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Rafet GÜMRÜKÇÜ
Customs Consultant
Transfer pricing is the name given to the pricing policy made in the relations established by commercial organizations with different branches or departments or with organizations connected through partnerships. Transfer pricing can also be defined as the pricing applied to each other in any commercial transaction or purchase and sale of goods and services between different companies, branches and partnerships within the same institution.
"Disguised profit distribution" through transfer pricing is regulated in Article 13 of the Corporate Tax Law No. 5520, which came into force on 01/01/2007.
In Article 13 of the Law; It is stated that if the institutions in a relationship purchase or sell goods or services at a price and price determined contrary to the arm's length principle, the resulting gain is distributed as disguised gain through transfer pricing.
In order to talk about disguised profit distribution through transfer pricing;
Purchasing or selling a good or service by an institution,
The institution in question must have purchased or sold these goods or services with "related persons",
Price or price determination has been made in violation of the "arm's length principle" in the purchase or sale of goods or services,
Must.
For an institution, "related person" means the institutions' own partners, the real persons or institutions to which the institutions or their partners are related, the real persons or institutions to which the institutions or their partners are directly or indirectly affiliated in terms of management, control or capital, the management, control or capital of the institutions or their partners. It refers to the real persons or institutions over which it has influence, spouses of the partners, ancestors and descendants of the partners or their spouses, relatives in the lineage including third degree, and relatives in-laws.
Through transfer pricing between related institutions,
To reduce taxes incurred in foreign trade for companies and partnerships located in different countries,
To increase profits globally within the organization,
Getting more tax refunds on export transactions,
To reduce the tax burden and costs at the headquarters and to provide tax advantages by indirectly reducing the tax burden through these transactions,
It is intended. The arm's length principle states that the price or price applied in the purchase or sale of goods or services with related parties should be in line with the price or price that would occur if there was no similar relationship between them. In other words, the buying and selling transactions made by the institutions with which they have a relationship must be in line with the current market conditions. The relationship between the parties should not have any impact on the pricing of goods or services and should not affect the price.
There are five types of transfer pricing methods in practice. We would like to address these one by one.
- Comparable price method: It refers to the determination of the comparable sales price by comparing it with the market price that real or legal persons who purchase or sell goods or services and who do not have any relationship with each other will apply in their transactions with each other.
- Cost plus method: It refers to the calculation of the arm's length price by increasing the relevant goods and service costs by a reasonable gross profit rate. The reasonable gross profit rate indicates the gross profit rate applied to unrelated persons on goods or services.
- Resale price method: It refers to the calculation of the arm's length price by deducting a reasonable gross sales profit from the price that would be applied if the goods or services subject to the transaction were resold to real or legal persons who are not related in any way.
- Profit sharing method: It is based on the principle of dividing the total operating profit or loss related to one or more controlled transactions among the related persons in accordance with the arm's length, in proportion to the functions they undertake and the risks they undertake.
- Transaction-based net profit margin method: From a taxpayer-controlled transaction; It is based on examining the net profit margin determined based on a relevant and appropriate basis such as costs, sales or assets.
When you look at which taxpayers will prepare domestic and which taxpayers will prepare international transfer pricing reports;
- Domestic and international transactions made by taxpayers registered with the Large Taxpayers Tax Office with related parties within an accounting period,
- Domestic transactions made by corporate taxpayers operating in free zones with related parties within an accounting period,
- Foreign transactions made by other corporate taxpayers with related parties within an accounting period,
They are required to prepare an Annual Transfer Pricing Report.
Taxpayers prepare the annual transfer pricing report until the delivery time of the Corporate Tax Return. The prepared report is not delivered to any institution. However, it must be submitted if requested by the administration or tax inspection authorities. If the report is not requested after it is prepared, it does not need to be submitted to any place or institution.
In the Corporate Tax Law, the purchase of goods or services is mentioned within the scope of transfer pricing. However, customs legislation only deals with the purchase and sale of goods. While determining the value of these goods, the valuation procedures and principles specified in the Customs Law No. 4458 are taken into consideration. Therefore, "transfer pricing" is also within the scope of customs legislation.
At the end of the transfer pricing fiscal year, adjustments can be made to the price as a result of examining the reports prepared on the transactions between related companies. By looking at the transfer pricing report of a company that is in a relationship, the company's goods value may be reduced and the goods value of another company that is in a relationship and involved in the transfer pricing may be increased.
However, when we look at the issue from the customs value perspective, the situation is different. According to customs legislation, the value of the goods is the sales price. The sales price is the price actually paid or payable. In order for the customs value to be accepted as the sales price, there must be no relationship between the buyer and the seller, and in case of a relationship, the sales price must be acceptable as the customs value.
It would be more accurate to express the subject with an example.
The effect of price changes within the scope of transfer pricing on customs value has been discussed in European Union countries for many years. With the price decreases resulting from transfer pricing, the customs value also decreased, and lawsuits were filed in local courts demanding the refund of overpaid taxes. However, as in Turkey, when there is an increase in the price, there is no problem in paying excess taxes by increasing the customs value.
It has been understood that there is a dependent relationship between "Hamamatsu Germany" and "Hamamatsu Japan", which are the subject of the case. In the year-end review, it was determined that the "Hamamatsu Germany" company had reduced and updated its prices due to transfer pricing. For this reason, the company “Hamamatsu Germany” requested the refund of the overpaid customs duties, but the German Customs Administration rejected this request. The company “Hamamatsu Germany” appealed this decision to the Munich Financial Court. The opinion of the court is; It was stated that the 'final' transfer pricing between the parties was based on the principle of comparable values, but the price declared during import was temporary, therefore the resulting price was nominal and could not be accepted as the sales price for the purpose of customs value declaration. In light of this opinion, the court referred the case to the Court of Justice of the European Union for a preliminary decision and asked the following question: "In case the transfer price is corrected at the end of the year, can this amount be used to determine the customs value, regardless of whether it causes a tax refund or additional tax payment?"
Regarding the issue, the Court of Justice of the European Union ruled that the year-end price change, which is unknown at the time of import, cannot be taken as a basis in determining the sales price and that price changes that occur retrospectively as a result of transfer pricing cannot be taken into account in the declaration of customs value.
Although transfer pricing is a fact of life, it is not possible to comply with this pricing in every situation in terms of customs legislation. Customs legislation allows the payment of customs duties by making a declaration with an exceptional value in accordance with Article 53/5 of the Customs Regulation, in case of a positive increase in the customs value as a result of the transfer pricing made at the end of the year. However, according to the current legislation, if the transfer pricing changes negatively, it is not possible to refund the overpaid customs duties, since the customs value of the goods is accepted as the sales price.
SOURCE
Corporate Tax Law No. 5520
General Communiqué on Disguised Profit Distribution through Transfer Pricing (Serial No: 1)
Article 24 of the Customs Law No. 4458
Article 53 of Customs Regulation No. 4458
https://www.gumruktv.com.tr/kose-yazilari/transfer-fiyatlandirmasi-sonucu-meydana-gelen-fiyat-degisikliklerini-gumruk-kiymetine-beyani-tartismaya-acildi - Onuray Applause
QUESTIONS AND ANSWERS
Question 1. When approaching the issue in terms of the partners of the institutions, the spouses of the partners, the real persons or institutions to which the institutions or their partners are related, which of these is not considered to have a relationship within the scope of transfer pricing?
Answer: Transfer pricing cannot be applied to transactions made with partners' friends.
Question 2. What are Transfer Pricing Methods?
Answer: Comparable price method, cost plus method, resale price method
profit split method and transactional net profit margin method:
Question 3. When is the transfer pricing report prepared?
Answer: The transfer pricing report is prepared until the delivery date of the Corporate Tax Return.
Question 4. The taxpayer is responsible for a controlled transaction; Which method is based on examining the net profit margin determined based on a relevant and appropriate basis such as costs, sales or assets?
Answer: Transactional net profit margin method
Question 5. What is the common issue that transfer pricing and customs legislation deal with?
Answer: Transfer pricing is related to the "goods value" in customs legislation.
