A new compliance requirement is now imposed on companies doing business in Turkey, calling for annual declaration of the ultimate beneficial ownership (UBO) information to the tax office. In addition, designated institutions and professions covered by the anti-money laundering law (such as banks, payments agencies, finance companies, lawyers, accountants, notaries etc) are also required to report the beneficial owner information of their clients, when and if requested by the Revenue Administration. Tax Procedural Communiqué No.529 published in the Official Gazette on 13 July 2021 sets out the rules for determining who falls under the definition of an UBO and includes explanations on the content and timeframe of the declaration.
The availability of beneficial owner information, i.e. the natural person behind a legal entity or arrangement, is a key requirement of tax transparency and the fight against tax evasion and other financial crimes. Consequently, the transparency standards set out by the OECD-hosted Global Forum on Transparency and Exchange of Information for Tax Purposes (the Global Forum) for its member countries includes beneficial ownership information requirements as well.
On 13 July 2021, the Ministry of Treasury and Finance published Tax Procedural Communiqué No.529 to adapt the domestic legislation to comply with the international standards for ensuring the availability beneficial ownership information. The purpose of our bulletin is to provide with an overview of the key elements provided by the Communiqué on beneficial ownership declaration requirement.
Definition of an UBO
The Communiqué provides a definition of beneficial ownership. According to this definition, beneficial owners are individuals who ultimately own or control a legal entity or arrangement such as a company, a trust. The criteria for deciding who should be considered a beneficial owner are as follows:
For legal entities,
For entities without legal status,
Who is required to annually report UBO information?
Corporate taxpayers as well as other entities without legal status that have been listed in the Communiqué (i.e. commandite companies, trusts and similar institutions) which are active as of 1 August 2021 (including those in the liquidation process) are required to regularly report the UBO information to the Revenue Administration.
Corporate taxpayers will declare their UBO information in their advance tax returns and annual corporate tax returns. Parties other than corporate taxpayers will declare the UBO information to the Turkish Revenue via electronic forms by the end of August every year. In case of change in the declared information, the changes must be declared within one month. For the first UBO declarations, however, all taxpayers and other parties mentioned in the Communiqué must declare the UBO information via electronic form by the end of August 2021.
On-demand reporting obligation
In addition, financial institutions (such as banks, payment service companies, financing and factoring companies, insurance companies, private pension companies, brokers, portfolio/asset management companies among others) and designated non-financial businesses and professions (DNFBs) covered by the anti-money laundering law are also required to report the beneficial owner information of their clients, when and if requested by the Revenue Administration. DNFBs with anti-money laundering obligations in Turkey include, but not limited to:
This second -on demand reporting obligation- piece of the Communiqué is actually nothing completely new, because in essence such UBO identification requirements have already been in place since 2008 based on the Law 5549 and the MASAK Regulation on Measures on Prevention of Laundering Proceeds of Crime and Financing of Terrorism.
Content of the declaration
The Communiqué prescribe a variety of items of information and documents which will be submitted by a taxpayer to the Revenue Administration with respect to each of its UBOs including the following:
Penalty for non-compliance
Where the taxpayer refuses or fails to provide the Revenue Administration with all required information or provides incorrect information, irregularity penalty may be imposed under Tax Procedural Code.
For further information about this bulletin you can contact:
Tax Services, Director, PwC Turkey
Tel: +90 212 326 6454