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Advance pricing agreements

Availability and eligibility

Are advance pricing agreements with the tax authorities in your jurisdiction possible? If so, what form do they typically take (eg, unilateral, bilateral or multilateral) and what enterprises and transactions can they cover?

Advance pricing agreements (APAs) with the tax authorities are possible in Turkey, whether unilateral, bilateral or multilateral, although only corporate taxpayers can currently enter into APAs. All corporate taxpayers, without any exceptions or limits, may request an APA from the Turkish Revenue Administration for only the cross-border transactions with their non-resident entities or related parties to determine the transfer pricing method to be used. Domestic transactions of corporate taxpayers cannot be included in APAs.

Also, it is possible to request an APA regarding transfer pricing for transactions that occur among the corporate taxpayers operating in the free trade zones of Turkey and other corporate taxpayers in the scope of related parties.

Although personal income taxpayers are subject to transfer pricing regulations, they cannot request an APA, whether for internal or cross-border transactions.

Rules and procedures

What rules and procedures apply to advance pricing agreements?

The initial step in any APA is for the taxpayer to make a written request to the tax administration. The taxpayer must submit documents containing the necessary information for the request to be deemed an acceptable method by the Turkish Revenue Administration for related-party transactions.

The Turkish Revenue Administration then examines the documents submitted and decides whether an APA for those transactions is legally possible.

If the answer is positive, the evaluation stage follows. The taxpayer completes any missing items for the APA if the Turkish Revenue Administration requires further information at this stage; the administration also starts to investigate the conditions surrounding the APA. The administration then moves on to the analysis stage.

During the analysis stage, the authorities examine comparable transactions, functions performed, assets used, risks assumed, other adjustments, applicable method(s), critical assumptions and the choice and assessment of other essential elements.

After this, the authorities either:

  • accept the taxpayer’s request;
  • accept the request provided that some changes are made; or
  • reject the request completely.

If the request is denied, the tax authorities will return all the documents submitted by the taxpayer.

The final step consists of signing an official APA, which remains confidential between the tax authorities and the parties involved (ie, it is not disclosed to third parties).

Required information and documents for an APA

The basic information and documents that taxpayers requesting an APA should present to the Turkish Revenue Administration are:

  • a written application containing the period of arrangement to consider, the names, ID numbers, addresses and telephone numbers of the taxpayers or their representatives who will be involved in the arrangement process, the taxpayers’ line of business, structure of organisation (headquarters and branches), shareholders, capital structure, sector, summaries of economic and legal background, definitions of related parties and ownership relations of related parties;
  • all information related to the functions and risks of the company and the assets that are used;
  • documents and reasons related to critical assumptions (suggested transfer pricing method and explanations, analysis and other works based on the choice and application of this method);
  • information related to intangible property ownership and payments of royalties or intangible rights;
  • if the related parties use different accounting standards and methods, information related to these standards and methods;
  • the price list for the fiscal period;
  • the cost of production for the fiscal period;
  • the intercompany pricing policy applied to transactions between related parties;
  • information about the volumes of controlled and uncontrolled transactions during the fiscal period, including transaction dates and invoices, bank slips and similar documents;
  • related parties’ financial statements from the previous three years, copies of income or corporate tax returns and copies of agreements about foreign transactions;
  • financial data and documents of the previous three years supporting the suggested transfer pricing method;
  • if there are two or more comparable transactions, the arm's-length range and the method used to determine that range; and
  • any other documents required to determine the arm’s-length price.


How long does it typically take to conclude an advance pricing agreement?

The APA process may take years because of the complexity of related-party transactions and the difficulty to obtain adequate information promptly. To avoid such delays, it is useful for taxpayers to submit adequate documents and information, as requested by the Turkish Revenue Administration.

What is the typical duration of an advance pricing agreement?

 Currently, an APA can be requested for future years and the maximum duration of an APA is three years under Article 13 of the Corporate Income Tax Law. However, a roll-back mechanism is applicable which allows taxpayers to sign an APA for the previous five tax calendar years. 


What fees apply to requests for advance pricing agreements?

There is no application fee to request an APA in Turkey.

Special considerations

Are there any special considerations or issues specific to your jurisdiction that parties should bear in mind when seeking to conclude an advance pricing agreement (including any particular advantages and disadvantages)?

A pre-filing meeting with the Turkish tax authorities is possible to discuss any issues. Accordingly, it is possible to take the tax authority’s opinion regarding the subject or the industry. This can be done anonymously and does not mean that the taxpayer requesting the tax authorities’ opinion must apply for an APA.

Requesting an APA does not necessarily mean that the tax authorities will commence a transfer pricing audit on the related-party transactions of the applicant. Transfer pricing audits and APAs are different processes and should be considered separately. In this sense, if an APA application has not been completed yet, a taxpayer that requested the APA may be subject to a transfer pricing audit. Likewise, a taxpayer can apply for an APA during a transfer pricing audit.

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