Executive Summary: Regulations for “Tax Amnesty/Restructuring” that entered into force with Law No. 7440

Yayınlanma Tarihi: 16 Mart 2023



Executive Summary: Regulations for “Tax Amnesty/Restructuring” that entered into force with Law No. 7440

Introduction

The Law on the Restructuring of Certain Receivables, also known as “Tax Amnesty” or “Tax Restructuring” entered into force with its publication in Official Gazette No. 32130 on March 12, 2023. Tax Amnesty/Restructuring regulations (restructuring of receivables, voluntary tax base and tax increase and correction of company accounts) will be the subject of this Bulletin.

 

Which receivables are within the scope of the Law?

 

-          Public receivables which are accrued but not yet paid

-          Receivables not accrued yet or receivables at court stage

-          Transactions at tax inspection or assessment stage

 

The tax amnesty regulations cover the following topics:

 

-          Restructuring of receivables

-          Voluntary tax base and tax increase

-          Correction of company accounts

 

A- RESTRUCTURING of RECEIVABLES

 

1.     Which 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 Tax Procedure Law) and tax penalties,

o Customs taxes and administrative fines,

o Insurance premiums,

o Community insurance premiums,

o Pension deductions,

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

 

2.     Accrued but unpaid receivables

 

The public receivables which have accrued but not paid yet, or the receivables whose deadline not expired as of 12.03.2023 will be divided as the amount to be paid and the amount to be waived. The table below summarizes the related amounts to be paid and waived:

 

Receivable

To be Paid

To be Waived

Principal Tax

whole amount of tax

whole amount of the penalty based on principal tax, administrative penalties

Penalties non related with the principal tax

50%

50%

Tax penalties regarding participation

50%

50%

Late payment charges

late payment charges will be calculated according to the "domestic producer price index" (D-PPI)

whole amount of the delay interest, delay penalty calculated with the fixed rate

3.     Uncertain and Disputed Receivables

a.     Receivables for which litigation has been initiated or the deadline for litigation process has not expired

If 50 % of the principal tax amount is paid with the additional delayed payment charge calculated with the D-PPI (up until 12.03.2023) according to the payment terms of this Law, 50% of the tax and the delay interest/penalties will be waived.

 

b.     Receivables for which a Tax Court Decision is present:

Depending on the status of the latest decision before the publication of the law, the opportunities for restructuring are as follows:

Latest decision

Amount to be paid

Amount to be waived

In case the tax court cancels the assessment

- 10% of the tax principal

-Amount to be calculated according to D-PPI

-90% of the tax principal

- late payment interest and similar charges, as well as entire amount of penalty related to tax principal

In case the tax court entirely or partially approves the tax assessment

-Entire amount of approved taxes

- 10% of abandoned taxes

- Amount to be calculated according to D-PPI

-The remaining 90% of abandoned taxes

- late payment interest and similar charges, as well as entire amount of penalty related to tax principal

In case the latest decision is an annulment decision

-50% of taxes

-Amount to be calculated according to D-PPI

-The remaining 50% of taxes

- late payment interest and similar charges, as well as entire amount of penalty related to tax principal

In case the latest decision is partially approval, partially annulment (for the part that is approved)

-All of the approved taxes

- 10% of abandoned taxes

- Amount to be calculated according to D-PPI

- The remaining 90% of abandoned taxes

- late payment interest and similar charges, as well as entire amount of penalty related to tax principle

In case the latest decision is partially approval partially annulment decision (for the part that is annulled)

· 50% of taxes

· Amount to be calculated according to D-PPI

Remaining 50% of taxes

- late payment interest and similar charges, as well as entire amount of penalty related to tax principal

c.      Lawsuits filed only regarding tax penalties

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 12.03.2023 when this Law is published or paid in the time and manner specified in this Law.

The table below shows the restructuring of such disputed penalties:

 

 

Phase

Amount to be paid

Amount to be waived

Those who have been sued before the court of first instance or those whose litigation period has not passed yet

25% of the penalty

75% of the penalty

In case of a decision regarding the abandonment of those who are at the stage of objection or appeal

10% of the penalty

90% of the penalty

In case of a decision regarding the approval or amended approval for those who are at the stage of objection / appeal

The 50% of the penalty approved, the 10% of the abandoned penalty

The remaining 50% of the- penalty, The remaining 90% of the abandoned penalty

In case the latest decision is an annulment decision

25% of the penalty

75% of the penalty

In case the latest decision is partially approval, partially annulment (for the part that is approved)

50% of the penalty approved

The remaining 50% of the penalty

In case the latest decision is partially approval partially annulment decision (for the part that is annulled)

25% of the penalty

75% of the penalty

 

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 law suit 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.

 

4.     Regulations regarding the Inspection/Assessment 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.

 

 

 

Payment

Amount to be Paid

Amount to be waived

Taxes that are Levied Related to Tax Principal

50% of the tax principal

Remaining 50% of the tax principal

The amount that will be calculated according to the D-PPI until the date of the publication of the law

All penalties related to the tax principal

All late payment interest that will be calculated until due date of term of litigation determined upon notification of tax assessment after publication of the Law

The late fees applied until the publication date of the Law

Penalties Unrelated to the Tax Principal

25% of the penalty

75% of the penalty

Tax-Loss Penalties to be Charged Due to the Participation

25% of the penalty

75% of the penalty

 

 

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.

 

B-  VOLUNTARY TAX BASE AND TAX INCREASE

 

With the 5th article and temporary article 1 of the Law, it is stated that if the tax bases or taxes for 2018 and the following years related to some taxes are increased at certain rates and paid according to the terms of the Law, no tax inspection or tax assessment shall be made for the mentioned periods.

 

1.     Income and Corporate Tax

 

Income tax payers and corporate tax payers can increase their tax bases regarding 2018, 2019, 2020, 2021, 2022 with certain rates. Summarized table is below:

Minimum Tax Base Increase (TRY)

Year

Tax Base İncrease rate (%)

Income Tax Payers (revenue-expense model)

Income Tax Payers (balance sheet model)

Corporate Tax Payers

Tax rate that will be applied to the increased tax base (*)

2018

35

          63.800

    94.000

        200.000

20%

2019

30

          66.400

    99.600

        215.000

20%

2020

25

          70.500

  105.800

        230.000

20%

2021

20

          75.000

  112.400

        260.000

20%

2022 (**)

25

        105.000

  200.000

        500.000

20%

 

(*) The increased corporate tax bases will be subject to corporate tax at a rate of 20%. However, corporate tax rate of 15% will be applicable if certain criteria are met. If the taxpayers have submitted the annual corporate tax return and made related payments on time, and if they do not have any definite or disputed debts for these tax types  

(**) Tax payers who want to increase their tax base for fiscal year 2022 should submit their income or corporate tax returns. The tax base in these returns should be compared against some thresholds:

a-The tax base of 2021 will be accelerated with %122,93 and

b- 3rd. provisional tax base of 2022 will be accelerated with %40.

The tax base for 2022 will not be smaller than the higher one of a- or b- amount. 

 

Half of the losses from previous years regarding the fiscal years for which tax bases have been increased can be offset against the profit of 2022 and the following years. i.e. the remaining half of the losses cannot be carried forward.

Tax to be paid over increased base will be considered as non-deductible expense.

The taxes previously paid as withholding taxes can’t be deducted from the taxes calculated over the increased tax bases.

 

Taxpayers can increase the tax base for a specified fiscal year as they prefer, or some or all of the years.

2.     Witholding 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.

 

The tax bases for the payments within the scope shall be increased by the following ratios:

 

Year

Rate of increase in wages, professional service payments and rent payments (%)

Rate of increase in progress payments for multi-year construction works (%)

2018

6

1

2019

5

1

2020

4

1

2021

3

1

2022

2

1

 

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

 

3.     Value Added Tax (VAT)

 

If the taxpayers increase their annual total of the output value added tax which they submitted in VAT returns with the following rates, the value added tax inspection and assessment cannot be conducted for the relevant periods.

 

Year

Rate of increase  (%)

2018

3

2019

3

2020

2,5

2021

2

2022

2

 

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 amount 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.

 

Tax payers who have submitted at least 3 of the VAT returns in a specific year, can calculate the average VAT amount paid for a month and then calculate the 12 months’ VAT amount and apply the rates above to this amount.

 

4.     Other Arrangements Regarding Base and Tax Increase

 

The application for the tax base and tax increases summarized above must be made until 31 May 2023.

 

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 within 7 work days, then these inspections will not be continued. Pre-assessment settlement requests regarding tax inspections concluded within this period will not be considered.

 

In case a tax 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 base increase.

 

1000 TRY stamp tax will be charged for tax returns to be submitted by taxpayers due to tax base or tax increase.

 

If the whole tax amount calculated according to the tax base or tax increase regulation is paid within the 1st installment period, 10% deduction will be applied to the tax amount and no inflationary adjustment coefficient will be applied.

 

C-  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 31.12.2022 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 31.12.2022 but do not physically exist can be corrected by issuing 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, equipments.

 

For goods, machinery, equipment 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. For these goods and machinery/equipment a special provision account is assigned. If the provision amount for the goods is distributed to the shareholders, it will not be taxable. The provision amount for the machinery/equipment will be considered as depreciation.

 

During the correction process, a reduced-rate (half-rate) value added tax shall be declared and paid. This tax paid on machinery, equipment cannot be deducted from the calculated value added tax. The VAT calculated for the goods can be deducted according to general principles however it is not subject to VAT refunds.

 

D- COMMON PROVISIONS

 

It is possible to pay the amounts that are payable within the scope of amnesty in a single installment, or in 12 to 36 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 to the tax amount.

 

If the entire amount of tax restructured is paid within the first installment payment period, then coefficient will not be applied and a discount of 90% will be applied for the auxiliary amounts to be calculated based on the D-PPI.

 

Taxpayers can select from one of the installment plans below:

Number of Installments

Period (Months)

Coefficient

12

12

1,09

18

18

1,135

24

24

1,18

36

36

1,27

48

48

1,36

 

The deadline for benefitting from the provisions of the Law is 31.05.2023