A detailed new amnesty law, "The Law Relating to Restructuring of Tax and Some Other Receivables and Amendments to Certain Laws" (the "Law"), which is quite comprehensive and offers partial tax amnesty for to the period ending on December 31, 2023, was published on the Official Gazette dated March 12, 2023 and has entered into effect.
The Law includes provisions that constitute partial amnesty such as restructuring of overdue public receivables, termination of tax disputes pending investigation and judicial proceedings, and immunity from tax audits by paying additional taxes for previous years, known as tax base and tax increase. In addition, there are provisions which allow off-record assets to be recorded into the accounting records and the assets which are not recorded to accounting records to be written off from the accounting records.
Restructuring of Public Receivables
Taxes, customs duties, social security premiums, taxes collected by municipalities and related charges, penalties, fines, delay interest and penalties without any underlying tax, administrative fines and some other receivables collected by the Ministry of Treasury and Finance, relating to tax periods prior to December 31, 2023 are within the scope of the Law.
The provisions of the Law on restructuring are in the nature of partial amnesty. Tax penalties and late interest related to taxes within the scope of restructuring are removed, in case, the tax bases are increased and paid by increasing the rate of increase in the producer price index, taking into account the period until the publication of the Law.
For penalties imposed, with no underlying tax, 50% of the penalty amount and the entire amount of delay charges will be waived.
For administrative fines that are charged over customs value of the imported goods, 30% of the fine amount is increased by the producer price index is paid, and then the remaining 70% of the fine and interest payables will be forgiven. For administrative fines that are not linked to customs value of the goods imported, 50% of the fines will be forgiven.
In order to restructure the receivables within the scope of the Law, an application must be made to the relevant administration until May 31st, 2023 and first installment must be paid until June 30th, 2023. Structured receivables can be paid in 12, 18, 24, 36 or 48 equal monthly installments.
In case the receivables under the Amnesty Law are paid in installments, the receivable amount will be multiplied by the coefficient of 1.09 for 12 equal installments, 1.135 for 18 equal installments, 1.18 for 24 equal installments, 1.27 for 36 equal installments and 1.36 for 48 equal installments, respectively according to the preferred maturity, and the amount found can be paid.
If all accrued taxes are paid in cash within the first installment payment period, a 90% discount will be made on the amount calculated based on the domestic producer price index change rates.
If the first two installments of the restructured receivables are not paid on time, the restructuring conditions are deemed to be violated and the advantages of the restructuring are cancelled. In addition, even if the first two installments are paid on time, the advantages of the restructuring are canceled if more than three installments are not paid on time in a calendar year.
Disputed Receivables or Receivables Still at the Litigation Stage
If there is an existing court case filed against tax, customs tax and penalty assessments in the first degree courts or if the statute of limitations to challenge has still not run then the taxpayer may benefit from the Law by paying only 50% of the principal amount increased by the producer price index, in such case remaining balance of the principal tax and penalties and interest will be forgiven.
For disputed receivables that are in the stage of objection/appeal (of which there are several kinds) or correction of the decision on the date of publication of the Law, the application will be made according to the status of the last judicial decision. In the event that the last judicial decision rendered before the publication of the Law is the decision of cancellation, if 10% of the principal amount of taxes and customs duties increased by the rate of increase in the producer price index, the collection of the remaining 90% of the taxes, penalties and interests related to tax principal will be waived. In the event that the last judicial decision is the decision regarding the approval of the assessment, if the entire amount of principal tax is paid by the rate of increase in the producer price index, the collection of penalties and interest related to the principal tax will be waived.
In cases where the most recent decision regarding the administrative fines that are not linked to a tax liability is an annulment decision, the collection of the remaining part of the fines will be waived if 25% of the penalty is paid by increasing the increase in the producer price index. In order to benefit from the provisions of the Law for the disputed receivables or receivables that are at the litigation stage, an application must be made until 31 May 2023 and the first installment must be paid by 30 June 2023.
Transactions at the Inspection and Assessment Stage
Tax inspections that started before the effective date of the Law will also be able to benefit from the provisions of the Law. Transactions that are under investigation or assessment will be finalized by the authority and in the event that 50% of the levied taxes are increased by the rate of increase in the producer price index as of the normal due dates, the collection of the remaining half of the original tax, all penalties and interests related to the tax base will be waived.
For the penalties that are not dependent on the original tax, 25% of the imposed penalties will be collected. Cases where a pre-assessment reconciliation application has been made are also considered within this scope. The tax inspections and tax assessments, which started before the date of publication of the Law, will continue and concluded until March 21, 2023 (including this date). If these transactions cannot be completed until March 21, 2023, tax inspection will not continue. If the taxpayer has benefited from the tax base increase or tax increase provisions and the tax assessment procedures are completed in the meantime, the taxes paid due to the tax base increase or tax increase will be deducted from the amount to be paid.
Tax Base Increase and Tax Increase
The Law grants taxpayers the opportunity to get immunity on tax inspection for previous taxation periods, if they make an additional payment for income tax, corporate income tax, VAT or withholding tax for past years. It would not be wrong to state that this is the most desired regulation by taxpayers, since tax inspections and tax disputes continue for years and take a lot of administrative time.
It is regulated in the Law that taxpayers who intend to benefit from this application, which is explained under the title of tax base increase and tax increase, will not be subject to tax investigation in terms of the taxes they have increased, or even if their previous year's tax transactions are subject to an investigation for any reason tax assessment will not be made for the type of taxes which tax base increase or tax increase is made. Therefore, it will be possible to eliminate the past tax risks by paying an additional tax through an increase in the tax base or tax increase.
a) Income or Corporate Tax Base Increase
In practice, taxpayers will increase the income or corporate tax bases they have declared for the period between 2018 and 2021; and for which the statute of limitations has not yet expired, and which they will declare for the year 2022, at the rates stipulated in the Law. Taxpayers will pay tax at the rate of 20% over the increased tax base. If the taxpayers have submitted their previous year's declarations within the legal deadlines and have not made an application within the scope of the Law for the restructuring of public receivables or not applied for the transactions at the stage of inspection and assessment, the 20% tax rate will be applied as 15%. If the taxpayers have declared tax loss in the relevant years, the tax base will be increased by taking into account the minimum declaration amounts specified in the Law.
Taxes paid due to the tax base increase cannot be deducted from the ıncome or corporate tax base.
Corporate Tax Base Increase Table
|Period||Tax Base Increase Rate||Minimum Corporate Tax Base Increase Amount (TL)||Tax Rate Applicable to the Increased Base|
Increased corporate tax bases are taxed at a rate of 20% however, the bases increased according to the provisions of this paragraph are taxed at a rate of 15% instead of 20%, provided that the taxpayers have submitted their annual declarations for the year they want to increase within the legal deadlines, have paid the taxes accrued from these tax types in due time and have not benefited from the provisions of Articles 2 and 3 of this Law for these tax types.
In order to increase corporate tax base for the year 2022; 2022 corporate tax base should not be less than the base to be found by increasing the corporate tax base for 2021 by 122.93%, or the base to be found as a result of increasing the third temporary tax base for 2022 by 40%.
Corporate tax base increase provisions only protects corporations from corporate tax inspections, and does not provide protection from profit distribution taxes and other type of taxes. The Law has a specific provision reserving tax inspection right of tax administration regarding one off additional corporate tax liability introduced by the Law.
Income Tax Base Increase Table
|Period||Tax Base Increase Rate||Minimum Income Tax Base Increase Amount for Commercial Income Earners and Self-Employed Individuals(TL)||Minimum Income Tax Base Increase Amount for Commercial Income Earners Who Keeps Expense and Revenue Ledger (TL)|
The minimum tax base to be taken as basis for taxation for taxpayers whose income consists only of commercial earnings determined in simple procedure, cannot be less than 1/10 of the amounts determined for taxpayers keeping books on the basis of balance sheet as of the relevant years, 1/5 for those whose income consists only of real estate capital will, and for other income taxpayers whose income is other than these, the amount determined for taxpayers keeping books on the basis of business account.
50% of the losses of the years in which the income and corporate taxpayers increase their tax bases cannot be deducted from the profits of 2022 and the following years, and total amount of the financial losses of 2022 cannot be deducted from the profits of 2023 and the following years.
In addition, tax exemptions, tax deductions and the previous year's losses tax can be deducted from the corporate tax base of taxpayers, cannot be deducted from the tax bases increased according to the provisions of the Law.
b) Boost on the Income Tax Withholding of Salary, Self-Employment, Rent and Construction Spread Over Years Payments
In case the taxpayers increases income tax withholdings, they have to declare over the wages, rent and construction payments extending to the years and makes the payment of tax boost, they will not be subject to tax inspection and tax assessment will not be made for those taxes. For the corporate and income tax, the tax base of the previous years are increased and the tax is calculated on the increased tax base. As to the withholding tax payments the tax base is not increased, an additional tax is calculated and paid at a certain rate of paid withholding tax.
|Period||Income Tax Withholding of Salary, Self-Employment , Rent Payments and Dividend Increase Rate||Income Tax Withholding of Construction Spread Over Years Payment Increase Rate|
The Parliament, for the first time, has made regulation for tax increase for the dividend distribution withholding tax and thus provided an opportunity to prevent conflicts that may arise from transfer pricing.
c) Value Added Tax Increase
Value Added Tax taxpayers will be exempt from VAT inspections provided that they the pay the additional tax at the rates specified below table, over the sum of annual output VAT declared in the VAT returns (including the ones given with reservation).
|Period||VAT Increase Rate|
Applications for tax base and tax increases must be made until 31 May 2023 and the first installment must be paid by 30 June 2023. Stamp duty of 1.000 TL will be collected from the declarations to be submitted due to the tax base and tax increase.
The goods, machinery, equipment and fixtures with their current value, which are physically exist but not recoded in the accounting books, can be recorded into the accounting books with a notification to the tax office until May 31, 2023. A special provision is accounted in the in the accounting records and it is deemed as the accumulated depreciation.
Reverse charge VAT at half of the VAT rate applicable to the assets will be calculated over the values notified. The VAT payments made for the commercial stocks is recoverable.
However such VAT cannot be refunded in cash or on account due to tax exempt deliveries. The VAT paid for fixtures, machinery and equipment is not recoverable and considered as the non-deductible expenses. In example, there will be 4 % VAT rate will be applied to the commercial stocks notified if the commercial stocks are subject to 8% VAT rate.
Moreover, such 4% tax will be considered as recoverable VAT. Where the declared asset is an asset subject to depreciation, the additional VAT paid will be recorded as the non-deductible expenses.
Retrospective tax penalty will not be applicable for the declared assets.
Recorded Assets which do not Exist but Which are Included in the Records
Taxpayers may issue an invoice for the assets which do not exist in the business by applying a mark-up rate equal to the current year profit margin latest until May 31, 2023 and fulfill all tax obligations arising from sale. In such case tax penalty or delay charges will not be applied to the taxpayers. Based on this regulation, the calculated VAT is paid in three equal installments, where the first installment is paid in the period of tax statement and the subsequent ones are paid on the first and second month following the tax statement period.
Cash Account and Receivables from Shareholders
Corporate taxpayers who has cash accounts balances or receivables from shareholders in the accounting books, as of December 31, 2022 but which are not available to the business can benefit from the Law to regularize the status by declaring them to the tax office until May 31, 2023. 3% tax on the amounts declared is paid within the declaration deadline.
The text of the Law contains very detailed provisions and the explanations stated in our bulletin intend to provide general information only.
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