Transfer Pricing for Foreign-Owned Subsidiaries in Türkiye: What Finance Teams Must Track

If your Turkish subsidiary trades with its parent company or sister entities abroad — buying components, paying management fees, receiving loans, licensing a brand — transfer pricing rules apply. These rules require that transactions between related parties happen at "arm's length," meaning the price should be what unrelated companies would agree on. Türkiye takes this seriously, and the documentation burden falls on your local finance team. This guide explains what they must track.

What transfer pricing means in practice

Transfer pricing governs the price of any transaction between related parties — your Turkish subsidiary and any entity in the same group. The core requirement is the arm's length principle: the price must reflect what independent parties would charge.

Why does the tax authority care? Because without rules, a group could artificially shift profit. For example, the parent could overcharge the Turkish subsidiary for components, draining its taxable profit out of Türkiye into a lower-tax jurisdiction. Transfer pricing rules prevent this.

Türkiye's framework

Türkiye's transfer pricing rules (under Corporate Tax Law Article 13) follow OECD Transfer Pricing Guidelines closely, with some local specifics:

• Related-party definition is broad — covers parent, subsidiaries, sister companies, and in some cases significant shareholders.
• Accepted methods mirror OECD: Comparable Uncontrolled Price (CUP), Resale Price, Cost Plus, Transactional Net Margin Method (TNMM), and Profit Split.
• Documentation is mandatory above certain thresholds — and the burden is on you to prove arm's length, not on the authority to disprove it.

What documentation is required

Türkiye uses a three-tiered documentation system aligned with OECD BEPS Action 13:

1. Country-by-Country Report (CbCR). For large multinational groups (consolidated revenue above the threshold, currently around EUR 750 million), the ultimate parent files a CbCR. Your Turkish entity may need to notify the authority which group entity files it.

2. Master File. For groups above a local revenue/asset threshold, a master file describing the group's global business, transfer pricing policies, and intangibles is required.

3. Annual Transfer Pricing Report (Local File). This is the one most foreign-owned subsidiaries must prepare. It documents each related-party transaction, the method chosen, the comparables used, and the arm's length analysis. It must be ready by the corporate tax return deadline (late April) and submitted to the authority on request.

There is also a transfer pricing form appended to the annual corporate tax return, summarising related-party transactions.

What your finance team must track all year

The documentation is prepared annually, but the data must be captured continuously:

• Every related-party transaction, tagged as such: purchases, sales, service fees, royalties, interest on intra-group loans, cost allocations.
• The basis for each price: contract terms, the method applied, supporting comparables.
• Volumes and running totals per transaction type and per related entity.
• Any changes in terms mid-year — these need explanation.

If these transactions are buried in your general ledger without a "related party" flag, assembling the annual report becomes a painful archaeology project. The fix is to tag related-party transactions at the moment they're recorded.

Common pitfalls for foreign-owned operations

Management fees without substance. Charging the Turkish subsidiary a management fee is fine — but you must show real services were provided and the fee is proportionate. A round-number fee with no documentation invites a challenge.

Intra-group loans at off-market rates. Interest on a parent loan must reflect market rates. Too high drains Turkish profit; too low can be re-characterised. Document the rate basis.

Forgetting the notification deadlines. CbCR notification has its own deadline separate from the tax return. Missing it triggers penalties even if no tax is due.

Inconsistency between entities. If your Turkish local file says one thing and the parent's master file says another, you've created your own audit flag.

How Birasyo helps

Birasyo ERP lets you tag related-party transactions at entry — every intra-group purchase, sale, fee, or loan is flagged and categorised. Running totals per related entity and transaction type are available on demand, so when the annual transfer pricing report is due, the underlying data is already organised rather than reconstructed. Group reporting features give the parent visibility into the Turkish entity's related-party position at any time.

Explore Birasyo group reporting for foreign-owned operations →

Summary

Transfer pricing is one of the highest-risk compliance areas for foreign-owned Turkish subsidiaries because the documentation burden is on you and the penalties are real. The work is not the annual report itself — it's capturing clean, tagged data throughout the year. Get the tagging right at the source, and the annual compliance becomes a formality rather than a fire drill.