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Update - Turkey Publishes Law on Restructuring Public Receivables and Amending Certain Laws — Orbitax Tax News & Alerts

Turkey's Revenue Administration has announced the publication of Law No. 7256, the Law on Restructuring Public Receivables and Amending Certain Laws.

Some of the main measures of the law are for the introduction of a new tax amnesty regime for outstanding public receivables including most taxes, customs duties, social security, administrative fines, late payment interest and penalties, etc., as well as remaining installment payments due under the prior amnesty regime. In general, the regime covers public receivables accrued up to 31 August 2020.

Under the regime, 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.

The payment of amounts due under the regime may be made in one lump-sum or in up to 18 installments over 36 months. The lump-sum or first installment payment is due by 31 January 2021, although for social security, the initial payment deadline is 28 February 2021. Certain coefficients apply depending on the number of installments, with discounts provided if paid in full in one lump-sum or within two installments. Applications for the regime should be made with the relevant administration by 31 December 2020.

Another related measure is the introduction of a new voluntary disclosure scheme. Under the scheme, the voluntary disclosure of certain domestic or foreign assets up to 30 June 2021 will be relieved from additional tax liability or tax examination. Eligible assets include cash, gold, foreign exchange, securities, other capital market instruments.

Further to the amnesty and disclosure, the law also provides for the introduction of a 2% corporate tax rate reduction (i.e., an 18% corporate tax rate) for five years for companies that list at least 20% of their shares on the Istanbul Stock exchange in an initial public offering. Certain companies are excluded, including:

  • Banks;
  • Leasing companies;
  • Factoring companies;
  • Financing companies;
  • Payment and electronic money institutions;
  • Authorized foreign exchange institutions;
  • Asset management companies;
  • Capital market institutions;
  • Insurance and reinsurance companies; and
  • Pension companies.

If the conditions for the reduction are no longer met during the five-year period, the difference in tax due at the regular rate will become payable with interest. The rate reduction is available from 1 January 2021. Note, prior reports of a 2% reduced rate have been updated to reflect the 2% rate reduction.

Lastly, the law provides for a change in the effective date of the new 2% accommodations tax introduced as part of Law No. 7194. Originally to apply from 1 April 2020 and subsequently deferred to 1 January 2021, the tax will now be effective from 1 January 2022.