19.08.2022/58
About the New Asset Peace Regulation
Summary: A new “asset peace” regulation has been introduced with the temporary 15th article added to the Corporate Tax Law with Law No. 7417. The Communique on the Recovery of Certain Assets into the Economy (Communique No. 1) was published in the Official Gazette on 09.08.2022. The main principles of the new asset peace regulation are summarized below:
1. Assets Covered by the Regulation
The regulation covers:
– Money, gold, foreign exchange, securities, and other capital market instruments located abroad,
– Money, gold, foreign exchange, securities, other capital market instruments, and real estate located in Turkey.
2. Declaration and Notification of Assets
In order to benefit from the regulation:
– Money, gold, foreign exchange, securities, and other capital market instruments located abroad must be notified to Turkish banks or intermediary institutions by 31/3/2023 (inclusive) under the provisions of the article,
– Money, gold, foreign exchange, securities, other capital market instruments, and real estate located in Turkey must be declared to the relevant tax offices for income or corporate tax purposes by 31/3/2023 (inclusive).
Legal representatives of companies, partners, or those authorized to act on behalf of the company or its partners, based on a power of attorney or representation agreement issued by authorized organizations before 5/7/2022, can:
– Notify assets located abroad that they owned as of this date and transfer them to Turkey or to an account in Turkish banks or intermediary institutions,
– Declare assets located in Turkey, but not recorded in the legal books as of 5/7/2022, and benefit from the provisions of the article by declaring them in accordance with the explanations in this Communique.
Similarly, assets owned by the company or its partners, but controlled by persons other than the company’s legal representatives, partners, or proxies, can be notified or declared on behalf of the company under the provisions of this article to benefit from the regulation.
3. Valuation of Assets Covered by the Regulation
For both the notification of assets located abroad to banks or intermediary institutions and the declaration of assets located in Turkey to the tax offices, the assets will be valued as follows at the date of notification or declaration:
– Money in Turkish lira will be valued at its nominal (face) value,
– Gold will be valued at market price,
– Foreign currency will be valued at the exchange rate of the Central Bank of the Republic of Turkey,
– Securities and other capital market instruments, such as stocks, bonds, bills, Eurobonds, debt instruments, futures, and option contracts, will be valued at their market price, if available; if not, at market price, or if that cannot be determined, at the purchase price, or if the purchase price is not available, at nominal (face) value,
– Investment fund participation shares will be valued at the closing price determined in the relevant market,
– Real estate will be valued at market price.
Additionally, any corrections made to the notifications or reductions of assets declared after the notification will be based on the values at the time of the original notification.
4. Transfer of Assets from Abroad to Turkey
– Assets located abroad and notified must be transferred to Turkey or to an account in a Turkish bank or intermediary institution within three months from the date of notification.
– Assets located abroad can be used to settle debts registered in legal books of banks or financial institutions abroad, and such debts must be paid by 31/3/2023 at the latest. In this case, assets used to pay the debt will not need to be brought to Turkey, provided they are deducted from the books.
– If capital advances recorded in legal books as of 5/7/2022 are covered by assets such as money, gold, foreign exchange, securities, and other capital market instruments brought to Turkey before this date, these advances may benefit from the provisions of the article by being deducted from the books.
– Assets located abroad but not covered under the scope (such as real estate) can be converted into eligible assets by 31/3/2023 to benefit from the provisions of the article and brought to Turkey.
5. Tax Payable under the Asset Peace
For assets located abroad:
– For notifications made by 30/9/2022, tax is 1%,
– For notifications made between 1/10/2022 and 31/12/2022 (inclusive), tax is 2%,
– For notifications made by 31/3/2023 (inclusive), tax is 3%.
Tax will be collected in advance by banks and intermediary institutions.
For assets located in Turkey and declared to tax offices, tax will be assessed at a rate of 3% by the tax offices.
6. Refund of Taxes Collected on Assets Located Abroad
If assets located abroad are transferred to accounts in Turkish banks or intermediary institutions, or brought to Turkey and deposited in these accounts, and are held in these accounts for at least one year, the tax rate applicable on the value of the assets will be considered 0%.
In such cases, taxes collected by the banks and intermediary institutions, which have been paid to the tax office, will be refunded to the notifier upon their application within the correction statute period, using the form in Appendix 4 of the Communique.
Notifiers can request a refund in cash or offset it against tax liabilities.
For a refund to be made, taxes calculated on the value of the assets notified under the article must have been paid by the tax responsible parties.
The one-year period for refunds will not be affected if the assets transferred to or deposited in bank or intermediary institution accounts are evaluated in different deposit, participation, or investment accounts.
7. Registration of Notified or Declared Assets and Special Fund Accounts
Notified or declared assets must be recorded in legal books by taxpayers who maintain books under the Tax Procedure Law.
Taxpayers keeping books on a balance sheet basis will open a special fund account in the liabilities section for the assets notified or declared under the provisions of this article. This account will be considered part of the capital, cannot be withdrawn from the business within two years of the notification or declaration date, and can only be used for capital increase.
Assets recorded in legal books will be included in the business, without being considered for the determination of the period profit, and will be allowed to be withdrawn from the business after two years, without affecting taxable income and distributable profit for corporations.
8. No Title Deed Fee and Capital Gain Tax on Transfer of Real Estate
For real estate included in the business records by declaration, no fee will be charged for title deed transactions under the Stamp Duty Law No. 492.
Furthermore, the provisions on capital gains in Article 80 of the Income Tax Law will not apply to the transfer of such real estate to the business.
9. Income, Expenses, and Depreciation
Assets included in legal books via notification or declaration will not be eligible for depreciation.
Losses resulting from the disposal of these assets will not be accepted as expenses or deductions for income or corporate tax purposes.
However, any gains and returns arising from the retention and disposal of such assets will be considered for the determination of income or corporate profit, based on general principles.
Taxes paid on the declared or notified assets cannot be written off as expenses or offset against other taxes.
10. Advantages of the Asset Peace
Assets subject to the regulation will not be subject to tax audits or assessments as long as the conditions for notification, declaration, transfer of foreign assets to Turkey, documentation of the assets deposited in Turkish banks, timely payment of related taxes, and the opening of special fund accounts are met.
Moreover, if tax audits or assessments occur for reasons other than the notified or declared assets, and a tax base difference is found:
If the tax base difference arises from the notified or declared assets and the amount of notified or declared assets is equal to or greater than the found difference, no tax assessment will be made for income tax, corporate tax, or value-added tax.
If the difference exceeds the amount of notified or declared assets, tax will only be assessed on the difference for income tax, corporate tax, and value-added tax.
Finally, if a notification or declaration is made after a tax audit or referral to the tax commission, it will not prevent tax assessments based on the audit or commission’s decision, and amounts subject to notification or declaration cannot be offset.
You can access the relevant Communique here.
Best regards,
BİLGENER
