324 NEWSLETTER 2021 disguised profit distribution through transfer pricing is regulated in the CTL and is an event that concerns this law, the price agreed by the parties should be taken as a basis in other transactions for taxation. This view was clearly emphasized in the decision of the 4th Chamber of the Council of State8 with the following justification: “Evaluating the above-mentioned legislation provisions together with the information and documents in the case file; the resolution of the dispute seems to depend on the determination of the existence of the disguised profit distribution with the transfer pricing method. However, essentially, the resolution of the dispute depends on the comparison of the provisions of the Value Added Tax Law which regulates the expenses that are not accepted as deductible and the Corporate Tax Law. In this case, with the last amendment made in article 30/1-d, which regulates the expenses that are not accepted as deduction of the Law No. 3065, it is not necessary to deduct the value added taxes paid due to the goods/services obtained from abroad regarding the earnings disguised through transfer pricing, from the discount accounts…” On the other hand, opposing view argues that the wording of the old VATL is quite clear and in this context, the VAT deduction corresponding to the disguised profits cannot be accepted. Pursuant to this opinion, the inability to deduct VAT related to the disguised profit is not the result of the transaction not arising from commercial activity; it is a result of the imperative provision of Article 30(d) of VATL. Conclusion Disguised profit distribution through transfer pricing is one of our tax security methods regulated in Article 13 of the CTL.One consequence of this practice for taxpayers is that the income distributed implicitly through transfer pricing is not allowed to be deducted in 8 The Decision of 4th Chamber of Council of State, No. 2016/13841, 26.12.2017, E., 2017/9030 K., https://www.lexpera.com.tr/ictihat/danistay/e-2016-13841-k2017-9030-t-26-12-2017 (Access date: 23.01.2022).
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