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Draft Tax Bill: “Tax Amnesty and Reconciliation”


The Turkish Parliament has been discussing the draft tax bill for some time now. Previously, the bill was designed to introduce an opportunity for a new payment scheme which had lower interest rates due to the prevailing economic crisis; however, since then, the scope of the bill has been extended and finally it has taken the form of an "amnesty" whereby taxpayers volunteer to pay some additional taxes. Taxand Turkey highlights the key issues in the "Tax Amnesty and Reconciliation" draft tax bill.

New payment scheme for overdue tax and social security payments
The late payment interests that have taken the form of actual tax penalties (monthly rates of 2.5% for 2006-2009; 1.95 for the first 3 quarters of 2010 and 1.40 since October 2010) will be reduced to be in line with inflation rates, providing significant reductions on unpaid tax and social security debts from before December 2010.

Similarly, the electricity and water debts incurred before December 2010, the membership fees to the Turkish Union of Chambers, Stock Market, Organised Industrial Zone are also included in the scope of this payment scheme.

Close of tax years to tax inspections

Taxpayers are to be granted an opportunity to close their books to tax inspections provided that they increase the tax bases for the years 2006-2009 for corporate income tax, VAT and salary income tax purposes and pay additional taxes.

For corporate income tax purposes, the increase rates and minimum increase amounts are as follows;

  • 2006: increase of tax base by 30% (minimum increase by TL19,1K)
  • 2007: increase of tax base by 25% (minimum increase by TL20,6K)
  • 2008: increase of tax base by 20% (minimum increase by TL22,4K)
  • 2009: increase of tax base by 15% (minimum increase by TL24,4K)

The tax rate to apply on additional tax base is determined as 20%. However, if the taxpayer has made tax filings and tax payments on the due dates during the past, then the tax rate shall be applicable as 15%, instead of 20%.

If the company has made tax losses in those years, the taxes shall be calculated over the minimum figures. However, it is important to note that the half of carried forward losses will be disallowed.

For VAT purposes, the additional payable taxes are:

  • 2006: 3.0%
  • 2007: 2.5%
  • 2008: 2.0%
  • 2009: 1.5%

Above rates shall be applicable on the output VAT declared on the VAT returns, i.e. the VAT calculated over the sales.

Salary income tax purposes, the additional payable taxes are;

  • 2006: 5%
  • 2007: 4%
  • 2008: 3%
  • 2009: 2%

Above rates shall be applicable on the gross wages declared on the withholding tax returns.

It is possible for taxpayers to apply either for 3 kinds of taxes or for only one type of tax, excluding the others.

A peace for tax litigations
An offer has been made for taxes and penalties that are currently in the stage of reconciliation or filing of a legal action as well as those for which a legal action has been started. The offer is to:

  • decrease the taxes by 20% or 50%
  • decrease the penalties by 100%
  • decrease the delay payment interest down to inflation rate.

To benefit from the above discounts taxpayers are to waive the right to litigate and make timely payment of 50% of the tax together with an interest calculated at the inflation rate.

Stock amnesty
A harmonisation will be possible between the book values and the physical values for the merchandise and fixtures and furnishings that exist in the enterprise, but that do not exist in the books, and that do not physically exist although they are recorded in the books, on condition that taxes are paid over such assets at the determined rates and amounts.

Cash and receivables from shareholders
It is possible to benefit from the Law by paying 3% on the amounts declared.

Payment terms
There is an option for taxpayers to make the payments in instalments of up to 3 years. If the taxpayers wish to make the payment on instalments, interest rates of 1.05%, 1.07%, 1.10%, 1.15% will be applied for 1 year, 1.5 year, 2 years and 3 years terms, respectively.

The draft law is expected to be enacted within February.


Taxand's Take

The draft law calling for a "tax amnesty and reconciliation" will affect most of the taxpayers in Turkey. If multinationals' Turkish subsidiaries are to benefit from the new law, the Turkish companies should close previous tax years to tax inspections. Since the number of tax inspections has increased recently, it would be advantageous for multinationals take part in the tax amnesty and reconciliation and therefore benefit from the bill reducing administration costs.

Your Taxand contacts for further queries are:
Saban Erdikler
T. +90 212 337 00 00

Uluc Ozcan
T. +90 212 337 00 00

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Taxand's Take Author