Law No. 7440, also known as the "Tax Amnesty Law", "Income Statement Increase Law" or "Restructuring Law", which includes the restructuring of certain receivables and amendments to certain laws, has been published in the Official Gazette.
Law No. 7440 on the Restructuring of Certain Receivables and Amendments to Certain Laws was published in the Official Gazette dated 12/03/2023 and numbered 32130. Among its many provisions, the Law introduces the following regulations, which are being followed with particular interest:
restructuring of finalised receivables,
restructuring of receivables that are not yet finalised or are under litigation,
restructuring of matters at the tax audit and assessment stage,
tax base and tax increase (voluntary increase of declared income),
correction of business records.
Below you can find answers to the most frequently asked questions on these topics.
Which receivables are covered by the restructuring?
In general, the restructuring provisions of the Law cover:
taxes and tax penalties within the scope of Tax Procedure Law No. 213,
administrative fines imposed before 31/12/2022 (inclusive),
other principal and ancillary public receivables pursued under Law No. 6183,
customs duties, administrative fines, interest, late-payment interest and late-payment surcharges pursued by customs offices,
receivables of the Social Security Institution,
receivables of special provincial administrations,
receivables of municipalities,
water and waste-water charges and contribution-to-expenditure receivables,
receivables of the Investment Monitoring and Coordination Directorates (YİKOB).
How will tax debts be restructured?
Ancillary public receivables such as late-payment interest and late-payment surcharges attached to receivables that are overdue or whose payment period has not yet expired are cancelled. Instead of these ancillary amounts, the principal must be paid within the specified period and manner together with an amount calculated on the basis of the monthly changes in the Domestic Producer Price Index (D-PPI / Yİ-ÜFE) up to the date of publication of the Law.
How will penalties not attached to a principal tax be restructured?
For tax penalties imposed independently of a principal tax, and tax penalties imposed for participation in an offence, that are overdue or whose payment period has not yet expired: if 50% of the penalty, plus an amount calculated on the basis of monthly D-PPI changes up to the publication date of the Law in place of the late-payment surcharge, is paid in full within the period and manner set out in the Law, the remaining 50% of the penalty and all related late-payment surcharges will be waived. Where the unpaid receivable consists only of late-payment surcharges, it is sufficient to pay the D-PPI-based amount calculated in place of the surcharge.
How will receivables that are not finalised or are under litigation be restructured?
For additional, ex officio or administrative tax assessments and customs duty accruals that, as of the publication date of the Law, are subject to a lawsuit before a court of first instance or for which the period to file a lawsuit has not yet expired: if 50% of the taxes/customs duties, plus an amount calculated on the basis of monthly D-PPI changes up to the publication date in place of interest, late-payment interest and late-payment surcharges, is paid in full within the period and manner set out in the Law, the remaining 50% of the taxes/customs duties, the interest, late-payment interest and surcharges, the tax penalties/administrative fines attached to the principal and all related late-payment surcharges will be waived.
How can taxpayers with ongoing tax audits or assessment procedures benefit from the restructuring?
Tax audits and assessment procedures for periods covered by the Law that started before its publication but have not yet been completed will continue, subject to the provisions on tax base and tax increase. After completion, if a written application is made within thirty days of notification of the tax assessment notice, and 50% of the assessed tax, plus a D-PPI-based amount up to the publication date in place of late-payment interest, plus the full late-payment interest calculated from that date until the end of the lawsuit filing period, and 25% of any penalty not attached to a principal tax, is paid in twelve equal monthly instalments starting from the month following notification, then 50% of the principal tax, 75% of penalties not attached to a principal tax, the late-payment interest applied up to the publication date and all penalties attached to the principal tax will be waived.
Can tax loss penalties imposed for participation benefit from the restructuring?
Yes, the Law also covers these receivables. For tax loss penalties imposed for participation in relation to the periods covered by the Law, if those liable pay 25% of the penalty within the period and manner specified, the remaining 75% will be waived.
Can assessment committee decisions and tax audit reports completed before publication but not yet recorded by the tax office benefit from the restructuring?
Yes. Assessment committee decisions and tax audit reports that were completed before the publication of the Law but reach the tax office records on or after that date will be followed by the necessary assessment and notification. The Law can then be benefited from, provided that the amount determined under the first and second paragraphs of Article 4 is paid in full within the period and manner set out in the first paragraph of that Article.
Are taxes and penalties in the pre-assessment reconciliation process covered?
Restructuring is available for receivables for which, as of the publication date of the Law, a request for pre-assessment reconciliation has been made under Law No. 213 but the reconciliation date has not yet arrived or no agreement has been reached, and the tax and penalty notices have not yet been served on the taxpayer.
For which taxes is the tax base and tax increase available?
Under Article 5 of the Law, the tax base and tax increase can be used for corporate tax, income tax, income (withholding) or corporate (withholding) tax and value added tax.
What is the effect of a tax base and tax increase on tax audits and assessments?
If taxpayers increase their tax base/tax under the conditions of the Law and pay within the specified period and manner, no tax audit will be carried out and no further assessment will be made for those tax types for the years in which the increase was made.
What is the increase amount for income and corporate tax?
Income and corporate taxpayers will increase the taxable base in their annual returns by no less than the rates in the table below.
Year | Minimum increase rate (%) |
|---|---|
2018 | 35 |
2019 | 30 |
2020 | 25 |
2021 | 20 |
What is the increase amount if no taxable base arose in the income tax return?
Where a loss was declared in the income tax return, no taxable base arose due to deductions and exemptions, or no return was filed at all (including those who carried on activities or earned income in the relevant years without the knowledge of the tax office), the increase amount may not be less than: for taxpayers keeping books on the business-account basis, TRY 63,800 for 2018, TRY 66,400 for 2019, TRY 70,500 for 2020 and TRY 75,000 for 2021; for taxpayers keeping books on the balance-sheet basis and self-employed professionals, TRY 94,000 for 2018, TRY 99,600 for 2019, TRY 105,800 for 2020 and TRY 112,400 for 2021. For taxpayers whose income consists only of commercial income determined under the simplified method, the minimum base is 1/10 of the amounts set for balance-sheet taxpayers for the relevant years; for those whose income consists only of rental income, 2/5 of those amounts; and for all other income taxpayers, the amount set for business-account taxpayers.
What is the increase amount if no taxable base arose in the corporate tax return?
Where corporate taxpayers declared a loss in the return for the year they wish to increase, no taxable base arose due to deductions and exemptions, or no return was filed at all (including those who carried on activities or earned profits in the relevant years without the knowledge of the tax office), the increased base may not be less than the amounts in the table below.
Year | Amount (TRY) |
|---|---|
2018 | 200,000 |
2019 | 215,000 |
2020 | 230,000 |
2021 | 260,000 |
At what rate will the increased income and corporate tax bases be taxed?
The increased bases are taxed at 20% and no further tax is levied on them. However, the rate is 15% for income and corporate taxpayers who filed their annual returns for the relevant year on time, paid the taxes accrued on those returns and the related stamp duty on time, and did not benefit from Articles 2 and 3 of the Law for these tax types. This also applies where no tax was payable on those returns due to exemptions, deductions and offsets.
Can losses in the returns be offset if a tax base increase is made?
50% of the losses for the years in which an income or corporate tax base increase is made cannot be offset against profits of 2022 and subsequent years. Taxpayers who filed their 2022 corporate tax return before making the increase and deducted all losses for those years will not be penalised and no late-payment interest will be charged if they correct their returns within the application period for the base increase. Taxes accrued on such corrections must be paid within one month of filing the return. No correction is made to the 2022 advance tax returns as a result of such a correction to the annual corporate tax return.
What is the increase amount for value added tax?
VAT payers declare VAT of no less than 3% for 2018, 3% for 2019, 2.5% for 2020 and 2% for 2021 of the annual total of VAT calculated in their returns for each tax period (including returns filed with reservation). For taxpayers benefiting from the deferral–cancellation scheme under Article 11(1)(c) and provisional Article 17 of VAT Law No. 3065, deferred taxes are deducted from the calculated tax when determining the basis for the increase.
How is the VAT increase calculated if not all VAT returns were filed?
If returns for at least three periods of the year were filed, the average calculated VAT in those returns is annualised to find the annual calculated VAT used as the basis, and the increase is calculated on that amount at 3% for 2018, 3% for 2019, 2.5% for 2020 and 2% for 2021.
How is the VAT increase calculated if no VAT returns were filed?
If no returns, or returns for only one or two periods, were filed, this provision can be used by making a VAT increase at 18% on the increased base, provided that an income or corporate tax base increase has been made for the relevant year.
Can the VAT increase be made for only some of the year's returns?
No. VAT payers must make the increase for all tax periods of the relevant year. However, if the taxpayer started or ceased business during that year, the increase is made for the periods in which they were active.
Does the VAT increase prevent audits and assessments regarding carried-forward VAT and VAT refunds?
For tax audits of periods following the years for which an increase was requested, the right to audit and/or assess is reserved with respect to VAT carried forward to subsequent periods, cancellation and refund procedures arising from export-registered deliveries or other refundable transactions in the increase periods, transactions under Article 9(2) of Law No. 3065, and transactions involving joint and several liability. However, no assessment may be proposed for the increase periods in audits relating to VAT carried forward.
Can a tax base increase be made for periods that have already been audited?
Yes. Taxpayers who have previously been subject to a tax audit may also make an increase for the audited years.
Is there a discount if the taxes accrued from the increase are paid in advance?
If all taxes accrued as a result of the tax base or tax increase are paid in advance within the first instalment period, a 10% discount is applied to these taxes (excluding stamp duty).
Can books and documents for the relevant periods be destroyed after the increase?
No. Making a tax base or tax increase does not prevent the application of the provisions of Law No. 213 on the retention and presentation of books and documents.
Who cannot benefit from the tax base and tax increase?
The following taxpayers cannot benefit from the tax base and tax increase provisions:
Those who commit the acts in Article 359(b) of Law No. 213 ("those who destroy books, records and documents, or remove pages of books and replace them with other pages or none, or who issue the originals or copies of documents wholly or partly falsely") and the acts in Article 359(ç) of the same Law. If such acts are found to have been committed in 2022 or in any period covered by this Article, these taxpayers cannot benefit from the increase provisions for other periods either.
Those convicted of terrorism offences.
Those for whom, as of the effective date of this Article, a tax audit or an examination for terrorist financing or money laundering has been requested by judicial authorities, general law enforcement or the Financial Crimes Investigation Board (MASAK) within investigations or prosecutions based on membership of, affiliation with or links to terrorist organisations or structures found by the National Security Council to act against national security.
By when must tax base and tax increase notifications be submitted?
Under Article 9(1)(a) of the Law, notifications must be submitted to the relevant tax office by 31/5/2023 (inclusive).
What is the application deadline to benefit from the Law?
Subject to the application and payment periods in the relevant articles, debtors wishing to benefit from the Law must apply to the relevant authority by 31/5/2023 (inclusive).
What is the payment period for restructured debts?
Amounts payable to collection offices of the Ministry of Treasury and Finance, the Ministry of Trade, the Social Security Institution, special provincial administrations, municipalities and YİKOBs must be paid with the first instalment by 30/6/2023 (inclusive) and the remaining instalments in up to forty-eight equal monthly instalments thereafter. If the last day of an application or instalment period falls on an official holiday, the period ends at the close of business on the first working day after the holiday.
Waiver of receivables not exceeding TRY 2,000
Under the Law, receivables pursued under Law No. 6183 by collection offices of the Ministry of Treasury and Finance that fell due before 31/12/2022 (inclusive) but remained unpaid as of 1/1/2023 are waived where the total principal and ancillary receivables accrued in the name of a single public debtor do not exceed TRY 2,000 across all collection offices. Collection office records as of 1/1/2023 are used to determine this amount. Lawsuits relating to receivables waived under this provision are terminated by the court upon notification by the creditor collection office that the receivable has been cancelled, and no litigation costs, attorney fees or ancillaries are claimed by either side. Amounts paid before the publication of the Law are not refunded.
