Law No. 7256 introduced an asset peace and, with the extension of its application period, taxpayers had the opportunity to benefit from the asset peace until 30 June 2022. Following the expiry of the asset peace under Law No. 7256, Law No. 7417, approved at the General Assembly on 1 July 2022 and published on the Official Gazette dated 5 July 2022, introduces a new asset peace. The details of the new asset peace, which involves many significant differences from the previous one, are provided below.
Law No. 7417 on Certain Amendments to Civil Servants Law and Certain Laws and Statutory Decree No. 375 (“Law No. 7417“), which was published in the Official Gazette dated 05.07.2022 and No. 31887, introduces a new asset peace under Article 50 thereof.
What Does the New Asset Peace Introduce?
i. Foreign Assets to be Notified
Individuals or legal persons can notify their banks or intermediary institutions of their money, gold, securities and other capital market instruments abroad by 31 March 2023.
Individuals or legal persons can use these assets to fulfil the loans obtained from foreign banks or financial institutions and recorded in the legal books on the date that Law No. 7417 comes into effect (i.e. 5 July 2022). These assets should be used to fulfil the mentioned loans until 31 March 2023. In addition, these assets will be written off from the records and the asset peace applies to them without it being brought into Turkey.
The banks and intermediary institutions will collect taxes in cash on the assets at the following rates:
- At 1% for the notifications until 30 September 2022
- At 2% for the notifications between 1 October and 31 December 2022 (this date included)
- At 3% for the notifications until 31 March 2023 (this date included)
The banks and intermediary institutions will declare and pay the taxes collected to the tax offices until the evening of the fifteenth day following the notification.
If the notified assets are held in the account for at least one year after they are transferred to the banks or intermediary institutions in Turkey or deposited to these accounts as brought from abroad, the tax will apply at 0%. Those who made the notifications can apply to tax offices for the refund of the taxes declared and paid previously by the banks and intermediary institutions.
ii. Local Assets to be Declared
Income and corporate income tax payers must declare the money, gold, foreign currencies, securities, other capital market instruments and immovable properties that are in Turkey but not recorded in the legal books to the tax offices by 31 March 2023.
The declared assets will be taxed at 3% of their value (regardless of the declaration date) and this tax must be paid by the end of the month following the assessment. In addition, the title deed fee will not apply to the transfer of the immovable properties that are declared within the asset peace and recorded in the legal books, and the transfer of these properties will not be deemed as disposal under Article 80 of the Income Tax Law.
iii. Capital Premiums
The asset peace also applies to the capital premiums that are recorded in the legal books on the date that it came into effect (5 July 2022) if these premiums are fulfilled before the same day through transferring the money, gold, foreign currencies, securities and other capital market instruments to Turkey from abroad. Mentioned capital premiums must be written off from the records by 31 March 2023.
iv. Important Points for Local and Foreign Assets
Regarding the recording of the local/foreign assets in the legal books and their taxation:
- Those keeping the legal books on a balance sheet basis will record the local/foreign assets in a provisional special fund account under the liabilities that will be opened at the date of notification or declaration. The amounts in the fund account (i) cannot be withdrawn from the fund for two years, (ii) can only be used to contribute to capital and (iii) are not taxed in the case of liquidation.
- Independent professionals keeping an income book or those keeping legal books based on the operation account method will record the assets in their books as indicated separately on the date of notification/declaration.
- Declared/notified assets are not taken into account in the calculation of the business profit of the taxation period. These assets can be withdrawn after two years of notification/declaration without being taken into account in the calculation of taxable profit or distributable profit.
- Those who are not income or corporate tax payers can also benefit from the asset peace by only declaring the assets and without any further requirements sought except for the declaration. However, they should certify the assets, except the immovable properties, by depositing them to banks or intermediary institutions by the notification date at the latest.
- The taxes paid cannot be written off or deducted from other taxes.
- Depreciation provisions under Tax Procedural Law No. 213 do not apply to local/foreign assets.
- The losses incurred from the sale of the assets cannot be considered an expense or a deduction in terms of income or corporate income tax.
- No adjustment can be made to the notifications/declarations after the period for filing them.
v. Provisions for Tax Inspection or Valuation Commission Decisions Regarding Local/Foreign Assets
- Tax inspection and assessment cannot be made for the amount corresponding to the notified/declared assets. In the results of a tax audit conducted based on another reason or in a valuation commission’s decision, if a tax base difference is found due to the notified/declared assets, (i) no assessment is made if the amount of the related assets is equal to or more than the base difference found, and (ii) a tax assessment is made only for the difference if the amount of the notified/declared assets is less than the base difference.
- If the tax assessment or valuation commission’s decision finds a tax base difference for a reason other than the notified or declared assets, the assessments are made without deducting the notified/declared amounts from the tax base difference found. In this case, reasons for the tax base difference could be the incorrect application of the depreciation rate or procedures, errors in the expenses in the calculation of the taxable income, etc.
- For the application of the provisions regarding tax inspection, (i) the foreign assets must be brought to Turkey or transferred to an account to be opened in a bank or intermediary institution in Turkey within three months following the notification and (ii) taxes on the local assets declared must be paid on time. In addition, the notification or declaration must be made before the tax inspection starts or the referral to the valuation commission takes place.
- If the taxes accrued are not paid, the original tax is followed up and collected with a delay interest, and the taxes collected cannot be subject to rejection and refund.
The new asset peace introduced by Law No. 7417, came into force by publishing in the Official Gazette dated 5 July 2022 and No. 31887, is generally similar to the previous asset peace. However, it also includes many significant differences, such as the gradual tax rates foreseen for assets located abroad depending on the notification date and the duration of the assets’ stay in the bank accounts, the amount to be recorded in the accounts cannot be withdrawn from the operation for two years, non-taxpayers can also benefit from the asset peace for local assets and the title deed fee is not charged in the declaration of immovable properties. As with other asset peace, we expect the Ministry of Treasury and Finance to issue a communiqué containing the details and examples.