New transfer pricing regulations: Turkey finalises Country-by-Country reporting requirements for multinationals

In a bid to increase transparency by tackling base erosion and profits shifting (BEPS), Turkey has mandated that certain multinational enterprises (MNEs) submit a Country-by-Country (CbC) report as introduced in BEPS Action 13.

The preparation and delivery of each CbC report will not only require extensive work compiling the relevant accounting data, but a deep understanding of the CbC reporting requirements of each jurisdiction will be necessary. MNEs will need to untangle the web of automatic exchange relationships between tax authorities to identify the relevant reporting entities and deadlines for both notifications and submissions in those jurisdictions the MNE is present.

In parallel with the global implementation of CbC reporting, the Turkish Revenue Administration has ratified Draft legislation on reporting for 2019 and subsequent years. As per Presidential Decision 2151 (25 February 2020) and published in the Official Gazette (number 31050), this legislation enacts transfer pricing reporting standards in line with Action Plan 13 of BEPS.

In addition, further clarification of the three-tiered reporting standards (e.g. Country-by-Country Reporting, Master File and Local File) was delivered through Communiqué Serial No. 4 Amending the General Communiqué on Disguised Profit Distribution Via Transfer Pricing.

In summary, the General Communiqué mentioned above provides general information and definitions in line with OECD TP Guidelines while other technical issues and reporting requirements still need further clarification and guidance.

Regarding CbC reporting, two obligations remain for taxpayers that are part of a multinational group with consolidated group revenue of EUR 750 million or more.

The first obligation is notification. The deadline for notifications (to be submitted via the Internet Tax Office at www.gib.gov.tr. for the FY19 report) is 30 October 2020, 23:59 pm.

The second obligation is the CbC report itself. The deadline for submitting the CBCR for FY19 report is 31 December 2020. This date can be applied differently for groups having a different reporting year). The deadline for filing the CbCR, however, can be no later than 12 months following the closing of the fiscal year of the Ultimate Parent Entity (UPE).

CBC reports must be sent electronically via the BTRANS platform. To access this platform, passcodes and usernames should be requested via a signed petition. It should be noted that a BTRANS petition has not yet been announced.

A vital issue for submission of CbC reporting is the reporting entity concept. As of September 2020, Turkey has not yet signed a CbC MCAA (Multilateral Competent Authority Agreement on the exchange of CbC). As a result, CbC reports, regardless of where the Ultimate Parent Entity (UPE) is resident, should be submitted by the reporting entity via a local filing.

The Communique states that if there is more than one constituent entity in a MNE Group in Turkey, one reporting entity should be assigned for both notification and reporting under the condition that the other constituent entities are specified in the notification form.

Local taxpayers will fulfil the compliance burden of CbC reporting. As a result, it is important for Turkish tax-resident companies to manage TP compliance management according to the following steps and deadlines:

• Assessment whether they are obliged to prepare Country-by-Country report, Master File or local file reports considering the thresholds explained in the Communique.
• Collect necessary information to meet the 30 October deadline of notification of the CbC.
• Determination of the reporting entity if there are more than one group entity in Turkey.
• Activate a BTRANS account by applying to the Turkish Revenue Administration.
• Getting the prepared CbC report from the UPE (or the preparation of CbC Report) before December 2020.

For more information on CbC reporting and how it could affect your business, contact your regular CMS advisor or local CMS expert Dr. Döne Yalçın.