Recent Developments
The Law on the Amendment to the Income Tax Law and Certain Laws (the “Law“) entered into force upon its publication on the Official Gazette No. 30836 dated July 19, 2019.
The Law introduced a new asset peace incentive.
What’s New?
a) Assets held abroad
- Individuals and legal entities can freely 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 December 31, 2019.
- Banks and intermediary institutions will levy a 1% tax 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.
- Individuals and legal entities can utilize the abovementioned assets until December 31, 2019 to close loans from banks and financial institutions abroad and which are recorded in taxpayers’ legal books as of July 19, 2019. Assets used to repay loans can benefit from this provision without being brought into Turkey if they are removed from the legal book entries.
- If the capital advances recorded in taxpayers’ legal books as of July 19, 2019 are compensated by bringing money, gold, foreign exchange, securities and other capital market instruments held abroad to Turkey before July 19, 2019, taxpayers can benefit from the provision if the capital advances are removed from the legal book entries.
- Taxpayers who keep legal books in accordance with the Tax Procedure Law can include the assets brought into Turkey into their enterprise without including them in the determination of their current income, and can withdraw these assets from their enterprise without including them in the determination of their taxable income or distributable income.
- No tax audit or tax assessment will be conducted on these assets notified in line with the provision.
- The 1% tax cannot be recorded as an expense or be offset from other taxes. Losses arising from the disposal of assets brought into Turkey cannot be considered an expense or deduction for income and corporate income tax purposes.
- In order to benefit from this provision, (i) taxpayers must pay the tax imposed on the newly notified assets by the due date; and (ii) taxpayers must bring the assets into Turkey or transfer them into a Turkish bank/intermediary institution account within three months from the notification date.
b) Assets in Turkey not recorded in legal books
- Income and corporate income taxpayers can declare to the tax authorities their money, gold, foreign exchange, securities, other capital market instruments and immovables held in Turkey but not recorded in their legal books by December 31, 2019.
- These assets can be recorded into taxpayers’ legal books without being taken into consideration when determining their current income by December 31, 2019. These assets can 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 a 1% tax on the asset value, which must be paid by the end of the month following the declaration.
- No tax audit or tax assessment will be conducted on these assets declared in line with the provision.
- The 1% tax cannot be recorded as an expense or be offset from other taxes. Losses arising from the disposal of assets recorded in legal books cannot be considered an expense or deduction for income and corporate income tax purposes.
- In order to benefit from this provision, taxpayers must pay the tax imposed on the newly declared assets by the due date.
Conclusion
The new asset peace incentive’s goal is to bring assets held abroad into Turkey and include them in Turkey’s national economy.
