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Turkey Publishes New Law on Restructuring Public Receivables and Amending Certain Laws Including an Additional Corporate Tax for 2022 — Orbitax Tax News & Alerts

Turkey's Revenue Administration has announced the publication of Law No. 7440 of 9 March 2023 on Restructuring Public Receivables and Amending Certain Laws. The main measures of the law are for a new tax amnesty regime for outstanding public receivables including most taxes, customs duties, social security, administrative fines, late payment interest and penalties, etc. In general, the regime covers public receivables accrued up to 31 December 2022. Similar to prior amnesty regimes, the latest regime provides that taxpayers are exempted from the requirement to pay 100% of the tax penalties that are based on the outstanding amount due and 50% of the penalties for irregularities (not based on the amount due). Further, instead of being subject to default interest and the like, amounts due are adjusted based on the monthly rate of change in the domestic producer price index. Taxpayers may also be shielded from potential tax audits/inspections and assessments if they voluntarily increase their tax base and fulfill certain conditions for tax years 2018 to 2022.

Applications for the amnesty regime must be made with the relevant administration by 31 May 2023. The payment of amounts due under the regime may generally be made in up to 48 equal monthly installments, with the first installment due by 30 June 2023. Coefficients are applied to increase the amount due depending on the number of installments. If paid in full with the first installment, no coefficient is applied.

Law No. 7440 also includes various other measures, including an additional corporate tax that applies for tax year 2022 at a rate of 10% or 5%. The tax base for the 10% additional tax is:

  • The exemptions and deductions claimed by corporate taxpayers in the corporate tax return for 2022 in accordance with the Corporate Income Tax Law (Law No. 5520) and related regulations; and
  • The tax base of taxpayers subject to reduced corporate tax rates in accordance with Article 32/A of Law No. 5520, which concerns investment incentives (certificates).

The tax base for the 5% additional tax is the amount of earnings (dividends) obtained from abroad that are exempted under the participation exemption.

Certain exemptions and deductions are specifically excluded from the additional tax, however. These include, among others, the exemption for foreign currency protected lira deposits, tax-deductible donations, tax-exempt revenues of investment funds and partnerships from portfolio management, tax-exempt earnings of venture capital investment funds, real estate investment funds, and pension funds subject to certain conditions, and investment incentive allowances. Further, certain corporate taxpayers are exempted from the additional tax, including taxpayers in areas affected by the earthquake that struck on 6 February 2023. This includes the provinces of Adana, Adıyaman, Diyarbakır, Elazığ, Gaziantep, Hatay, Kahramanmaraş, Kilis, Malatya, Osmaniye, and Şanlıurfa, as well as the Gurin district of the Sivas Province.

The additional tax is payable in two installments and is not deductible. The first installment of the additional tax is due by the payment deadline for corporate tax, i.e., 30 April 2023, and the second installment is due within four months following the payment deadline for corporate tax, i.e., 31 August 2023.