Under Article 13 of the Corporate Tax Law, if a company transacts with related persons at prices that breach the arm's length principle, the profit is deemed to have been distributed, wholly or partly, in a disguised manner through transfer pricing. Under certain conditions, taxpayers must prepare an annual transfer pricing report and file a form with their tax return.
Intra-group service fees, royalties, sales of goods and interest on current accounts with shareholders are the transactions most often examined.
Source: Corporate Tax Law No. 5520 Art. 13
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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.Disguised profit distributionTransferring corporate profits to shareholders or related persons outside the tax base through transactions with related persons at prices or amounts that are not at arm's length.Related partyA person or entity that has a relationship of control, joint control or significant influence with the reporting entity.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.Advance taxTax paid in advance during the year by income and corporate taxpayers, in quarterly periods, on current-period earnings.Capital gainGains of individuals from disposing of certain assets and rights that are subject to income tax.
Last updated: October 22, 2026 · This definition is for general information only.