About the New Asset Peace Regulation
Summary: The “Asset Amnesty” regulation has been amended through a change made to the temporary 15th article added to the Corporate Tax Law by Law No. 7417. This change encourages companies to convert foreign currencies in their balance sheets as of March 31, 2022, into Turkish lira deposits and participation accounts by the end of 2022. The amendment stipulates that if companies convert their foreign currencies into Turkish lira at the conversion rate and hold the resulting Turkish lira assets in deposits or participation accounts with a maturity of at least three months, the interest, profit shares, and other gains from these accounts, including the year-end revaluation, will be exempt from corporate tax.
1. Assets Covered by the Regulation The regulation covers the following assets: – Foreign assets (money, gold, foreign currency, securities, and other capital market instruments), – Domestic assets (money, gold, foreign currency, securities, and other capital market instruments), and real estate.
2. Declaration and Reporting of Assets To benefit from the amnesty regulation: – Foreign assets must be reported to Turkish banks or intermediary institutions by March 31, 2023. – Domestic assets and real estate must be declared to tax offices by March 31, 2023.
Company representatives or authorized persons may declare previously unregistered domestic assets or foreign assets located abroad before July 5, 2022.
3. Valuation of Assets The valuation as of the date of notification or declaration will be as follows: – Turkish Lira: at nominal value, – Gold: at market value, – Foreign Currency: at the exchange rate of the Central Bank of the Republic of Turkey, – Securities and capital market instruments: at market value (if available), otherwise at cost or nominal value, – Real Estate: at market value.
4. Bringing Foreign Assets to Turkey – Foreign assets must be brought to Turkey or transferred to Turkish banks/intermediary institution accounts within three months from the notification date. – Foreign assets may be used to pay off debts to foreign banks or financial institutions registered before July 5, 2022, in which case the assets do not need to be brought to Turkey.
5. Tax to Be Paid Under the Asset Amnesty For foreign assets: – 1% tax for notifications made by September 30, 2022, – 2% tax for notifications made between October 1, 2022, and December 31, 2022, – 3% tax for notifications made by March 31, 2023.
For domestic assets: – 3% tax for declarations.
6. Refund of Taxes Paid on Foreign Assets After foreign assets are brought to Turkey and held for one year, the tax rate will be reduced to 0%, and the paid taxes may be refunded upon request.
7. Record and Special Fund Account for Reported or Declared Assets Reported or declared assets must be recorded in legal books. Taxpayers who prepare their accounts on the basis of the balance sheet will open a special fund account for the reported or declared assets, and this account will be considered as capital for at least two years and cannot be withdrawn for other purposes.
8. Exemption from Real Estate Transfer Tax and Value-Added Tax No transfer tax will be applied to real estate transferred to the business, and no income tax or corporate tax will be levied on the profit derived from the sale of real estate.
9. Income, Expenses, and Depreciation – Depreciation will not be applied to assets recorded under this regulation. – Losses incurred from the sale of these assets in the future will not be accepted as deductible expenses for income or corporate tax purposes. – Profits or gains derived from these assets will be taxable for income or corporate tax purposes.
10. Advantages of the Asset Amnesty If all conditions, including notification, declaration, bringing foreign assets to Turkey, and other requirements, are met, no tax audit or assessment will be conducted. If a tax audit or correction is initiated for reasons other than notification or declaration, no tax will be applied to the reported or declared assets.
