- definition, scope and duration of APA;
- APA process which consists of five steps (pre-filing, formal application, preliminary evaluation, analysis, and unconditional/conditional acceptance or rejection of the application);
- preparation of annual APA report for monitoring the implementation of the signed APA; and
- revision, renewal and cancellation of an existing APA.
In fact, the draft guidelines reiterate the explanations already made in the existing transfer pricing legislation, particularly the provisions contained in the Transfer Pricing General Communiqué No.1. However, more specific information is requested by TRA from taxpayers in their APA application than those listed under section 7.2 of the above-mentioned General Communiqué No.1, including:
- function-risk matrix between related parties;
- flow chart of all intercompany transactions;
- information on the type of intangibles (patent, trademark, know-how, industrial design and so on) related to the transaction covered in the APA;
- information on (if any) R&D activities that are carried out by the Turkish entity;
- critical assumptions regarding functions, financial issues, accounting practices, economic conditions, legal regulations and any other related matters;
- (if any) relevant tax audit reports;
- any other APAs applied for, or concluded, by the foreign related parties;
- any transfer pricing documentation prepared by the foreign related parties involving in the intercompany transaction that is the subject matter of APA;
- (if any) relevant cost contribution agreements; and
- (if any) all relevant agreements between related parties; and
- provision of financial statements according to Turkish GAAP [generally accepted accounting principles].
It can be said that such informative guidelines are beneficial for taxpayers intending to request an APA to ensure that the APA process is carried out by TRA in a transparent and cooperative environment.
On the other hand, it would be appropriate to review the scope of information to be submitted in the APA application in order not to create any additional burden on taxpayers and to make more explicit explanations regarding comparable searches, comparability adjustments, financial analyses and critical assumptions so that taxpayers, to the extent possible, can prepare their application files more completely and hence the APA process can be concluded in a timely and efficient manner.
Last but not least, there is no specific date given by TRA as to when the draft guidelines will be completed and published as a final version. In this context, TRA may provide an insight about the expected date for the relase of final guidelines after receiving public comments.