Executive summary

The General Assembly of Turkey's Parliament has approved Law No. 7143 Regarding Amendment of Certain Laws and Restructuring Tax Receivables and Other Certain Receivables (the Law). The Law will enter into force once it is published in the Official Gazette.

The Law contains a wide scope of amendments, including the restructuring of tax and premium debts. The Law aims to restructure taxes and tax penalties, delayed interest penalties, and late fees for tax periods prior to 31 March 2018. It also aims to restructure customs duties, administrative fines, interests, delayed interest penalties, late fee receivables which are to be collected by revenue offices of the Customs and Trade Ministry before 31 March 2018 and some certain public receivables that will be collected by revenue offices of the Finance Ministry.

In addition, the Law targets the restructuring of interim public receivables or public receivables which are in the process of litigation.

This Alert summarizes the key provisions of the Law.

Detailed discussion

Definite receivables

Definite receivables which are executed by revenue offices of the Ministry of Finance, special provincial administrations and municipalities will be renounced on the date of issuance:

• In the case of due taxes or the unpaid portion of undue taxes and instead of secondary public receivables such as delayed interest penalties and late fees, an amount to be calculated based on Domestic Producer Price Index (DPPI) rates which are published monthly until the date of issuance are paid in line with the duration and procedures explained in the Law, delayed interest penalties and late fees related to unpaid taxes and tax penalties regarding unpaid taxes will be renounced. If the receivables consist of only secondary public receivables such as delayed interest penalties and late fees, only an amount to be calculated based on DPPI rates which are published monthly until the date of issuance will be paid instead of these secondary public receivables in order to benefit from this provision.

The Law also provides for the restructuring of certain administrative fines and other public receivables that are not related to tax penalties in certain conditions.

Interim receivables or receivables in the process of litigation

With respect to tax assessments and accruals related to customs duties in the process of tax litigation filed or to be filed by the deadline at the first instance tax courts by the effective date of the Law, if 50% of these taxes and instead of secondary public receivables such as delayed interest penalties and late fees, an amount to be calculated based on DPPI rates are paid in line with the duration and procedures explained in the Law, 50% of taxes/customs duties, interest, delayed interest penalties, late fees, tax penalties/administrative fees and late fees regarding these penalties/fees will be renounced. This provision will be effective on the date of issuance.

For tax assessments and accruals related to customs duties which are in the process of tax litigation at various appeal phases, several restructuring options would also be available under certain conditions as stated in the Law.

Transactions in the process of tax audit and tax assessment

With respect to tax audits and tax assessments for the periods covered by this Law, if such tax audits and tax assessment procedures have been initiated before the date of issuance and are still underway, they shall continue. After the completion of the tax audits and assessments, the collection of a certain percentage of the assessed taxes, delayed interest and penalties will be renounced under certain conditions as set forth in the Law.

Joint provisions

The Law states that, in order to benefit from the provisions of the Law, taxpayers must apply to the relevant authority by the second month following the date of issuance.

Restructured amounts in line with the Law could be paid under installments or in advance. Installments will be paid over two-month periods with 6, 9, 12, or 18 installments, starting from the fourth month following the date of issuance of the Law. If an advance payment method is opted, the payment should be made within the first installment payment deadline. If the amounts are paid in advance within the first installment payment period, 90% of the amounts that will be calculated with the monthly DPPI change rates instead of secondary receivables will be renounced and administrative fines will be reduced by 25%. If a restructured receivable only consists of secondary public receivables, payment of the amounts that will be calculated with monthly DPPI change rates will be reduced by 50%.

Other restructuring alternatives and reduced rates are available under the Law under certain conditions.

Tax base and tax increase

If taxpayers increase their income and corporate tax bases, a tax audit for income or corporate taxes will not be performed and no income or corporate tax will be levied for the years for which the base increase is applied if the duration and procedures explained in the Law are followed by taxpayers regarding the payment.

The Law also allows a tax base increase of taxpayers for value added tax and income and corporate income tax withholdings, together with income tax and corporate income tax base increases.

• Income taxpayers and corporate taxpayers can increase their tax bases to a minimum of 35% for the 2013 calendar year, 30% for the 2014 calendar year, 25% for the 2015 calendar year, 20% for the 2016 calendar year, 15% for the 2017 calendar year until the end of third month of entry into force of the Law.
• If there are losses or no tax bases because of deductions and exemptions in the tax returns of corporate taxpayers or if no tax return is submitted in the years which the taxpayers elect to increase their tax bases, tax bases may not be less than TL36.190 for the 2013 calendar year, TL38.323 for the 2014 calendar year, TL40.701 for the 2015 calendar year, TL43.260 for the 2016 calendar year and TL49.037 for the 2017 calendar year.

In order for taxpayers to benefit from this provision of the Law, taxpayers must increase their tax bases by the end of the third month following the date of issuance.

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CONTACTS

For additional information with respect to this Alert, please contact the following:

Kuzey Yeminli Mali Müsavirlik A.S. Istanbul, Turkey

• Ates Konca
  ates.konca@tr.ey.com
• Gamze Durgun
  gamze.durgun@tr.ey.com

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ATTACHMENT

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