The Presidential Decree No. 2151, published in the Official Gazette dated 25 February 2020 and No. 31050, and which entered into force on the same date (“Presidential Decree”) amended the Council of Ministers’ Decree No. 2007/12888 on Disguised Profit Distribution through Transfer Pricing, whereby new transfer pricing documentation rules were introduced.
Detailed explanations on the Country-by-Country Report were provided within the General Communiqué on Disguised Profit Distribution through Transfer Pricing (Serial No. 4), which was published in the Official Gazette dated 1 September 2020 and No. 31231 (“Communiqué”).
According to the regulations introduced by the Presidential Decree and the Communiqué, in cases where the ultimate parent company or surrogate reporting entity are not resident in Turkey, the Turkish resident entity of the multinational enterprises group may not submit the Country-by-Country Report to the Tax Administration if the below conditions are met:
- There is an obligation in the country where the ultimate parent company or the surrogate entity are resident in;
- There is an international agreement between the Turkish Tax Administration and the administration of the country where the ultimate parent company or the surrogate entity are resident in;
- There is a competent authority agreement in force regarding the exchange of Country-by-Country Report information; and
- There is no systematical mistake regarding the information exchange.
The “Multilateral Competent Authority Agreement on the Exchange of Country-by-County Reports” (“Agreement“) signed in Ankara on 30 December 2019 was ratified by the Presidential Decree No. 3038 published in the Official Gazette dated 1 October 2020 and No. 31261 (bis).
However, in order for the Agreement to come into force between Turkey and the other contracting states, the competent Turkish authority should notify the Coordinating Body Secretariat under Article 8 thereof, and other states must also enforce the Agreement.
The list of states where the Agreement is in force between competent authorities can be found in the OECD website.
When the Agreement comes into force between Turkey and the other contracting states, the Turkish resident entity of a multinational enterprises group may not submit the Country-by-Country Report to the Turkish Tax Authority if the other requirements are met.