Tax Procedure Law Circular on Explanation of the Definition of Real Beneficiary Published
The explanation regarding the determination of the beneficial owner and the notification requirements has been published on the official website of the Revenue Administration in the Circular No. 145 of the Tax Procedure Law.
The explanations included in the mentioned circular are provided below:
“1. Introduction”
In response to the requests submitted to our Directorate, the explanations regarding the determination of the beneficial owner in accordance with Article 5 of the General Communiqué No. 529 of the Tax Procedure Law are the subject of this circular.
2. Determination of the Beneficial Owner
As stated in the 529th Series of the Tax Procedure Law General Communiqué, 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 communiqué, the beneficial owner;
a) The natural person shareholders owning more than twenty-five percent of the shares of a legal entity,
b) If it is suspected that the natural person shareholder owning more than twenty-five percent of the shares of a legal entity is not the beneficial owner or if no such shareholder exists, the natural person or persons who ultimately control the legal entity,
c) If the beneficial owner cannot be determined under (a) and (b), the natural person or persons with the highest level of executive authority are considered the beneficial owners.
Natural persons owning more than twenty-five percent of the shares of a legal entity must be reported in all cases. However, if the beneficial owner is determined under (b) and (c) of the aforementioned communiqué, the names of these persons are reported in the beneficial owner notification form. Necessary explanations regarding the beneficial owner are made in the relevant sections of the form.
3. Direct and Indirect Control
A natural person may directly or indirectly control a legal entity, whether incorporated or not. Even if a person does not have more than twenty-five percent of the shares in an entity directly or indirectly, those who have ultimate control through different means are considered beneficial owners along with those who hold more than twenty-five percent of the shares.
For example; persons who have significant influence over the entity through methods such as appointing or removing the majority of board members, making decisions on behalf of the company, contractual agreements, or family ties are considered to have ultimate control over the legal entity. Necessary explanations regarding this are made in the relevant sections of the Beneficial Owner Notification Form.
Example 1: Y, a person holding 40% of the shares in B Company, which owns 80% of the shares in Company A, has indirect ownership of 32% in Company A (80% x 40%). Therefore, Y is one of the beneficial owners of Company A.
Example 2: The founder of the company, Z, transferred his shares in the company to his children; however, he continues to serve as the chairman of the board. Z has the authority to appoint or remove the majority of the board members. In this case, Z is one of the beneficial owners of the company.
4. Persons with the Highest Level of Executive Authority
By “persons with the highest level of executive authority,” we mean natural persons who have the authority to make strategic decisions fundamentally affecting the commercial activity of the legal entity, as well as those who exercise executive control over daily or routine operations through a senior management position such as CEO, CFO, or director of finance, etc.
The related Circular can be accessed here.
Kind regards,
BİLGENER
