320 NEWSLETTER 2021 In this context, in the event that corporations sell goods or services to related parties at a value below a valid price in accordance with the arm’s length principle, or purchase goods or services from related parties with a value above the arm’s length principle, the difference between the actual price and the arm’s length price represents the profit distributed through transfer pricing.1 In other words, disguised profit distribution through transfer pricing is possible if the income is either less than it should be or if the expense is more than it should be.2 The purpose of transfer pricing is to prevent the treasury loss. Also, in case the price applied in the purchase and sale of goods and services between institutions and real persons is different from the price applied in transactions with unrelated parties, the use of this difference in bad faith is prevented by transfer pricing.3 Besides, if it is determined that there is a disguised profit distribution through transfer pricing, this situation has some consequences for the taxpayers: (i) refusal of the deduction, (ii) determining the distributed earnings as dividends and (iii) correction. Pursuant to Article 11/1 (c) of the CTL, in cases where goods or services are sold and purchased by related parties at prices in contrary to the arm’s length principle, the difference between the price actually applied and the precedent value, the amount of disguised earnings distributed through transfer pricing, are not taken into account as a discount in the determination of corporate income. The Situation of Disguised Profit Distribution Through Transfer Pricing Under Value Added Tax Law No. 3065 In accordance with Article 1/1 of Value Added Tax Law No. 3065 (“VATL”), commercial, industrial, agricultural and professional deliveries and services made in Turkey are subject to VAT. In this context, 1 Onay, İsmail: “Transfer Fiyatlandırması Yoluyla Örtülü Kazanç Dağıtımına Konu İşlemlerin Katma Değer Vergisi Boyutu”, Vergi Dünyası Dergisi, Year 39, No. 460, December 2019, p. 99. 2 Softa, Murat / Taşkesen, Naciye: “Transfer Fiyatlandırması Yoluyla Örtülü Kazanç Dağıtımında KDV Kargaşası”, Vergi Sorunları Dergisi, No. 320, May 2015. 3 Özer, Umut: “Transfer Fiyatlandırması Yoluyla Örtülü Kazanç Dağıtımı Hakkında Bilinmesi Gerekenler(E-Yaklaşım)”, E-Yaklaşım, No. 280, April 2016.
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