Tax amnesty launched

In brief

A new tax amnesty program was launched in Turkey on 9 June. Under the program taxpayers can:

• restructure their unpaid tax debts and other payables to the State,
• settle their pending tax disputes,
• protect their past accounts against potential tax audits by making voluntary tax base increases,
• correct their business records to reflect the reality of their situations

In detail

A new tax amnesty program has been launched in Turkey (Law No: 7326). The purpose of the tax amnesty program is to decrease the number of controversies with taxpayers and facilitate Revenue Agency collection of amounts due.

Taxpayers may avail themselves of mechanisms that will be fully described below, but can be briefly grouped as follows:

• restructuring of unpaid tax debts and other payables to the State,
• settlement of tax reports, deeds of assessments and tax court proceedings,
• closing of past accounts to potential tax audits by increasing the tax base voluntarily,
• correction of business records to reflect the reality of the situation.

The amnesty program will run through 31 August. In terms of scope, the amnesty covers quite a broad range of public receivables, including taxes, social security premiums, administrative fees imposed by municipalities as well as other public receivables collected as per the Law on the Collection Procedure of Public Receivables and certain regulations. This bulletin summarises only the tax related provisions of the amnesty.

Restructuring of unpaid tax debts – Article 2

With the amnesty law, a new possibility is introduced for taxpayers to restructure the taxes and penalties they owe.

In terms of scope, this provision covers tax and penalty assessments issued by 30 April 2021 only. Assessments issued after this date are not in scope.

Participants in the amnesty program are entitled to a once every two months payment schedule of 6 to 18 instalments, and hence the payment periods for debts may last up to three years.

The interest of structured debts has been rearranged based on the domestic Producer Price Index (PPI), making them more advantageous for taxpayers. Moreover, those who pay the entire amount at once are relieved of 90% of the interest.

Aside from tax debts, the amnesty also restructures customs duties and payables to the social security institution.

The deadline for application for the restructuring opportunity is 31 August 2021, and the payment for the first instalment must be executed by 30 September 2021 (31 October for the restructuring of social security debts).

Tax assessments under appeal – Article 3

The provisions of the amnesty depend upon the stage any already issued tax assessment is in with the court and the outcome of any intermediate court decisions that had already been made on the date the amnesty law was published (9 June 2021).

1.Tax assessments issued before 9 June 2021 that are still subject to appeal and have not yet been appealed

The taxpayer is entitled to settle the dispute by paying 50% of the tax amount. The taxpayer receives a full discharge of the penalty and the default interest accrued on the tax amount. Reduced interest is charged on the settled tax amount, based on the domestic PPI.

2.Tax assessments pending before the First Instance Tax Court

Tax assessments appealed by the taxpayer but for which no decision has been rendered by the First Instance Tax Court at the time of the promulgation of the amnesty law (9 June 2021) receive the same treatment as above (cancellation of 50% of the tax, full discharge of penalty, reduced interest on the settled tax amount).

3.Tax assessments with decisions issued by the First Instance Tax Courts

Intermediate decisions issued by the First Instance Tax Court are important in determining settlement terms under the amnesty program.

If the decision of the First Instance Tax Court is positive, the taxpayer is entitled to an abatement of 90% of the taxes owed and pays only 10%.

If the decision of the First Instance Tax Court is negative, there is no abatement of taxes.

In both cases (positive or negative first degree decision) the penalty and default interest are waived in full. The settlement amount will be collected together with interest, which will be calculated based on the domestic PPI, which is lower than the normal interest rate.

Taxpayers who decide to settle under the amnesty program terms must apply by 31 August at the latest. Also, they must withdraw their appeal by this date and must renounce all future rights to appeal.

Ongoing tax inspections – Article 4

Taxpayers with ongoing tax inspections on the date of publication of the amnesty law (9 June) are entitled to settle audit tax liability by applying for tax amnesty and paying 50% of the taxes claimed, with a full waiver of penalties and default interest that has accrued. Reduced interest will be charged on the settlement amount and will be based on the domestic PPI.

This provision is open for all tax assessments issued as a result of tax audits which had already started at the time of the publication of the amnesty law (9 June), regardless of the completion date of the tax audit.

Taxpayers who want to settle their audit tax liability on the above terms under the amnesty program must apply to the tax office within 30 days following the receipt of the tax assessment notification and upon completion of the tax inspection.

Voluntary declaration of tax liabilities – Article 4

Under the amnesty program taxpayers may come forward and voluntarily report their “unknown tax liabilities”, meaning the taxpayer has not reported the tax liability before and has not been contacted by the tax office for the taxes.

If participating in the amnesty programme, the taxpayer will pay the concerned taxes, along with interest calculated at rates lower than the normal rate. The deadline for application for this provision is 31 August.

Closing of past accounts to future tax audit – Article 5

A taxpayer who voluntarily increases his previously declared tax base using the rates determined in the amnesty package and who pays tax on this additional base, will not be subjected to any tax inspection related to the years and types of taxes for which he has increased his tax base.

Years for which taxpayers will be able to benefit from voluntary increase provisions are 2016 to 2020 (inclusive).

The taxes in this scope are:

-income tax,

-corporate income tax,

-value added tax,

-income withholding tax (limited to specific payments).

Taxpayers are free to choose certain years and certain taxes. There is no obligation to choose all years/all taxes.

Taxpayers wishing to benefit from the voluntary tax base increase provisions are required to apply to the tax office by 31 August at the latest.

Payments for the taxes calculated on the incremental tax base may be executed in full (by 30 September) or in a maximum of 6 instalments (where the instalments will be paid every two months starting from September). If paid all at once, there is a 10% discount.

Correction of accounting records – Article 6

The amnesty enables taxpayers to correct their business records as of 31 December 2020, to comply with the reality of their situations.

Assets that are not disclosed in the financial books

The company inventory, machinery and equipment that actually exists but is not included in the financial books will be recorded in the books after the taxpayer declares and pays VAT (at half the rate normally applicable) on their current value.

Assets that exist in the books but not in reality

A correction may be made by issuing an invoice which considers the gross profit rate and by fulfilling all tax obligations.

Correction for false cash balances and receivables from shareholders that appear in the books

These balances can be removed from the balance sheets by paying a 3% tax on the corrected amount.