The Law No.7440 Regarding the Restructuring of Certain Receivables and Making Amendments on Certain Laws (Tax Amnesty Law)

TAX NEWS

NO: 2023/8

Subject: The Law No.7440 Regarding the Restructuring of Certain Receivables and Making Amendments on Certain Laws (Tax Amnesty Law)

The Law No.7440 Regarding the Restructuring of Certain Receivables and Making Amendments on Certain Laws (Amnesty Law) has entered into force as of March 12th, 2023 by being promulgated on the Official Gazette. Thereafter, Serial No. 1 of the Communiqué establishing the principles and procedures for the implementation of the aforementioned Law was published in the Official Gazette of 25 March 2023.

1) Scope of The Tax Amnesty

This law provides various advantages to taxpayers. In general, the following receivables and transactions are covered by the Law: 

• Restructuring of public receivables which have been accrued but unpaid (tax, customs duty, SSI and other receivables)
• Opportunity to benefit from the Law for taxes which will be accrued as a result of inspections or assessment processes commenced before the Law (Restructuring of the receivables not accrued yet)
• Declarations made by regret or voluntary
• Tax Base and tax increases
• Stock declaration and correction of accounting entries

2) Restructuring of accrued and unpaid receivables

Following receivables which have accrued, but are not yet paid, or whose payment deadline has not yet expired as of (and including) the date when this Law is published;

Note:

Whole secondary receivables such as delay charges will not be collected. Instead, an amount to be calculated based on monthly change rates of “Domestic Price Index” will be collected.

3) Receivables that have not accrued yet or still in the stage of litigation (disputed receivables)

A) Litigation process has been initiated or term of litigation process has not expired 

B) Tax Court Decision

1) In case Tax Court cancels the assessment 

2) In case the Tax Court approves the assessment

3) In case Council of State or Regional Administrative Court overturns the decision of the Tax Court 

Note:

In case the decree is made in a manner to partially approve and partially overturn, what shall be done?

Terms of approval decision shall be valid for the approved part while terms of reversing decision shall be valid for the overturned part.

C) On tax settlement phase 

4) Tax Base Increase

Among other various regulations, the Law No. 7440 granted the taxpayers the opportunity to voluntarily increase the taxes and tax bases declared during the fiscal years 2018, 2019, 2020, 2021 and 2022.

Accordingly, the taxpayers will not undergo any tax inspection or tax assessment regarding the income tax, corporate tax, income withholding tax (i.e. on salary payments, rental payments, independent professional service fee payments and the payments associated with multi-year construction works) and VAT amounts declared during the concerning fiscal years on condition that the tax / tax base amounts are increased and the tax amounts are paid at rates specified by the law.

A) Enhancement of the Corporate Tax

Please note that the corporate tax bases enhanced within the scope of the Law No. 7326 cannot be lower than a certain threshold. The relevant rates and amounts are summarized in the table below; 

The enhanced corporate tax bases shall principally be subject to corporate tax at a rate of 20%. However, corporate tax rate shall be applied at 15% upon the fulfilment of the following conditions;

• Corporate tax returns were submitted and corporate tax liabilities were paid within the specified time limits in 2018, 2019, 2020, 2021 and 2022,
• The taxpayer has not benefited from the provisions of the law regarding the restructuring of the public receivables.

To benefit from the 2022 CIT base increase;

• 2022 CIT base cannot be lower than the figure calculated by increasing the 2021 CIT base by 122,93% or the figure calculated by increasing the 2022 Q3 Advance CIT base by 40%. If there is no CIT base in 2021 or 2022, the increase in the Q3 Advance CIT base is calculated above the minimum amount.
• If the taxpayer has declared a tax loss in 2022, none of the tax loss can be used in future periods if the tax base has been increased for 2022.

Note:

• Taxpayers can increase the tax base for specified fiscal years or preferred fiscal years.
• Tax payers can increase the tax base even if there is no tax base in the CIT Return or even no CT return has been declared. Minimum increase amounts are announced; tax base increase amount for the preferred fiscal years. (e.g.) TRY 500.000 will be applied to fiscal year 2022.
• The Law states that if income and corporate income taxpayers increase their annual corporate income tax bases for the fiscal years between 2018 and 2022 at the rates specified in the Law, no tax inspection or tax assessment will be conducted on these taxpayers regarding the taxation periods and tax types, tax bases which have been increased.
• If taxpayers benefited from investment allowance during the years they benefited from the corporate tax base increase, they are required to increase also the withholding related to investment allowance
• Tax to be paid over increased base will be considered as non-deductible expense.
• Half of previous year losses related to the fiscal years in which tax bases have been increased can be offset against the profit of 2022 and the following years. In other words the other half of the relevant losses cannot be benefitted. Also, as mentioned above, if the taxpayer has declared a tax loss in 2022, none of the tax loss can be used in future periods if the tax base has been increased for 2022.
• Stamp tax is charged at 1.000 Turkish lira for annual withholding and value added tax declarations and other declarations submitted by taxpayers due to tax base or tax increase.
• Deferred losses and previous years losses regarding exemptions and deductions cannot be offset from the increased bases.  

B) Enhancement of the VAT

Pursuant to the Article 5/3/a of the Law No. 7440, in the event that the taxpayers declare additional VAT amounts for the 2018, 2019, 2020, 2021 and 2022 fiscal years at the rates specified by the law, they will not undergo any tax inspection nor will they be subject to any tax assessment from the perspective of the VAT legislation for the concerning periods. The additional VAT amounts shall be required to be declared by the end of the second month following the month in which the law is published on the Official Gazette. The relevant rates are summarized in the table below;

Note:

• VAT increase will be performed for a full fiscal year.
• Taxpayers who has not calculated VAT amount due to various reasons or taxpayers who has calculated VAT amount which is consisting only of deliveries within the scope of defer-cancel implementation can benefit from VAT base increase on the condition that corporate tax base increase has been realized for the concerning year. For such cases, VAT to be paid will be calculated by applying 18% to the increased corporate tax base.
• Administration’s right to conduct tax inspection will be reserved for those who has made request for VAT refund.
• Tax inspections can also be made for deferred taxes. However, no assessment will be made as a result of inspection regarding the years in which tax base increase has been realized.

C)  Enhancement of the WHT on Salary Payments

As expressed before, the scope of the provisions of the law in connection with the enhancement of the tax and tax base amounts covers WHT (i.e. on salary payments, rental payments, independent professional service fee payments and the payments associated with multi-year construction works) as well. For the sake of practicality, only the WHT applicable over the salary payments will be analyzed in this circular.

Pursuant to the Article 5/1/a of the Law No. 7440, in the event that the taxpayers declare additional WHT (i.e. on salary payments) amounts for the 2018, 2019, 2020, 2021 and 2022 fiscal years at the rates specified by the law, they will not undergo any tax inspection nor will they be subject to any tax assessment from the perspective of the income tax legislation (i.e. as far as the salary payments are concerned) for the concerning periods. The additional WHT amounts shall be required to be declared until 31/8/2021 (including this date). The relevant rates are summarized in the table below;

5) Stock declaration and correction of accounting entries

Provisions of the Law No.7440 also allows; 

• Recording of inventory, machinery, equipment and fixed assets which physically exist but are not booked in the statutory accounts,
• Adjusting the books for inventory, machinery, equipment and fixed assets which are physically non-existent,
• Adjusting the cash and receivables from the shareholders balances which do not actually exist although being booked in the statutory accounts.

According to the Article 6 of the Law No.7440, taxpayers are required to pay additional taxes in the amount of %3 over the receivables from shareholders and cash balances declared through amnesty returns.

The amounts stated in the 31.12.2022 books have to be declared and corrected until 31/5/2023 (including this date).

The taxes paid may not be offset from income or corporate tax and may not be deemed as expense in the calculation of the tax base.

6) Payment

In order to benefit from the provisions of this Law, taxpayers must pay the first instalment of the amounts due by 30 June 2023 and the remaining instalments in a maximum of 48 equal instalments in monthly periods following this date.

If all the calculated amounts are paid in advance within the first instalment period, the coefficient will not be applied.

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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