Law No. 7256 introduced a patrimonial peace and, with the extension of its period of application, taxpayers had the possibility of benefiting from the patrimonial peace until June 30, 2022. Following the expiration of the patrimonial peace under Law No. 7256, Law No. 7417, approved by the General Assembly of July 1, 2022 and published in the Official Journal of July 5, 2022, introduces a new peace asset. Details of the new Asset Peace, which has many significant differences from the previous one, are provided below.
Law No. 7417 on Certain Amendments to the Law on Civil Servants and Certain Laws and Decree-Law No. 375 (“Law No. 7417“), which was published in the Official Journal of 05.07.2022 and n° 31887, introduces a new patrimonial peace by virtue of article 50 thereof.
What does the New Asset Peace bring?
I. Foreign assets to be notified
Natural or legal persons may notify their banks or intermediary institutions of the presence of money, gold, securities and other capital market instruments abroad before March 31, 2023.
Natural or legal persons can use these assets to honor loans obtained from foreign banks or financial institutions and registered in the legal books on the date of entry into force of Law No. 7417 (i.e. the July 5, 2022). These assets are to be used to honor the mentioned loans until March 31, 2023. Moreover, these assets will be deregistered and the peace of heritage will apply to them without them being brought into Turkey.
Banks and intermediary institutions will levy cash taxes on assets at the following rates:
- at 1% for notifications until September 30, 2022
- At 2 o’clock% for notifications between October 1 and December 31, 2022 (including this date)
- At 3% for notifications up to 31 March 2023 (including this date)
Banks and intermediary establishments will declare and pay the taxes collected to the tax services until the evening of the fifteenth day following the notification.
If the notified assets are held in the account for at least one year after their transfer to the banks or intermediary institutions in Turkey or deposited in these accounts as brought in from abroad, the tax will apply. at 0%. Those who made the declarations can ask the tax offices for the reimbursement of taxes declared and paid previously by banks and intermediary institutions.
ii. Local heritage to be declared
Income and corporate tax payers must declare silver, gold, foreign currencies, securities, other capital market instruments and real estate which are in Turkey but not not recorded in the legal books at the tax offices before March 31, 2023.
Declared assets will be taxed at 3% of their value (regardless of the date of declaration) and this tax must be paid before the end of the month following the imposition. In addition, the right of ownership shall not apply to the transfer of immovable property which is declared in the patrimonial peace and registered in the legal books, and the transfer of such property shall not be considered as an alienation within the meaning of article 80 of the income tax code. Right.
iii. Capital premiums
The Patrimonial Peace also applies to capital bonuses which are entered in the legal books on the date of its entry into force (July 5, 2022) if these bonuses are fulfilled before the same day by the transfer of silver, gold , currencies, securities and other capital market instruments to Turkey from abroad. The capital premiums mentioned must be deleted from the registers before March 31, 2023.
iv. Important points for local and foreign assets
Concerning the recording of local/foreign assets in the legal books and their taxation:
- Those who keep legal books on a balance sheet basis will record local/foreign assets in a temporary special fund account in liabilities which will be opened on the date of notification or declaration. Monies in the fund account (i) cannot be withdrawn from the fund for two years, (ii) can only be used to contribute capital and (iii) are not taxed in the event of liquidation.
- Independent professionals keeping an income book or those keeping legal books under the transaction account method will enter the assets in their books as indicated separately on the date of notification/declaration.
- Declared/notified assets are not taken into account in the calculation of business profit for the tax period. These assets can be withdrawn after two years of notification/declaration without being taken into account in the calculation of taxable profit or distributable profit.
- Those who are not liable for income or corporation tax can also benefit from peace of assets by declaring only the assets and with no other requirement than that of the declaration. However, they must certify the assets, with the exception of real estate, by depositing them with banks or intermediary bodies no later than the date of notification.
- Taxes paid cannot be amortized or deducted from other taxes.
- Depreciation provisions under Tax Procedure Law No. 213 do not apply to local/foreign assets.
- Capital losses resulting from the disposal of the assets cannot be considered as an expense or a deduction for income or corporation tax.
- No changes can be made to notifications/declarations after the filing deadline.
v. Provisions for Tax Inspection or Valuation Board Rulings on Local/Foreign Assets
- Tax control and taxation cannot be carried out for the amount corresponding to the notified/declared assets. In the results of a tax audit carried out on the basis of another ground or in a decision of an assessment commission, if a difference in the tax base is found due to the notified/declared assets, (i) no assessment is only carried out if the amount of the assets concerned is equal to or greater than the difference in the basis observed, and (ii) taxation is only established for the difference if the amount of the assets notified/declared is less than the difference basic.
- If the decision of the valuation or assessment commission finds a difference in the tax base for a reason other than the notified or declared assets, the valuations are made without deducting the notified/declared amounts from the difference in the base observed. . In this case, the reasons for the difference in tax base could be the incorrect application of the depreciation rate or procedures, errors in expenses in the calculation of taxable income, etc.
- For the application of the provisions relating to tax audit, (i) the foreign assets must be brought into Turkey or transferred to an account to be opened in a bank or an intermediary institution in Turkey within three months of the notification and (ii) the Taxes on declared local assets must be paid on time. In addition, the notification or declaration must be made before the start of the tax audit or referral to the assessment commission.
- If the taxes due are not paid, the original tax is pursued and recovered with late payment interest, and the taxes collected are not subject to rejection and refund.
The new patrimonial peace introduced by law n° 7417, which entered into force by publication in the Official Journal of July 5, 2022 and n° 31887, is broadly similar to the previous patrimonial peace. However, it also includes many important differences, such as the progressive tax rates provided for assets located abroad depending on the date of notification and the length of stay of the assets in the bank accounts, the amount to be register in the accounts cannot be withdrawn from the operation for two years, non-taxpayers can also benefit from the patrimonial peace for local property and the right of ownership is not deducted from the declaration of real estate. As with other peace of assets, we expect the Department of Treasury and Finance to issue a statement with details and examples.
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