Subject: Regulations of the Law on the Restructuring of Certain Receivables and Amendments to Certain Laws No. 7256
The Law on the Restructuring of Certain Receivables and Amendments to Certain Laws No. 7256 promulgated on the Official Gazette No. 31307 on November 17, 2020.
The Law No. 7256 introduces provisions on the restructuring of accrued and unpaid receivables, cash repatriation and several amendments to the tax legislation.
In this circular, we will briefly address some important points of the Law No. 7256.
A) Several amendments to the tax legislation.
1) Capital Companies' acquisition of their own shares (ARTICLE 17)
With the amendment to the Article 94 of the Income Tax Code No. 194 (“ITC”), the following regulations concerning the full-resident capital companies that have acquired their own shares have been introduced;
In the event that these shares are extinguished through a capital reduction, the difference between the acquisition value and the nominal value of the shares shall be treated as dividend distributed as of the date on which the resolution regarding the capital reduction is registered on the Trade Registry and 15% WHT will be applied thereon,
In the event that these shares are disposed of at a price lower than the acquisition value, the difference between the acquisition value and the disposal value shall be treated as dividend distributed as of the date on which the disposal takes place and 15% WHT will be applied thereon,
In the event that these shares are neither extinguished through a capital reduction nor disposed of within 2 years following the acquisition date, the difference between the acquisition value and the nominal value of the shares shall be treated as dividend distributed as of the last day of the 2-year time frame and 15% WHT will be applied thereon.
2) Corporate Tax Rate Reduction (ARTICLE 35)
With the amendment to the Article 32 of the Corporate Tax Code No. 5520 the corporate tax rate will be discounted with 2% for 5 years to the companies whose shares are offered to the public for the first time at a rate of at least 20% through Borsa Istanbul Stock Exchange, starting from the fiscal period in which their shares are offered to the public for the first time.
By the regulation, banks, leasing companies, factoring companies, financing companies, payment and electronic money institutions, authorized foreign exchange institutions, asset management companies, capital market institutions, insurance and reinsurance companies and pension companies are excluded from the scope of tax rate reduction.
3) Postponement of accommodation tax application (ARTICLE 42)
Accommodation tax which would be effective as of 01.01.2021 has postponed to 01.01.2022.
B) Restructuring of public receivables (ARTICLE 1 - 4)
The scope of restructuring of public receivables which have been accrued but unpaid (tax, customs duty, SSI, and other receivables) covers tax debts relating to the periods prior to 31 August 2020 and taxes within the returns submitted until that date.
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;
To be paid
To be waived
Whole tax / customs tax amount
Whole amount of penalties based on tax basis (tax loss) or administrative penalties
50% of the tax penalties imposed with no relation to the principal tax amount,
The remaining 50% of the tax penalties imposed with no relation to the principal tax amount
50% of the tax penalties imposed due to participation, inducement and support actions,
The remaining 50% of the tax penalties imposed due to participation, inducement and support actions,
Delay charges will be calculated based on the "Domestic Producer Price Index" rather than a monthly fixed rate.
The entire amount of auxiliary receivables such as interest, delay penalty, delay interest, etc.
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.
Furthermore, in case the calculated amount is fully paid within the first legal payment period, an extra discount of 90% will be applied on the amount to be collected.
Taxpayers who want to benefit from the restructuring opportunity are required to apply to the relevant tax office until 31/12/2020 (including this date).
C) Wealth Amnesty (ARTICLE 21)
The below assets of real and judicial persons are in the scope:
Cash, foreign exchange, gold, movable properties and other capital market instruments located out of Turkey.
Cash, foreign exchange, gold, movable and immovable properties, other capital market instruments located in Turkey.
According to the regulations of Wealth Amnesty, the real persons and judicial entities bringing their money, gold, foreign currency, securities and other capital market instruments which are kept abroad into Turkey until 30/06/2021, will be able to use those freely.
The assets present abroad which are brought to Turkey upon declaration or assets present in Turkey which are recorded in the statutory books in this manner until the date of 30/06/2021 shall not be subject to taxation by any law.
The assets located abroad, should be brought to Turkey within 3 months from the date of notification or should be transferred to a bank or brokerage account at the institution.
Assets located abroad can be used till 30/06/2021 for repayment of loans credited from banks or financial institutions or until 30/06/2021, they can be used to close credits recorded on legal books by the date of 17/11/2020. The assets used for the above purposes will not be required to be transferred to Turkey. The taxpayers who benefitted from the above-mentioned conditions would be obliged to prove with receipts documents that loans credited from banks and financial institutions located abroad are closed.
As per the relevant provisions of the law;
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