Intra-group invoicing, management fees, brand royalties — all fall under transfer pricing rules. The most commonly violated element in cross-border Turkish-EU invoicing is the documentation of the "arm\'s length" principle.
The Arm\'s Length Principle
The price of a transaction between two related parties must equal what independent parties would agree in similar conditions. The OECD guidelines recognise five methods: Comparable Uncontrolled Price (CUP), Resale Price, Cost Plus, Transactional Net Margin Method (TNMM), and Profit Split.
Documentation Thresholds
- Turkey: TL 100m consolidated assets or TL 30m export/import triggers a file.
- Hungary: Local File above HUF 50m per transaction; Master File for groups above HUF 2bn.
- UK: OECD Master/Local File structure + Country-by-Country Report above €750m consolidated turnover.
Audit Behaviour by Jurisdiction
Turkey has intensified TP audits over the past three years; a "disguised profit distribution" adjustment carries up to 150% penalty on corporate tax.
Hungary NAV audits are more technical, focused on the quality of TNMM comparability analysis.
UK HMRC performs risk-based diffuse assessment with heavier scrutiny on specific sectors (software, financial services).
Practical Application
If you bill a management fee from Turkey to Hungary: either prepare an independent benchmark study (TNMM using European databases) or apply Cost-Plus with a 5-10% margin, and document it. Both jurisdictions retain 5-year look-back audit rights.
The Economics
A full three-jurisdiction TP file: €4,000–€12,000 one-off, €1,500–€3,000 annual update. A single adjustment penalty routinely exceeds €50,000. The maths is unambiguous.