TAX NEWS NO: 2015/8
August 7, 2015
'FATCA Agreement' signed with the United States.
On 29 July 2015, Revenue Administration announced that “Enhanced Tax Information Exchange Agreement” was signed between the Government of the Republic of Turkey and the Government of the United States of America.
According to this agreement, all financial institutions stipulated in the “Memorandum of Understanding” such as Custodial Institutions, Depository Institutions, Investment Entities, Specified Insurance Companies which are situated outside of the US are bound to submit regular information (“report”) to the Internal Revenue Service (IRS) regarding financial accounts linked to US citizens.
Under the circumstance that this is not done, a 30% withholding burden may apply to certain payments that are carried out by US-sourced income.
The agreement stipulates that these reports are to be done by 30 September 2015. However, it is also important to note the statement presented in the “Memorandum of Understanding” which is attached to the Agreement as below;
“Based on this understanding, as of the date of signature of the Agreement, the United States Department of the Treasury continues to treat each Turkish Financial Institution, as that term is defined in the Agreement, as complying with, and not subject to withholding under, section 1471 of the U.S. Internal Revenue Code during such time as Turkey is pursuing the necessary internal procedures for entry into force of the Agreement. The United States further understands that the Turkish Revenue Administration intends to contact the United States Department of the Treasury as soon as it is aware that there might be a delay in the Turkish internal approval process for entry into force of the Agreement such that Turkey would not be able to provide its notification under paragraph 1 of Article 10 of the Agreement prior to September 30, 2015. If upon consultation with Turkey, the United States Department of the Treasury receives credible assurances that such a delay is likely to be resolved in a reasonable period of time, the United States Department of the Treasury may decide to continue to apply FATCA to Turkish Financial Institutions in the manner described above as long as the United States Department of the Treasury assesses that Turkey is likely to be able to send its notification under paragraph 1 of Article 10 by September 30, 2016“
As per our opinion, it is highly probable that the internal regulations will not be completed and the reporting period will be delayed until September 30, 2016.
AGREEMENT BETWEEN THE GOVERNMENT OF THE REPUBLIC OF TURKEY AND THE GOVERNMENT OF THE UNITED STATES OF AMERICA TO IMPROVE INTERNATIONAL TAX COMPLIANCE THROUGH ENHANCED EXCHANGE OF INFORMATION
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