The new tax amnesty of Türkiye

In detail

A new tax amnesty program has been launched in Türkiye (Law No: 7440, published in the official gazette on 12 March 2023). The amnesty, which covers quite a broad range of public receivables, including taxes, social security premiums, customs duties as well as administrative fines, will run through 31 May 2023. Our bulletin focuses on the tax related provisions of the program. 

Restructuring of unpaid tax debts – Article 2 

Under this measure of the amnesty, taxpayers are provided with the opportunity to restructure the taxes and penalties they owe. In particular: 

• Taxpayers are allowed to settle their debts by paying (even in installments) only the due taxes, without penalties. 
• For penalties that are not stemming from a tax principal (i.e. tax procedural penalties), the settlement takes place by paying 50% of the due amount. 
• The late interest for debts that are structured under this measure is rearranged based on the domestic Producer Price Index (PPI), making them more advantageous for taxpayers. Moreover, those who pay the entire amount at once are relieved of 90% of the interest. 

In terms of scope, this provision applies to taxes accrued as of publication of the amnesty law (12 March 2023). The deadline for application for restructuring opportunity is 31 May 2023, and the payment for the first installment must be executed by 30 June 2023. Participants applying for this provision are entitled to installments up to 48 months. 

Tax assessments under appeal – Article 3 

In addition, taxpayers are provided with the opportunity to settle their tax disputes pending before courts at any stage of proceedings. In this case, the settlement amount would depend on the stage and outcome of the procedure as per the date the amnesty law was published. Very briefly: 

1.Tax assessments issued before 12 March 2023 that are still subject to appeal and have not yet been appealed

The taxpayer is entitled to settle the dispute by paying 50% of the tax amount. The taxpayer receives a full discharge of the penalty and the default interest accrued on the tax amount. Reduced interest is charged on the settled tax amount, based on the domestic PPI. 

2.Tax assessments pending before the court

Tax assessments appealed by the taxpayer but for which no decision has been rendered by the court at the time of the publication of the amnesty law (12 March 2023) receive the same treatment as above (i.e. cancellation of 50% of the tax, full discharge of penalty, reduced interest on the settled tax amount).

3.Tax assessments with decisions issued by the court

The last court decision is important in determining settlement terms under the amnesty program. If the last decision is in favor of the taxpayer, in this situation the taxpayer is entitled to an abatement of 90% of the taxes owed and pays only 10%. In other cases, there is no abatement of taxes. 

In both situations (positive or negative court decision) the penalty and default interest are waived in full. The settlement amount is collected with interest, which will be calculated based on the domestic PPI, which is lower than the normal interest rate. Taxpayers who decide to settle under the amnesty program terms must apply by 31 May 2023 at the latest. Also, they must withdraw their appeal by this date and must renounce all future rights to appeal. 

Ongoing tax inspections – Article 4 

Taxpayers with ongoing tax inspections on the date of publication of the amnesty law (12 March 2023) are entitled to settle audit tax liability by applying for tax amnesty and paying 50% of the taxes claimed, with a full waiver of penalties and default interest that has accrued. Reduced interest will be charged on the settlement amount and will be based on the domestic PPI. 

This provision is open for all tax assessments issued as a result of tax audits which had already started at the time of the publication of the amnesty law (12 March 2023), regardless of the completion date of the tax audit. Taxpayers who want to settle their audit tax liability on the above terms under the amnesty program must apply to the tax office within 30 days following the receipt of the tax assessment notification upon completion of the tax inspection. 

Closing of past accounts to future tax audit – Article 5 and Article 10 

Taxpayers who voluntarily increase their tax base using the specific rates determined in the amnesty program and pay additional tax on the increased base will not be subject to any tax inspection related to the years and types of taxes for which the tax base has been increased. This applies to income/corporate income tax, value added tax and certain withholding taxes, including the withholding tax on dividends. 

Corporate income tax base increase

• Years 2018, 2019, 2020 and 2021

To benefit from this provision in respect of annual corporate tax returns for 2018, 2019, 2020 and 2021 taxpayers must increase their corporate income tax base by the following rates at a minimum: 

• 35% for 2018, 
• 30% for 2019, 
• 25% for 2020, 
• 20% for 2021. 

In any case, the additional tax base to be declared under this measure cannot be less than 200,000 TRY for 2018, 215,000 TRY for 2019, 230,000 TRY for 2020 and 260,000 TRY for 2021. The additional tax base will be subject to a corporate income tax rate of 20%; this rate is reduced to 15% for taxpayers who satisfy certain conditions detailed in the amnesty law. 

Taxpayers who benefit from the corporate tax base increase provision lose 50% of their tax carry forward losses for the years for which tax base has been increased. Carry forward tax losses already utilized will not be affected. 

• Year 2022 

To benefit from this provision in respect of annual corporate tax returns for 2022, taxpayers must increase the tax base by 25% at a minimum. In any case, the additional tax base to be declared as such cannot be less than 500,000 TRY. 

In addition, the taxpayer must have submitted its annual corporate income tax return for 2022. The corporate tax base declared on the annual tax return cannot be lower than the higher of:

a. the amount calculated by increasing the tax base declared in 2021 by 122.93%

b. the amount calculated by increasing the tax base declared in the advance tax return for the third quarter of 2022 by 40% 

If the advance tax return for the third quarter of 2022 has not been submitted, the amount calculated by increasing the tax base declared on the advance tax return for the second quarter by 100%, and if only the advance tax return for the first quarter has been submitted, the amount calculated by increasing the tax base declared on this tax return by 300% is taken into consideration in the comparison. 

In case the taxpayer declared loss in 2022, these losses cannot be carried forward as an offset in the future years. 

Application for corporate tax base increase for year 2022 does not provide guarantee against tax audits for the newly established supplementary tax which is calculated based on the 2022 annual tax return. 

VAT increase

To benefit from this measure in respect of VAT returns, taxpayers must pay additional VAT at the following rates at a minimum:

• 3% for 2018, 
• 3% for 2019, 
• 2.5% for 2020, 
• 2% for 2021, 
• 2% for 2022.

This calculation is made based on the annual VAT liability declared in the tax returns of the relevant tax year.

Dividend withholding tax

To benefit from this measure in respect of dividend withholding tax liability, taxpayers must increase their base for dividend withholding tax at the following rates at a minimum:

• 6% for 2018, 
• 5% for 2019, 
• 4% for 2020, 
• 3% for 2021, 
• 2% for 2022. 

If a taxpayer increases its tax base for dividend withholding tax, it is also required to increase its tax base for corporate tax.

Taxpayers wishing to benefit from the voluntary tax base increase provisions are required to apply to the tax office by 31 May 2023 at the latest. Due tax amounts may be paid in full (by 30 June 2023) or in a maximum of 12 instalments. If paid all at once, the law provides for a 10% discount.