Introduction

The Law on the Restructuring of Certain Receivables, also known as “Tax Amnesty” and “Tax Restructuring” entered in force with its publication in Official Gazette No. 31506 on June 9, 2021.

1.   What are the regulations within the scope of the Law on Tax Amnesty?

Within the scope of Tax Amnesty, regulations cover restructuring of;

Ø  Certain tax receivables

Ø  Uncertain tax receivables or tax receivables at court stage

Ø  Transactions at tax inspection or assessment stage

In addition to above, the tax amnesty regulations also cover the followings:

Ø  Voluntary tax base and tax increase

Ø  Correction of company accounts

Which tax receivables will be subject to restructuring?

Receivables that will be subject to restructuring are identified as follows;

o   Taxes (taxes, duties and taxes within the scope of TPL) and tax penalties,

o   Customs taxes and administrative fines,

o   Insurance premiums,

o   Community insurance premiums,

o   Pension deductible and corporate money,

o   Unemployment insurance premium,

o   Social security support premium,

o   Various administrative fines,

o   Interest, delay charges and similar payments related to the above-mentioned receivables

What is the term of receivables included in the scope?

Receivables within the scope of the Tax Procedural Law:

Ø  Taxes, late payment interests and similar charges regarding periods before 30.04.2021 (this date included), as well as taxes and related charges that should be have been declared until mentioned date,

Ø  Regarding 2021; the taxes accrued before 30.04.2021 (this date included), and related tax penalties, late payment interests (except for the second installment of the motor vehicle tax for 2021),

Ø  The tax penalties regarding detections made prior to 30.04.2021 (this date included) that are not related to tax principal.

Regulations Regarding Certain Receivables

The table below summarizes the restructuring of certain tax receivables which accrued but had not been paid yet.

The debtors who want to benefit from the provision of this article must not file a lawsuit, abandon the lawsuits and not resort to legal remedies.

Regulations Regarding uncertain and disputed Receivables

a) In tax assessments for which a lawsuit has been filed before the court of first instance or the period of filing a lawsuit has not yet expired as of the date of publication of the Law; in case 50% of the tax principal as well as a delay charge calculated on the basis of D-PPI until the date of publication of the Law is paid in the time and manner specified in the Law, then the remaining 50% of the tax principal and late-payment interest shall not be collected.

b) In tax assessments for which the objection or appeal period has not expired as of the date of publication of the Law, or for which objection or appeal has been made, or for which the period for the request for correction of the decision has not expired or for which the remedy has been applied; the last stage of the assessment as of the date of publication of the law will be taken as basis for restructuring of the disputed tax liability. Depending on the status of the latest decision before the publication of the law, the opportunities for restructuring are as follows.

c) If a lawsuit has been filed only regarding tax penalties as of the date of publication of the Law; the collection of all penalties and related late fees will be waived, provided that the taxes are paid before the date of 09.06.2021 when the Law is published or paid in the time and manner specified in this law.

The table below shows the restructuring of such disputed penalties.

d) As of the date of publication of the Law; claims for which an application has been made to benefit from the provisions of settlement, the settlement date has not been given, or the settlement date has not arrived, or the settlement date has not been reached, but the deadline for filing a lawsuit has not passed, may also benefit from the provision of this article.

e) The debtors who want to benefit from the provision of this article must not file a lawsuit, abandon the lawsuits and not resort to legal remedies in addition to the conditions specified.

Regulations Regarding Transactions at the Inspection Stage

Regarding the periods covered by the Law, tax inspections started before the date of publication of the Law, shall continue, without prejudice to the provisions of this Law regarding tax increase. Following the completion of these procedures, the following will be applied in the subsequent assessments.

Debtors who want to benefit from the provision of this article must not file a lawsuit, in addition to the conditions specified.

As of the date of publication of the Law, the provision of this article will also be applied for the receivables at pre-assessment stage.

It is not possible for the beneficiaries of the announced regulation provision to benefit from the provisions of settlement, pre-assessment settlement and reduction in tax penalties.

2. Voluntary Tax Base and Tax Increase

In Article 5 of the Law, it is stated that if the tax bases or taxes for 2016 and the following years related to some taxes are increased at certain rates, no tax inspection or tax assessment shall be made for mentioned periods.

2.1. Corporate Tax

Within the framework of the regulation, it is stated that corporate taxpayers can increase the tax bases already declared for the years 2016, 2017, 2018, 2019 and 2020 no less than the rates specified below.

(*) If the taxpayers submitted the annual corporate tax return and made related payments on time, and provided that they do not have any definite or disputed debts for these tax types, the tax rate over the increased bases will be applied as 15%, instead of 20%.

In case the taxpayer declared loss in related period, only 50% of the loss can be utilized in 2021 and the following years.

The taxes previously paid through withholding cannot be deducted from the taxes calculated over the increased tax bases.

2.2. Withholding Taxes

In accordance with the law, if taxpayers increase their tax base for the following payments subject to withholding, by certain rates, no tax inspection or assessment will not be made for the relevant periods.

Payments within the scope of the relevant regulation include:

·         Wage payments, professional service payments, progress payments for multi-year construction works, rent payments, various payments made to farmers, payments made to those who benefit from the tradesman exemption,

·         Progress payments for multi-year construction works and rent payments made to cooperatives within the framework of the provisions of Article 15 of the Corporate Tax Law,

·         Progress payments for multi-year construction, within the framework of the provisions of Article 30 of the Corporate Tax Law.

It is foreseen that the tax bases for the payments within the scope will be increased by the following ratios.

In order to benefit from the increase in income and corporate tax withholding tax base, it is not necessary to increase the income or corporate tax base.

2.3. Value Added Tax

If the taxpayers declare the value added tax, which will be determined as a tax increase over the annual total of the output value added tax in tax returns, not less than the following rates, the value added tax inspection and assessment cannot be conducted for the relevant periods.

It is not possible to consider the VAT paid within the scope of the relevant regulation as an expense in determining the income or corporate tax base. In addition, it is not possible to deduct the relevant amounts from the VAT payable or to be subject to a refund.

It is obligatory for taxpayers to increase for all taxation periods of the calendar year based on the increase.

Although tax inspections can also be performed for the VAT carried forward; no assessment can  be made as a result of inspection for the years in which tax base had been increased.

2.4. Other Arrangements Regarding Base and Tax Increase

The application for the tax base and tax increases summarized above must be made until 31 August 2021.

Increasing the tax base and tax does not prevent the implementation of the provisions of the Tax Procedure Law regarding the preservation and presentation of legal books and documents.

The tax base or tax increase does not constitute an obstacle to the tax inspections that were started before the Law was published. However, in case the tax inspections initiated for the taxpayers who applied to the tax base and tax increase cannot be concluded until 02.08.2021, then these inspections will not be continued. Pre-assessment settlement  requests regarding tax inspections concluded within this period will not be considered.

In the event that a base or tax base difference is determined as a result of inspection, the tax difference found as a result of the inspection will be evaluated together with the provisions regarding tax increase.

No stamp tax will be charged for tax returns to be submitted by taxpayers due to tax base or tax increase.

3.Correction of Records

In accordance with the law; it is possible to correct cash balances and receivables from shareholders’ that are recorded in accounts as of 31.12.2020 but do not physically exist in the company, provided that a 3% tax is paid over the relevant balances.

Taxes paid within the scope of the specified article cannot be deducted from income and corporate taxes, and they will not be considered as expenses in determining the tax base.

Additionally, inventory that is recorded as of 31.12.2020 but do not physically exist can be corrected by drawing up invoices and performing other tax-related obligations.

In the invoices to be issued, the gross profit rate determined according to the current year records for the same type of commodities, the fair market values ​​to be determined by them or the professional organization to which they are affiliated will be taken into account in terms of machinery, equipment and fixtures.

For goods, machinery, equipment and fixtures that are not included in the records although they are present in the enterprise; it is possible to record them over the fair market value determined by taxpayers or professional organizations.

During the aforementioned correction process, a reduced-rate (half-rate) value added tax shall be declared and paid. This tax paid on machinery, equipment and fixtures cannot be deducted from the calculated value added tax.

4. Common Provisions Regarding Regulations

4.1. Payments to be made under the Law

It is possible to pay the amounts that are payable within the scope of amnesty in a single installment, or in 6 to 18 installments that elapse to a period of 12 to 36 months subject to an inflationary adjustment (coefficient).

In case all the taxes accrued as a result of the tax base or tax increase are paid in advance within the first installment payment period, a 10% discount will be applied over such payables.

If case entire amount of tax restructured are paid in within the first installment payment period, then no coefficient will not be applied and a discount at 90% of the amounts to be calculated based on the D-PPI, instead of late-payment interest, shall be applied.

It is also possible to pay the amounts calculated within the framework of the law in installments, and taxpayers will be able to choose one of the installment options specified in the table below during the application. Payments in installments will be made in two-month periods, and interest will be applied by taking into account the coefficients specified in the table. Those who apply to benefit from the provisions of the law will be given a payment schedule for the installment period they prefer.

4.2. Application

Those who wish to benefit from the provision of the law must apply to the relevant authority until 31.08.2021.

5. Revaluation of fixed assets

Within the framework of the amendment made in the temporary article 31 of the Tax Procedure Law, the fixed assets and immovables can be subject to revaluation until 31.12.2021. After revaluation, a tax at the rate of 2% shall be calculated over the increase in the value. The declaration of the tax shall be made until the end of the month following the date of the revaluation. The first installment will be paid within the period of filing the declaration, and the following installments will be paid in the second and fourth months following the filing period.

6. Enforcement of Law

The above summarized articles of the Law No. 7326 entered into force on 09.06.2021, the publication date of the Law.

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