Recent Amendments in Relation to Tax Legislation
Introduction
Important amendments have been made in relation to the tax legislation through the publication of omnibus bills during July 2019. Within the scope of the above-referred amendments, this Newsletter Article evaluates “Tourism Share” and “Tax Amnesty” regulations.
Tourism Share Payment Liability
Tourism Publicity and Development Agency (“Agency”) is established through the Law No. 7138 on the Tourism Publicity and Development Agency (“Law No. 7138”), published in Official Gazette dated 15 July 2019 and no. 30832. The Agency’s main source of income will be the “tourism share”. As per Article 6 of the Law no. 7138, tourism share amount/ratio to be applied to certain entities is determined as follows:
- Combined facilities and accommodation facilities: TRY 7.5 out of every TRY 1,000;
- Catering and entertainment facilities certified by the Culture and Tourism Ministry (“Ministry”): TRY 7.5 out of every TRY 1,000;
- Marine tourism facilities and marine tourism vehicles certified by the Ministry: TRY 7.5 out of every TRY 1,000;
- Travel agencies (except for individual air ticket sales): TRY 7.5 out of every TRY 10,000;
- Airline enterprises (from their commercial passenger activities): TRY 7.5 out of every TRY 10,000; and
- Airport and terminal enterprises, except for those operated by the General Directorate of the State Airports Authority: TRY 2 out of every TRY 1,000.
Tourism share will be calculated based on the total net sales and leasing income. These rates will be reduced by 50 % for facilities engaged in the tourism types incentivized by the Ministry (such as winter, health, qualified sport tourism).
The tourism share will be declared by the end of the 24th day of the month following the taxpayer’s taxation period under the Value Added Tax Code no. 3065 (“VAT Code”) and it should be declared to the taxpayer’s registered tax office for income tax or corporate income tax purposes. Those who are not income or corporate income taxpayers must declare the tourism share to the tax office to be determined by the Revenue Administration. The payment should be made by the end of the 26th day of the month during which the declaration is made.
Tax Amnesty
Important amendments have been introduced through the Law No. 7186 Amending Income Tax Code and Other Codes (“Law No. 7186”), published in the Official Gazette dated 19 July 2019 and No. 30836 (Reiterated). The Law No. 7186 introduced a new “Tax Amnesty” for taxpayers. The main principles regarding the new Tax Amnesty may be summarized as follows.
Foreign Assets
Individuals and legal entities may dispose of their money, gold, foreign exchange, securities and other capital market instruments held abroad if they duly notify these assets to Turkish banks or intermediary institutions by 31 December 2019.
Taxpayers keeping their legal books in accordance with the Tax Procedural Code no. 213 (“TPC”) may include those assets brought into Turkey into their enterprise without including them in the determination of their current income, and may withdraw these assets from their enterprise without including them in the determination of their taxable income or distributable income.
Individuals and legal entities can utilize the abovementioned assets until 31 December 2019 to close loans from banks and financial institutions abroad and which are recorded in taxpayers’ legal books as of 19 July 2019. Assets used to repay loans may benefit from this provision without being brought into Turkey if they are removed from the legal books.
If the capital advances that have been recorded in the taxpayers’ legal books as of 19 July 2019 are compensated by bringing money, gold, foreign exchange, securities and other capital market instruments held abroad into Turkey prior to 19 July 2019, taxpayers may benefit from the provision if the capital advance amounts are removed from the legal book entries.
Banks and intermediary institutions will levy tax at the rate of 1% on these assets. The banks and intermediary institutions are responsible for declaring and paying the tax to their tax office through a tax return by the end of the 15th day of the month following the notification. The 1% tax cannot be recorded as an expense, nor may it be offset from other taxes. Losses arising from the disposal of assets brought into Turkey cannot be considered an expense nor deduction for income and corporate income tax purposes.
Assets in Turkey
Due to the fact that the tax amnesty regulated in relation to the assets in Turkey is, in principle, related to the recording of the referred assets, only income and corporate taxpayers may benefit from the referred provisions. Income and corporate income taxpayers may declare to the tax authorities their money, gold, foreign exchange, securities, other capital market instruments and immovable held in Turkey, which are not recorded in their legal books by 31 December 2019. These assets may be recorded into the taxpayers’ legal books without being taken into consideration when determining their current income by 31 December 2019. These assets may also be withdrawn from the enterprises without including them in the determination of their taxable income or distributable income.
The assets declared to the tax authorities will be subject to tax at the rate of 1% on the asset value, which must be paid by the end of the month following the declaration. Tax at the rate of 1% cannot be recorded as an expense, nor may it be offset from other taxes. Losses arising from the disposal of assets recorded in the legal books cannot be considered an expense or deduction for income and corporate income tax purposes.
No Tax Investigation and Assessment
No tax inspection and assessment will be carried out in relation to the assets notified or declared within the Tax Amnesty. In order to benefit from the referred provision, (i) the tax levied on the amounts declared or notified should be paid by the due date and (ii) taxpayers notifying of their foreign assets are required to move them to Turkey, or transfer them to an account to be opened at a bank or intermediary in Turkey, within three months as of the notification date.
Conclusion
The month of July 2019 was a very busy period in terms of tax legislation. Especially taking into account the automatic information exchange applications, we believe that the provisions of the Tax Amnesty in relation to the repatriation of foreign assets should be evaluated by the relevant taxpayers. Additionally, entities engaged in the tourism sector should be prepared for the new financial obligation identified as the “tourism share.”
All rights of this article are reserved. This article may not be used, reproduced, copied, published, distributed, or otherwise disseminated without quotation or Erdem & Erdem Law Firm's written consent. Any content created without citing the resource or Erdem & Erdem Law Firm’s written consent is regularly tracked, and legal action will be taken in case of violation.
Other Contents
Law No. 7456 on Additional Motor Vehicle Tax for Compensation of Economic Losses Caused by the Earthquake on 6/2/2023 and on Amendments to Certain Laws and Decree-Law No. 375 (“Law No. 7456”) was published in the Official Gazette dated 15.07.2023 and No. 32249. Law No. 7456 introduced significant...
In order to determine the procedures and principles regarding the implementation of certain articles of the Misdemeanor Law No. 5326 (“Law”), which is the general procedural law for administrative fines, the Ministry of Treasury and Finance (“Revenue Administration”) has published the General...
Through Article 20 of Law No. 7440 on Restructuring of Certain Receivables and Amending Certain Laws (“Law No. 7440”), published in the Official Gazette dated 12 March 2023 and No. 32130, significant and new tax regulations regarding debt push down financing structure for merger transactions are introduced...
Provisional Article 32 was added to Banking Law numbered 5411 (“BL”) through Article 17 of the Law No. 7186 on Amendments to the Income Tax Law and Certain Laws ("Law No. 7186") in the Official Gazette on 19.07.2019. This law enables companies that are experiencing financial difficulties, but which are...
Law No. 7420 on the Amendment of Income Tax Law and Certain Laws and Decrees (“Law No. 7420“) which was published in the Official Gazette dated 09.11.2022 introduced important amendments and regulations in the tax legislation. The addition of Article 32/B, entitled "Taxation in Capital Decrease" to...
Free Zones are zones that are established to promote export-oriented investment and production, accelerate foreign direct investment and technology access, direct enterprises towards export, and develop international trade. There are many tax advantages provided to taxpayers operating in...
Through the promulgation of Law No. 7394 on the Amendments of Treasury-Owned Immovable Property Valuation and the Value Added Tax Law and on the Amendments of Certain Other Laws and Decrees, published in the Official Gazette dated 15 April 2022 and No. 31810, significant amendments...
In recent years, many new business models have emerged and traditional business models have changed greatly, within the increasing digitalization in the economy. Along with said change, challenges arose for taxing the international business income of...
Through the promulgation of the Law No. 7351, published in the Official Gazette dated 22.01.2022 and no. 31727, essential amendments are introduced to Turkish tax legislation. Apart from the tax amendments, a new provision has been added to...
Social media has emerged with the development of the digital world and internet technology and has greatly influenced the world today. One of the main categories of actors in social media is social media content producers. These people earn through social networks in...
The 1990’s hold significant importance by means of the developments that took place in the global economy. During the transition to the second half of the 1900’s, the Federal Reserve increased interest rates, and the hot money flow changed its direction from East Asian countries to the West...