Interest-free loans to shareholders, sales to related companies below market price or paying above-market service fees are typical examples. If a disguised profit distribution is identified, corporate income is adjusted, a tax loss penalty may be imposed and the amount distributed may be treated as a dividend subject to withholding tax.
Source: Corporate Tax Law No. 5520 Art. 13
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Transfer pricingThe pricing of goods, services and financing transactions between related persons; tax legislation requires these prices to be at arm's length.Thin capitalisationTreating for tax purposes as capital the borrowings a company obtains from its shareholders or persons related to them that exceed a certain multiple of its equity.Current account interest calculationThe product of the amount of current account movements and the number of days elapsed, used to calculate interest on a current account.Tax loss penaltyA penalty imposed when tax is under-assessed because the taxpayer failed to fulfil tax obligations on time or fulfilled them incompletely.Advance taxTax paid in advance during the year by income and corporate taxpayers, in quarterly periods, on current-period earnings.Arm's length principleThe principle that transactions between related persons should be carried out at the prices and on the terms that would apply between independent parties with no such relationship.
Last updated: October 22, 2026 · This definition is for general information only.