful tax competition by the Council of Ministers are considered as if they have been carried out with related parties.
The arm’s length principle is defined as applying the same prices for the purchase or sale of goods or services between related parties as the prices that would be determined had the same transactions were carried out between unrelated enterprises. In other words; in accordance with the arm’s length principle, the prices agreed upon between related parties should be established as if these parties were acting as unrelated parties. As an indirect test of compliance with this principle, research of comparable companies will be performed in order to compare remuneration of the tested parties within the client group with the remuneration realized by independent entities involved in similar activities.
Corporations are free to determine their transfer prices by applying one of the methods stated in the law, which is most suitable for their transactions.
Prescribed methods in the law are the traditional transactions methods described in the OECD transfer pricing guideline.
• Comparable Uncontrolled Price Method
Arm’s length price should be determined by comparing the price charged for goods or services transferred among related parties to the price charged for comparable goods or services transferred in a comparable transaction among unrelated parties.
• Cost-Plus Method
Arm’s length price shall be calculated by increasing the relevant costs of goods and services with a reasonable rate of gross margin.
• Resale Price Method
Arm’s length price shall be calculated by deducting an appropriate rate of gross margin from the price that is to be applied in the event of resale of the goods or services in the market to third parties.
Companies can also use methods to be determined by themselves, other than those cited in the new law, if it is not possible to apply the methods stated therein.
There is no priority among the methods, thus whichever method that is best suitable to any given transaction should be used.
It is also possible to have an advance pricing agreement with the Ministry of Finance regarding transfer pricing policies of a corporation, at the discretion of the taxpayer. If the relevant conditions do not change, then the agreement will be in effect for a maximum period of three years. The agreement will be binding for both the tax administration and the taxpayer and thereby will provide certainty for both parties.
The profit distributed in a disguised manner through transfer pricing will be reclassified as dividends distributed and necessary adjustments on taxes will be made at the hands of the party receiving the deemed dividends. In order to make adjustments in this respect, the taxes assessed in the name of the company distributing dividends in a disguised manner must be finalised and paid.
The details and procedures regarding transfer pricing were set out by the Council of Ministers and the Ministry of Finance.
The companies which entered in any transaction with the related parties have to fill and submit a specific decleration form on thesetransactions. These companies are also obliged to prove the nature and the reasons of the transactions as well as chosen transfer pricing method by a certification report.
GRANIT delivers Transfer Pricing Planning/Feasibility services and prepares a detailed Report which covers; Functional Analysis and Economic Analysis/Benchmarking analysis, definition and classification of the entity, guidance on the function, risk and asset profile settings, benchmarking study to identify the arm’s length range for the Turkish/European entity for reference, assessment of the best transfer pricing method proven, and “incremental cost/tax” on the transaction, and APA (Advance Pricing Agreement) ruling versus Transfer Pricing Certification in Turkey.
Examples of our transfer pricing services delivered include, but not limited to:
• Design of global transfer pricing systems based on sound economics
• Preparing and managing global transfer pricing documentation, including defining disclosure policies
• Implementation of all intra-group service charges, whether cost based or value based, e.g. for high value adding centralized procurement services
• Assessment, planning and management of international transfer pricing risks
• Design, implementation and documentation of transfer pricing systems for treasury departments and Ministry of Finance
• Design and implementation of research and development cost sharing arrangements
• Management of transfer pricing controversy
• Advance Pricing Agreements
• A “coaching model” which allows multinationals/group companies with their own transfer pricing professionals to use GRANIT to discuss ideas and for the exchange of best practice in Turkey.
GRANIT and Transfer Pricing Associates provide specific services designed to address the particular needs of selected industries in Turkey.
Also GRANIT runs an informative website about Transfer Pricing which can be found at;