TAX NEWS
NO: 2022/10
Subject: Communique on Cash Repatriation Regulation Promulgated
A new “Cash Repatriation” Regulation has been introduced with the Temporary Article No.15 added to Corporate Tax Law with Article No.50 of the Law No. 7417 promulgated in the Official Gazette dated 5 Jul 2022.
For this time, the “General Communique No.1 on Bringing Certain Assets to the Economy”, (“Communique”) including the explanations regarding the new Cash Repatriation Regulation, has been promulgated in the Official Gazette dated 9 Aug 2022.
Although the new Cash Repatriation Regulation is basically similar to the former ones in principle, it differs in some important points when it is considering its progressive taxation and tax inspection implementation aspects.
In this circular, the new regulation is summarized within the framework of the explanations made in the Communique.
Assets within the Scope
Scope of cash repatriation regulation includes the assets:
a) Money, gold, foreign currency, securities, and other capital market instruments located abroad and owned by a real person or a legal entity and;
b) Money, gold, foreign currency, securities, and other capital market instruments and immovables located in Turkey and owned by income or corporate taxpayers, but not recorded in the legal books.
Declaration Time
For the assets located abroad, declarations could be completed by filling the form attached to the communique (Annex 1) via banks or intermediaries until the date of 31 Mar 2023.
For the assets located in Turkey, declarations could be completed by submitting the statement (attachment of Communique Annex 3) to tax offices until the date of 31 Mar 2023.
Value of Assets in the Course of Declaration
Assets will be valued with the following valuation criteria as of the date of statement or declaration, both in reporting the assets located abroad to banks or intermediaries and in the statement of the assets located in the country to the tax offices;
a) Turkish Lira at its nominal value,
b) Gold at fair market value,
c) Foreign currencies with the foreign exchange buying rate of the Central Bank of the Republic of Turkey,
d) Securities and other capital market instruments;
• Share registers with their stock exchange prices, if they do not have these prices, with their fair values. If their fair values cannot be determined, with their purchase price and if this is not possible to determine, with their nominal value,
• Debt instruments such as stock, bond, and Eurobond, with their stock exchange prices, if they do not have these prices, with their fair values. If the fair values cannot be determined, with their purchase price and if this is not possible to determine, with their nominal value,
• Mutual funds participation shares with their closing rates determined within their relevant market,
• Derivatives such as; futures and option contracts with their stock exchange prices, if they do not have these prices, with their fair values. If the fair values cannot be determined, with their purchase price and if this is not possible to determine, with their nominal value,
• Immovable properties with their fair market values.
Turkish Lira equivalent of the aforementioned assets will form a basis for statements and declarations.
In the implementation of this Communique, the fair value is the purchase and sale price determined as of the date of statement or declaration of the aforementioned assets, and this price must reflect the real situation.
To determine the stock market value of the assets to be valued at the stock market, the values formed in domestic or foreign stock exchanges where the aforementioned assets are traded on the date of statement or declaration shall be taken into account.
After making the declaration, the values of the assets on the first declaration date will be taken as the basis for the corrections to be made until 31/3/2023 in order to correct the mistakes made or to reduce the assets subject to the declaration.
As of the date of declaration of the assets in Turkey to the tax offices, these assets must be recorded in the ledgers with the Turkish Lira equivalent values determined within the framework of the abovementioned principles, and this amount will be taken into account in determining the sales income in case of disposal of the aforementioned assets.
Date for Possession of Assets
There is no such obligation to own the assets as of a certain date and to prove it. Therefore, it is sufficient to bring the asset to the country or register it within the periods specified in the law.
Tax Matters
Regulation implements tax payments at the different rates of 1%, 2% and 3% for the assets to be brought from abroad, taking account of delivery time; fixed tax payment rate of 3% for domestic assets.
Tax on Declaration of Foreign Assets
Banks and intermediary institutions shall collect the following taxes in advance as per the value of assets declared;
• 1% for declarations made until 30 Sep 2022,
• 2% for declarations made between 1 Oct 2022 and 31 Dec 2022
• 3% for declarations made until 31 Mar 2023.
Accordingly, those banks and intermediary institutions shall declare and pay them as tax responsible body until the end of the 15th day of the month following the declaration.
Tax Refund
If the declared assets are kept for at least 1 (one) year from the date which they transferred to accounts opened in banks or intermediaries in Turkey or brought from abroad and deposited in these accounts, the tax shall be considered as 0%. In this case, the tax collected by the banks and intermediaries during the statement and paid to the tax office shall be returned upon the application of the owner to the tax office individually.
Tax on Declaration of Domestic Assets
A tax of 3% (three percent) shall be levied on the value of the assets declared to the tax offices and this tax shall be paid until the end of the following month of the tax assessment.
The Offset of Taxes Paid
The abovementioned taxes could not be considered as an expense and could not be deducted from any other tax
Status of the Assets of the Companies on Behalf of Their Legal Representatives, Partners, or Attorneys
For those who are authorized to evaluate the assets within the scope of the Cash Repatriation Regulation on behalf of the legal representatives of the companies, their partners, or the company's shareholders based on a power of attorney or representation agreement drawn up by the authorities before 5/7/2022, the assets owned and located abroad as of this date;
• Bringing it to Turkey by being subject to a statement on behalf of the company or transferring it to an account to be opened in a bank or intermediaries in Turkey, or
• It is possible to benefit from this regulation by declaring the assets located in Turkey that are not recorded in the ledger as of 5 Jul 2022 on behalf of the company.
Assets owned by a company or by partners but disposed of by persons other than the legal representatives, partners, or attorneys of the company, can be benefited from the regulation by making a statement or declaration on behalf of the company.
In addition, it is possible to benefit from this regulation if the assets owned by real persons but saved by companies abroad, of which these persons are partners or legal representatives, are also subject to statement or declaration on behalf of the relevant real persons. However, during the inspection to be made for reasons other than statement or declaration, it is necessary to prove that the said assets belong to the company or company partners or real persons.
No tax inspection
No tax inspection or assessment shall be conducted with respect to the assets declared within the context of the concerning law.
In order to benefit from the above provision:
a) With respect to the assets subject to the statement located abroad;
• Those assets should be brought to Turkey within three months from the date of Statement or transferred to an account opened in a bank or intermediary in Turkey,
• The relevant taxes levied on the declared assets should be paid in a timely manner,
• They should be recorded to the ledger by the taxpayers who keep the ledger in accordance with the Law No. 213, it should be opened a special fund account for the assets that recorded in their ledger (Or demonstrate the assets on the relevant pages of the ledger), and this fund account and assets should not be taken from the business until two years have passed and the fund account should not be used for any purpose other than adding to the capital,
b) With respect to the assets located in Turkey and Subject to Declaration the following conditions should be met;
• Opening a special fund account for the assets that are recorded in their ledger (Or demonstrate the assets on the relevant pages of the ledger), this fund account and assets should not be taken from the business until two years have passed and the fund account should not be used for any purpose other than adding to the capital,
• Proving that asset (excluding immovables) has been deposited to accounts in banks or intermediaries) by those who are not income or corporate taxpayers,
• Timely payment of the tax levied on the declared assets Required.
c) In case of a tax base difference for Taxpayers Who Make a Statement or Declaration within the Scope of Cash Repatriation Regulation due to Tax Inspections or Referral Procedures Starting for Reasons other than the Stated or Declared Assets;
• If it is determined that the base difference arises due to the assets subject to the Statement or declaration, and the amount of stated or declared assets is equal to or more than the base difference amount, no assessment will be made in terms of income tax, corporate tax, and value-added tax.
• If it is determined that the base difference found arises due to the assets subject to the Statement or declaration, in case this difference is more than the stated or declared asset amount, tax assessment only will be made over the difference amount in terms of income tax, corporate tax, and value-added tax.
No permission to Make Adjustment
After the Statement and declaration period has expired, no adjustment can be made regarding the statement and declaration. In this case, it will not be possible to adjust the statements made until 31/3/2023 after this date.
Yours sincerely,
Deloitte Turkey
This communication contains general information only, and none of Deloitte Touche Tohmatsu Limited, its member firms, or their related entities (collectively, the “Deloitte Network”) is, by means of this communication, rendering professional advice or services. Before making any decision or taking any action that may affect your finances or your business, you should consult a qualified professional adviser. No entity in the Deloitte Network shall be responsible for any loss whatsoever sustained by any person who relies on this communication.
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