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11/09/2021 https://www.esin.av.tr/wp-content/themes/esin/images/esin.jpg

Communiqué on Obligations Related to the Beneficial Ownership Notification is Published

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Tax
General

New developments

Tax Procedural Law General Communiqué Serial No. 529 (“Communiqué“), involving the provisions on notification obligation related to beneficial ownership, has come into effect by being published in the Official Gazette dated 13 July 2021.

What does the Communiqué mean?

The Communiqué aims to fight tax fraud effectively by determining the persons (beneficial owners) who ultimately benefit from the income or wealth subject to taxation.

According to the Communiqué, the following must notify the tax authorities of the information on the beneficial owners based on the procedures and principals stipulated in the Communique, on the condition that these are active or subject to an ongoing liquidation process as of 1 August 2021:

  • corporate tax taxpayers
  • persons or partners authorized to represent unlimited companies; one of the partners of a limited partnership of which the capital is not divided into shares and the shareholder of an ordinary partnership who holds the higher percentage of shares; directors, trustees or representatives of the trusts or similar enterprises, whose headquarters are located in Turkey or those established abroad that have Turkish resident directors

In addition, those that are listed as liable within the scope of Law No. 5549 Regarding the Prevention of Laundering of Crime Revenues together with their branches, agents, representatives and commercial agents should submit the beneficial ownership information related to the transactions carried out by their customers to the Revenue Administration upon request.

Who is the beneficial owner and how is it determined?

The Communiqué defines the beneficial owner as real person(s) holding the ultimate control of the legal persons or the enterprises without any legal personality, or those who ultimately have influence over them. According to the Communiqué, the beneficial owner is determined for legal persons, enterprises without legal personality such as business partnerships and trusts and similar enterprises as follows:

  • For legal persons:
    • real person shareholders holding over 25% of the shares thereof
    • in cases of doubt that the real person holding over 25% of the shares would not be the beneficial owner or if there is no real person holding 25% of the shares, real person(s) holding the ultimate control over the legal personality
    • if the beneficial owner could not be determined based on the above, real person(s) who have the ultimate executive authority on the legal personality
  • For enterprises without legal personality such as business partnerships:
    • person(s) holding the ultimate control over the enterprise
    • if the beneficial owner could not be determined based on the above, real person(s) who have the ultimate executive authority on the enterprise
  • For the trusts and similar enterprises, founders, trustees, directors, auditors or those that have beneficiary titles, or those who have influence over these enterprises.

Notification obligation for the corporate tax taxpayers and enterprises without legal personality

Corporate tax taxpayers should submit the beneficial owner information within the annexes of the advance corporate tax returns and annual corporate tax returns. This notification contains the beneficial owner’s name, surname, citizenship, citizenship ID number, address and (if one exists) phone number, fax number and email address together with the basis for deeming that person the beneficial owner.
Other taxpayers, who are not corporate tax taxpayers, and other real persons should submit the notification until the end of August annually through the Internet Tax Office by way of filing the “notification form related to the beneficial owner.”

In addition, according to Temporary Article 1 of the Communiqué, all taxpayers including the corporate tax taxpayers and other real persons should submit the beneficial owner information electronically to the Revenue Administration by 31 August 2021 at the latest.

Beneficial ownership notifications should be made electronically. Notifications that are not made electronically will be regarded as not having been made.

Taxpayers should keep the information related to the beneficial ownership notification for five years starting from the year following the submission of the notification.

Consequences of not complying with the notification obligation

If the notification obligation related to beneficial ownership is not complied with, or a deficit or misleading notification is made, a special irregularity penalty under Tax Procedural Law No. 213 will be applied.

Conclusion

The notification obligation to determine the beneficial owners of income and wealth aims to increase tax transparency in line with the OECD’s studies and to fight tax fraud more effectively. It is essential for those who are obliged to submit the beneficial ownership notification to comply with the procedures and principles set forth in the Communiqué in order to avoid facing any fines or penalties.