Tax Procedure Law Circular on Explanation of the Definition of Real Beneficiary Published
The explanations regarding the determination and notification of the beneficial owner have been published on the website of the Revenue Administration in Circular No. 145 of the Tax Procedure Law.
The explanations provided in this circular are quoted below:
“1. Introduction”
In line with the requests submitted to our Administration, the explanations regarding the determination of the beneficial owner in accordance with Article 5 of the General Communique No. 529 of the Tax Procedure Law are the subject of this circular.
2. Determination of the Beneficial Owner
As stated in the General Communique No. 529 of the Tax Procedure Law, the beneficial owner must be a natural person. The determination of the beneficial owner is made by considering the following elements as a whole. As explained in the same Communique, the beneficial owner is:
a) Natural person shareholders owning more than 25% of the legal entity’s shares,
b) If it is suspected that a natural person shareholder owning more than 25% of the shares of the legal entity is not the beneficial owner, or if no natural person shareholder with such a shareholding exists, the natural person or persons who ultimately control the legal entity,
c) In cases where the beneficial owner cannot be determined under (a) and (b), the natural person or persons with the highest level of executive authority.
Natural persons owning more than 25% of the shares in a legal entity must be reported in all cases. However, if the beneficial owner is determined under the provisions of paragraphs (b) and (c) of the aforementioned Communique, the names of these persons are reported in the beneficial owner notification form. Necessary explanations regarding the beneficial owner are provided in the relevant sections of this form.
3. Direct and Indirect Control
A natural person may ultimately control an entity, whether or not it is a legal entity, directly or indirectly. Even if a person does not own more than 25% of the shares in an enterprise directly or indirectly, they are considered a beneficial owner along with the shareholders owning more than 25% of the shares if they have ultimate control through other means.
For example, persons who have significant influence over the entity, such as by appointing or removing the majority of members of the management or supervisory board, making decisions on behalf of the company through contracts or family ties, are considered to have ultimate control over the entity, whether it is a legal entity or not. Necessary explanations regarding this are provided in the relevant sections of the Beneficial Owner Notification Form.
Example 1: Y, who owns 40% of the shares in company B, which holds 80% of the shares in company A, is a beneficial owner of company A due to indirect ownership of 32% (80% x 40%).
Example 2: Z, the founder of the company, has transferred their shares to their children but continues to serve as the chairman of the board. Z has the authority to appoint or remove the majority of the persons in management. In this case, Z is one of the beneficial owners of the company.
4. Persons with the Highest Level of Executive Authority
The term “persons with the highest level of executive authority” refers to natural persons who have the authority to make strategic decisions that fundamentally affect the commercial activities of the legal entity, as well as those who hold high-level management positions, such as the chairman of the board, general director, or financial director, through which they exercise executive control.
You can access the related Circular here.
Kind regards,
BİLGENER
