A draft of the detailed new amnesty law entitled "The Draft Law on Restructuring of Certain Receivables and Amendments to Certain Laws" ("Draft Law") which offers taxpayers a broad amnesty for most types of unpaid taxes and for unpaid social security insurance premiums relating to the period up to April 30, 2021 is submitted to the Grand National Assembly of Turkey. The Draft Law was approved by the Parliament's Planning and Budget Commission as per 27.05.2021. In this respect, the Draft Law is expected to enter into force in the near future.
Tax amnesty is not new to Turkey. The country previously launched similar tax amnesty programs in 2011, 2016, 2017 and 2018.
In terms of scope, the Draft Law covers restructuring of public receivables, including taxes, social security premiums, administrative fees imposed by municipalities as well as other public receivables, voluntary tax/tax base increase, adjustment of unrecorded assets and adjustment of recorded assets that do not exist or are not available.
The details regarding the Draft Law are summarized below:
1. Restructuring of the Unpaid Tax Debts
Restructuring is available for all direct and indirect taxes, customs duties, social security premiums, taxes collected by municipalities, charges, penalties, fines, delay interest and any other additions relating to tax periods prior to April 30, 2021.
Depending on the type of the tax or other public receivable, the Draft Law offers full or partial amnesty for the principal amount, penalties and/or interest provided that the taxpayer satisfies the conditions described in the Draft Law. The interests of the structured debts are re-arranged based on the domestic Producer Price Index (PPI), making them more advantageous for taxpayers.
2. Settlement of Pending Tax Litigations
Taxes under appeal are also eligible for amnesty. That is, a taxpayer with an active administrative or judicial appeal has the opportunity to settle the tax liability in accordance with the Draft Law.
Benefits available under the Draft Law depend upon the stage of the lawsuit and the outcome of any intermediate decisions that had already been made on the date of publication of the Amnesty Law.
3. Opportunities for Taxpayers Who Are Currently Under a Tax Inspection
Taxpayers may also benefit from the law if they are under tax inspection before the effective date of the Draft Law.
In such cases, if an inspection results with additional tax assessment, the taxpayer will be entitled to settle the inspection result by paying 50 percent of the taxes claimed, with a full waiver of penalties and default interest that have accrued. Reduced interest will be charged on the settlement amount and will be based on the domestic PPI.
4. Voluntary Tax Base Increase
The Draft Law gives taxpayers the opportunity to get immunity on tax assessment for previous taxation periods for which they failed to declare income if they make an additional payment for income tax, corporate income tax, VAT or withholding tax (limited to specific payments) for past years.
Years for which taxpayers will be able to benefit from voluntary increase provisions are 2016 to 2020 (inclusive).
Taxpayers are free to choose certain years and certain taxes. There is no obligation to choose all years/all taxes.
As per to the Draft Law, if taxpayers voluntarily increase their tax base at the declaration rates/amount specified in the Draft Law for each type of tax and pay the applicable tax, then for such tax, they will no longer be subject to a further tax assessment.
Taxpayers that want to benefit from the voluntary tax base increase provisions are required to apply to the tax office by 31 August 2021 at the latest.
5. Adjustment of Unrecorded Assets and Adjustment of Recorded Assets That Do Not Exist or are not Available.
Taxpayers who have goods, machinery, equipment or fixtures which are used in their business but which are unrecorded can benefit from the Draft Law to regularize the status of such assets.
Also, taxpayers who have assets, cash receivables or receivables from shareholders which are recorded in their books but which are not available to the business or which do not exist can benefit from the Law to regularize the status of such receivables.
Cash and receivables from shareholders which are included in the records but which are not available to the business can be deleted from the taxpayer’s accounting records if 3% of the relevant amount is paid as tax.
