July 6, 2022

Repatriation of Capital

1) Legal Basis

The legal arrangement was made with the Article 50 of the Law No. 7417 on Civil Servants, which was published in the Official Gazette dated 5 July 2022 and numbered 31887, and on the Amendment of Some Laws and the Decree-Law No. 375 and with the temporary article 15 added to the Corporate Tax Law No. 5520.

2) Who Will Benefit From Repatriation of Capital?

Real and legal persons (Companies and other legal persons) will be able to benefit from Repatriation of Capital.

3) Will Domestic Residents Also Benefit From Repatriation of Capital?

Real and legal persons in the country and abroad will be able to benefit from Repatriation of Capital.

4) Which Assets Can Be Notified Under the Repatriation of Capital?

Currency, gold, foreign exchange, securities and other capital market instruments located abroad can be notified to banks or intermediary institutions until 31 March 2023 within the scope of the Asset Peace Law (7417).

5) Can the Covered Assets Be Used for Payment of Loans Abroad without Bringing them to Turkey?

Yes. Money, gold, foreign currency, securities and other capital market instruments located abroad can be used to close the loans used from banks or financial institutions abroad and recorded in the legal books as of 5 July 2022, until 31 March 2023 at the latest. In this case, provided that they are deducted from the book records, the provisions of the article are used without the condition of being brought to Turkey for the assets used in the payment of the debt.

6) Can Capital Advances Brought From Abroad and Recorded in the Legal Books of Companies Benefit from the Law?

In case the capital advances registered in the legal books as of 5 July 2022 are met by bringing money, gold, foreign exchange, securities and other capital market instruments abroad to Turkey before the entry into force of this article, the provisions of this article are used, provided that the said advances are deducted from the books until 31 March 2023 at the latest.

7) What Assets Can Taxpayers in Turkey Declare Under the Repatriation of Capital?

Money, gold, foreign currency, securities and other capital market instruments and immovables owned by income or corporate taxpayers and located in Turkey but not included in the legal book records can be declared to the tax offices until March 31, 2023.

8) Will the taxpayers in Turkey who make a declaration record the assets in the book?

Assets declared or declared within the scope of the first and fourth paragraphs of the Law are recorded in the legal books as of the date of notification or declaration by the taxpayers who keep the books in accordance with the Law No. 213 (Tax Procedure Law).

9) How will the taxpayers in Turkey, who keep books according to the balance sheet method, make their accounting records?

Taxpayers who keep books on the balance sheet basis open a special fund account in liabilities for the assets they have recorded in their legal books in accordance with the provisions of this article.

10) Is there a period for keeping the assets declared by taxpayers in the records?

The fund account cannot be withdrawn from the business, unless two years have passed from the date of notification or declaration, it cannot be used for any purpose other than adding to the capital, and it is not taxed if the business is liquidated.

11) Can self-employed and taxpayers who keep a business book also make a declaration?

Taxpayers who keep books on the basis of self-employment earnings book and business account can also benefit from the Law. They also show the said values in their books.

12) Is Income Tax Payable for Assets Held in the Fund Account?

Assets declared within the scope of the Law are not taken into account in the determination of the period income and can be withdrawn from the business without being taken into account in the determination of the taxable income and distributable income for corporations, provided that two years have passed from the date of notification or declaration.

13) Can Non-Taxpayers Benefit From Repatriation of Capital?

Yes. Those who do not have income and corporate tax liability can benefit from the provisions of the article without seeking other conditions other than the declaration in this paragraph. It is obligatory to document the assets other than the immovable by depositing them in banks or intermediary institutions as of the declaration date at the latest.

In accordance with the Fees Law No. 492, dated 2/7/1964, no fee is charged for the transactions to be made in the title deed regarding the transfer of immovables owned by income or corporate taxpayers and located in Turkey but not included in the legal book records and to be included in the business records.

14) Is Value Increase Calculation Made for Immovables Registered as Business?

Transfer of immovables notified in this context to operation In the application of the repetitive article 80 of the Law No. 193, the transfer of immovables to operation will not be counted as a divestiture and the gain in value increase will not be calculated.

15) Will Taxes Be Paid for Declared Assets?

Whether or not tax will be paid for the declared assets and at what rate varies between 0% and 3%, depending on the date of notification and the holding period in the accounts.

According to this;

Banks and intermediary institutions, over the value of the assets notified from the notification owner regarding the assets notified to them;

1% for notifications until -30/9/2022,

2% for notifications made between 1/10/2022 and 31/12/2022 (including this date),

3% for notifications made until 31/3/2023

They declare the tax they collect in advance to the tax office to which they are affiliated with a declaration as tax officer until the evening of the fifteenth day of the month following the notification and pay them within the same period.

The tax rate is applied as 0% if the declared assets are transferred to the accounts opened in banks or intermediary institutions in Turkey or are kept for at least one year from the date they are brought from abroad and deposited in these accounts.

16) Can the Initially Paid Tax Be Refunded for the Assets Held in the Accounts for More than One Year?

A tax of 3% is levied on the value of the assets declared to the tax offices, and this tax is paid until the end of the month following the month in which the assessment is made.

The tax, which should be applied as 0% if it is kept for at least one year from the date it is deposited in the accounts, but collected by the banks and intermediary institutions during the notification and paid to the tax office, is returned upon the application of the notification owner to the relevant tax office at the end of the period.

17) Can the Paid Repatriation of Capital Tax be written off?

The tax paid in accordance with the sixth paragraph of the article of the law cannot be recorded as an expense and cannot be deducted from any other tax.

18) Will be there Depreciation for the Reported Assets?

Regarding the assets subject to notification and declaration, the provisions of the Law No. 213 on depreciation are not applicable.

19) Can Losses Caused by the Sale of the Assets Subject to the Notification Be Deducted from the Tax Base?

Losses arising from the disposal of declared assets within the scope of the law are not considered as expenses or deductions in terms of income or corporate tax application.

20) Can a Tax Inspection be Conducted and a Tax Requested or Penalized for Assets Declared within the Scope of Repatriation of Capital?

No tax inspection or tax assessment is made regarding the amounts corresponding to the declared or declared assets within the scope of Repatriation of Capital.

In case it is determined that the tax assessment difference found as a result of tax examinations started for other reasons and the decisions of the valuation commission arises due to the assets declared or declared within the scope of the article, and the amount of reported or declared assets is equal to or more than the tax base difference found, no assessment is made regarding the base difference.

Although it is determined that the base difference found arises due to the declared or declared assets, if it is greater than the said asset amounts, only the difference between them is taxed.

In case the tax base difference is determined due to reasons other than the assets subject to notification or declaration as a result of tax inspection or valuation commission decisions, the amounts declared or declared within the scope of this article are assessed without deducting from the difference in the tax base.

21) Is the tax accrued for the Repatriation of Capital that was declared but could not be brought to the country in due time cancelled?

Although it is reported from money, gold, foreign exchange, securities and other capital market instruments abroad, in case the declared assets are not brought to Turkey within three months from the date of notification or transferred to an account to be opened in a bank or intermediary institution in Turkey, the taxes levied on the declared or declared amounts are not paid on time and the other conditions in this article are not fulfilled, the right to be protected from original tax and/or tax penalty specified in the ninth paragraph of the legal regulation cannot be used.

The provisions of the ninth paragraph shall not be applied for the assessments to be made as a result of the aforementioned examination or appraisal commission decisions due to the notifications and declarations made within the scope of this article after the date on which the tax examination was initiated or referred to the valuation commission.

Failure to pay the accrued tax on due date, together with the late fee, does not constitute an obstacle to the follow-up and collection of the tax original pursuant to the Law No. 6183. Collected taxes are non-refundable and non-refundable. In other words, those who declare the assets but do not bring them to Turkey on time will not be able to benefit from the rights brought under the law, but will have to pay the accrued tax.

22) Is it possible to make corrections in the declarations after the notification and declaration period?

After the notification and declaration period has expired, no corrections can be made regarding the notification or declarations.

23) Can Only Turkish Citizens Benefit From the Law?

There is no obligation to be a taxpayer or Turkish citizen in order to bring the said assets abroad to Turkey, and everyone can benefit from the regulation.

Ali KARAKUŞ

July 5, 2022

Istanbul

________________________________________

Source: Official Gazette No. 31887 dated 5 July 2022 Civil Servants Law No. 7417, and Law on Making Amendments in Some Laws and Decree Law No. 375

Source: Official Gazette No. 31887 dated 5 July 2022 Civil Servants Law No. 7417, and Law on Making Amendments in Some Laws and Decree Law No. 375
Legal Notice: The information in this article is intended for information purposes only. It is not intended for professional information purposes specific to a person or an institution. Every institution has different requirements because of its own circumstances even though they bear a resemblance to each other. Consequently, it is your interest to consult on an expert before taking a decision based on information stated in this article and putting into practice. Neither Karen Audit nor related person or institutions are not responsible for any damages or losses that might occur in consequence of the use of the information in this article by private or formal, real or legal person and institutions.