Advance Pricing Agreement in 10 Question

The lack of absolute accuracy on the implementation of transfer pricing rules and also the conflict between local tax authorities’ different implementation and interpretation of the related party transactions create uncertainty for MNEs on paying taxes properly. Wrong implications due to the uncertainty on applying correct transfer pricing policies increase the risk double taxation for MNEs.

Advance Pricing Agreement (“APA”) mechanism is introduced in more than 40 countries providing an excellent opportunity for taxpayers to avoid these uncertainties and risks. Bilateral APAs are becoming preferable to avoid double taxation at international levels.

APAs entered the Turkish tax system in 2008 for Turkish taxpayers, along with Corporate Tax Law No. 5520, as an alternative solution for avoiding tax disputes. Due especially to the fact the APA process was long and uncertain, the number of applications and APAs signed in the last decade is limited. To address the needs of taxpayers and to increase interest in APA applications, important arrangements and improvements were recently implemented in legislation.