Although the legislative work regarding CbCR regulations in Turkey (country-by-country reporting) for OECD BEPS Action 13 was completed with Presidential Decree no. 2151 effective from 25 February 2020, some amendments came into force on 1 September 2020 and deadlines were extended on 17 December 2020.
Presidential Decree no. 2151
In accordance with Presidential Decree no. 2151, which was announced on 25 February 2020 and became effective the same day, CbCR regulations in Turkey were implemented within the scope of transfer pricing documentation requirements. These CbCR regulations in Turkey include, among others:
- applicability of the CbCR preparation requirement for the Turkish-resident ultimate parent company of a Multinational Corporation (MNC) that has total consolidated annual revenue of EUR 750 million or above in the previous fiscal year;
- information regarding the method and deadline of the CbCR submission;
- the necessary information the CbCR should include;
- information regarding the necessary conditions, deadline and method of the CbCR submission by the Turkish-resident MNC group member company (or one of the Turkish-resident MNC group member companies on behalf of the others, if there is more than one);
- information regarding the CbCR submission notification liability of Turkish-resident members of MNC that meet the CbCR requirements;
- detailed information regarding the calculation of the EUR 750 million threshold.
Transfer Pricing General Communique no. 4
Following this Presidential Decree, Transfer Pricing General Communique no. 4 was also published the same day in Turkey and took effect as of 1 September 2020. Communique no. 4 includes amendments and additional explanations with respect to the above-mentioned CbCR regulations in Turkey. The most important amendments are as follows:
- The EUR 750 million threshold should be calculated by adding up the total income, revenue and profit amounts that are shown separately in the consolidated financial tables of the MNC.
- If the consolidated financials of an MNC are prepared using a currency other than the EUR, this should be indicated in the corresponding CbCR.
- If the ultimate parent company or the surrogate parent company of an MNC does not have tax residency in Turkey, and the EUR 750 million threshold definition is in their local currency, the local currency equivalent of EUR 750 million should be taken into consideration during the calculation of the threshold.
- If the ultimate parent company of an MNC is tax resident in Turkey, even though the CbCR is submitted in a different jurisdiction by the surrogate parent company of the MNC in accordance with the legislation of the corresponding jurisdiction, it is still mandatory to submit the CbCR in Turkey as well.
- One important step towards digitalisation in CbCR regulations in Turkey is that the CbCR should be submitted via BTRANS (Information Transfer Platform of the Revenue Administration in Turkey) in xml format. Taxpayers should request a user code and password from the registered tax offices. Necessary information and instructions regarding the file formats that can be used are given in BTRANS. BTRANS applications are available on the website of the Turkish Revenue Administration and this application should be completed by the taxpayers, uploading their files to BTRANS in order to be able to start uploading.
- Another new element of the CbCR regulations in Turkey is that an independent accountant financial advisor or a sworn financial advisor (if a service agreement is signed with the taxpayer) can also submit Annex-5 “Notification Form for Country-by-Country Reporting” and Annex-6 “Country-by-Country Report” on behalf of the taxpayer.
- The deadline for the annual notification forms of the years after FY2019 (FY2020 and the special accounting years that begin after 1 January 2020) is 30 June of the following year.
- The CbCR notifications should be submitted electronically every year via the Internet Tax Office. Taxpayers need to request a user code and password from the relevant tax office where they are registered.
- There is an update to the format of the notification form, and so this updated, new notification form should be submitted.
- MNC groups are allowed to make a deadline extension request to the Turkish Tax Authority if their financials for the previous fiscal year have not been consolidated in time. This notification should also include a petition including an explanation in this respect.
- A one-month extension of the notification submission deadline can be granted to make corrections and resubmit the notification if any information is missing or incorrect. If the resubmission is not made after this one-month extension, a tax penalty in line with the Turkish Tax Procedural Law will be imposed.
Circular on Implicit Profit Distribution Through Transfer Pricing / 2
In accordance with the “Circular on Implicit Profit Distribution Through Transfer Pricing / 2” dated 17 December 2020, some elements of the CbCR regulations in Turkey have been amended. Thus the deadline of the
- first CbCR submission for the accounting period 2019 and the
- first CbCR submission for the special accounting period expiring in January 2020, which must be filed via BTRANS by the end of January 2021,
has been extended until 26 February 2021.
If you would like to know more about transfer pricing issues and CbCR regulations in Turkey, please visit the homepage of WTS Turkey!