Turkey: Recent Amendments In Relation To Tax Legislation

Last Updated: 9 September 2019
Article by Canan Doksat

Introduction

Important amendments have been made in relation to the tax legislation through the publication of omnibus bills during July 2019. Within the scope of the above-referred amendments, this Newsletter Article evaluates "Tourism Share" and "Tax Amnesty" regulations.

Tourism Share Payment Liability

Tourism Publicity and Development Agency ("Agency") is established through the Law No. 7138 on the Tourism Publicity and Development Agency ("Law No. 7138"), published in Official Gazette dated 15 July 2019 and no. 30832. The Agency's main source of income will be the "tourism share". As per Article 6 of the Law no. 7138, tourism share amount/ratio to be applied to certain entities is determined as follows:

  • Combined facilities and accommodation facilities: TRY 7.5 out of every TRY 1,000;
  • Catering and entertainment facilities certified by the Culture and Tourism Ministry ("Ministry"): TRY 7.5 out of every TRY 1,000;
  • Marine tourism facilities and marine tourism vehicles certified by the Ministry: TRY 7.5 out of every TRY 1,000;
  • Travel agencies (except for individual air ticket sales): TRY 7.5 out of every TRY 10,000;
  • Airline enterprises (from their commercial passenger activities): TRY 7.5 out of every TRY 10,000; and
  • Airport and terminal enterprises, except for those operated by the General Directorate of the State Airports Authority: TRY 2 out of every TRY 1,000.

Tourism share will be calculated based on the total net sales and leasing income. These rates will be reduced by 50 % for facilities engaged in the tourism types incentivized by the Ministry (such as winter, health, qualified sport tourism).

The tourism share will be declared by the end of the 24th day of the month following the taxpayer's taxation period under the Value Added Tax Code no. 3065 ("VAT Code") and it should be declared to the taxpayer's registered tax office for income tax or corporate income tax purposes. Those who are not income or corporate income taxpayers must declare the tourism share to the tax office to be determined by the Revenue Administration. The payment should be made by the end of the 26th day of the month during which the declaration is made.

Tax Amnesty

Important amendments have been introduced through the Law No. 7186 Amending Income Tax Code and Other Codes ("Law No. 7186"), published in the Official Gazette dated 19 July 2019 and No. 30836 (Reiterated). The Law No. 7186 introduced a new "Tax Amnesty" for taxpayers. The main principles regarding the new Tax Amnesty may be summarized as follows.

Foreign Assets

Individuals and legal entities may dispose of their money, gold, foreign exchange, securities and other capital market instruments held abroad if they duly notify these assets to Turkish banks or intermediary institutions by 31 December 2019.

Taxpayers keeping their legal books in accordance with the Tax Procedural Code no. 213 ("TPC") may include those assets brought into Turkey into their enterprise without including them in the determination of their current income, and may withdraw these assets from their enterprise without including them in the determination of their taxable income or distributable income.

Individuals and legal entities can utilize the abovementioned assets until 31 December 2019 to close loans from banks and financial institutions abroad and which are recorded in taxpayers' legal books as of 19 July 2019. Assets used to repay loans may benefit from this provision without being brought into Turkey if they are removed from the legal books.

If the capital advances that have been recorded in the taxpayers' legal books as of 19 July 2019 are compensated by bringing money, gold, foreign exchange, securities and other capital market instruments held abroad into Turkey prior to 19 July 2019, taxpayers may benefit from the provision if the capital advance amounts are removed from the legal book entries.

Banks and intermediary institutions will levy tax at the rate of 1% on these assets. The banks and intermediary institutions are responsible for declaring and paying the tax to their tax office through a tax return by the end of the 15th day of the month following the notification. The 1% tax cannot be recorded as an expense, nor may it be offset from other taxes. Losses arising from the disposal of assets brought into Turkey cannot be considered an expense nor deduction for income and corporate income tax purposes.

Assets in Turkey

Due to the fact that the tax amnesty regulated in relation to the assets in Turkey is, in principle, related to the recording of the referred assets, only income and corporate taxpayers may benefit from the referred provisions. Income and corporate income taxpayers may declare to the tax authorities their money, gold, foreign exchange, securities, other capital market instruments and immovable held in Turkey, which are not recorded in their legal books by 31 December 2019. These assets may be recorded into the taxpayers' legal books without being taken into consideration when determining their current income by 31 December 2019. These assets may also be withdrawn from the enterprises without including them in the determination of their taxable income or distributable income.

The assets declared to the tax authorities will be subject to tax at the rate of 1% on the asset value, which must be paid by the end of the month following the declaration. Tax at the rate of 1% cannot be recorded as an expense, nor may it be offset from other taxes. Losses arising from the disposal of assets recorded in the legal books cannot be considered an expense or deduction for income and corporate income tax purposes.

No Tax Investigation and Assessment

No tax inspection and assessment will be carried out in relation to the assets notified or declared within the Tax Amnesty. In order to benefit from the referred provision, (i) the tax levied on the amounts declared or notified should be paid by the due date and (ii) taxpayers notifying of their foreign assets are required to move them to Turkey, or transfer them to an account to be opened at a bank or intermediary in Turkey, within three months as of the notification date.

Conclusion

The month of July 2019 was a very busy period in terms of tax legislation. Especially taking into account the automatic information exchange applications, we believe that the provisions of the Tax Amnesty in relation to the repatriation of foreign assets should be evaluated by the relevant taxpayers. Additionally, entities engaged in the tourism sector should be prepared for the new financial obligation identified as the "tourism share."

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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