Transfer Pricing in Turkey
Transfer pricing rules in Turkey require that transactions between related parties — such as a Turkish subsidiary and its foreign parent company — are priced as if they were carried out between independent parties. This is known as the arm’s length principle. For foreign-owned companies, transfer pricing is one of the most closely examined areas in a tax audit.
Note: transfer pricing thresholds, documentation requirements and penalties are updated regularly. Always confirm the current rules with your accountant before preparing documentation.
What is transfer pricing in Turkey?
Transfer pricing refers to the pricing of goods, services, loans, royalties and other transactions between related parties. Under Turkish Corporate Tax Law, if these transactions are not conducted at arm’s length, the resulting profit shift may be treated as a disguised distribution of profit and taxed accordingly.
Who is considered a related party?
Related parties generally include parent companies, subsidiaries, shareholders and their relatives, and any company connected through direct or indirect control or shareholding. Cross-border transactions with a foreign parent or sister company fall squarely within the scope of the rules.
What transfer pricing methods are accepted?
Turkey follows methods aligned with the OECD Transfer Pricing Guidelines. Companies must select the most appropriate method for each transaction.
| Method | When it is typically used |
|---|---|
| Comparable Uncontrolled Price (CUP) | When comparable independent transactions exist |
| Cost Plus | Manufacturing or service provision with measurable costs |
| Resale Price | Distribution activities |
| Transactional Net Margin (TNMM) | When direct comparables are limited |
| Profit Split | Highly integrated operations |
What documentation is required?
- An annual transfer pricing report covering related-party transactions.
- The transfer pricing form attached to the corporate tax return.
- For companies within multinational groups, a master file and country-by-country reporting may also be required above certain thresholds.
Documentation must be prepared in time and presented to the tax authority on request. Failure to maintain proper documentation can lead to penalties and the loss of penalty protection.
What happens if transactions are not at arm’s length?
If the tax authority concludes that related-party pricing has shifted profit out of Turkey, the difference can be reclassified as a disguised distribution of profit. This may trigger additional corporate tax, dividend withholding tax and penalties, so accurate pricing and documentation are essential.
Frequently Asked Questions
Does transfer pricing apply to small foreign-owned companies?
Yes. The arm’s length principle applies regardless of company size, although documentation thresholds and the depth of reporting can vary based on transaction volume and group structure.
Are management fees charged by the parent company covered?
Yes. Intra-group services such as management fees, royalties and interest on intra-group loans are all subject to transfer pricing rules and must be supported by documentation.
How often should transfer pricing documentation be prepared?
Documentation is generally prepared annually, aligned with the corporate tax return, and should be updated whenever transactions or business circumstances change significantly.
Related Guides
- Corporate Tax in Turkey: A 2026 Guide
- Dividend Distribution and Taxation in Turkey
- Withholding Tax in Turkey: A 2026 Guide
- Tax Compliance & Tax Services in Turkey
Need help preparing transfer pricing documentation for your Turkish operations? Contact our team to discuss your related-party transactions and compliance requirements.