Law No. 7256 on the Restructuring of Public Receivables and Amending Certain Laws was promulgated in the Official Gazette of Turkey no. 3130 on 17 November 2020, and took effect the same day. Under the law, finalised public receivables for restructuring include all kinds of tax and tax assessment, custom duties and related receivables, social security premiums and other receivables of social security institutions, administrative fee receivables of municipalities and other public receivables collected as per Law No. 6183 on the Collection Procedure for Public Receivables. In our article we describe the tax-related part of the provisions.
Restructuring of tax debts
According to the law, tax debts can be restructured in Turkey for periods before the 2020 financial year and for the 2020 financial year for tax and tax-related penalty amounts, such as late payment interest and late payment charges regarding tax liabilities accrued before 1 September 2020.
Tax debts may also be restructured for tax penalties not related to the original tax amount (such as irregularity and special irregularity fines) and which stem from inspections carried out before 1 September 2020.
Payments of finalised unpaid taxes and tax penalties related to original tax amount
If all unpaid tax amounts and the amounts to be calculated based on the monthly Domestic Producer Price Index (D-PPI) by 17 November 2020 are paid within the legal period and in line with the method mentioned in Law No. 7256,
- 100% of the late payment interest, late payment charge and any other related public receivables stemming from the unpaid tax amount, and
- 100% of the tax penalties and late payment charges stemming from the original tax amount (including the original tax amounts paid before the publication of Law No. 7256) and the late payment charges regarding the corresponding tax penalties
will be waived.
Payments of finalised unpaid tax penalties not related to original tax amount
The payments of finalised unpaid tax penalties which are not related to the original tax amount and which are due or undue as of 17 November 2020 will be realised in Turkey as follows:
- If 50% of the unpaid tax penalty amount not related to the original tax amount and the tax penalties stemming from the participation crime and 100% of the amount to be calculated based on the monthly D-PPI by 17 November 2020 are paid within the legal period and in line with the method mentioned in Law No. 7256, 50% of the remaining tax penalties and late payment charges stemming from related tax penalties will be waived.
- If the unpaid tax amount only consists of late payment charges, then if paying the amount to be calculated based on the monthly D-PPI instead of the late payment charge within the legal period and in line with the method mentioned in Law No. 7256, 50% of the remaining tax penalties and 100% of the late payment charges stemming from related tax penalties will be waived.
How to benefit from the provisions
To benefit from the provisions of Law No. 7256, an application should be made to the relevant Turkish authorities by 31 December 2020. Another condition is that the payment of the first of the eighteen instalments should be made to the Treasury and Finance Ministry by 31 January 2021, and the rest of the instalment payments should be made on a two-month basis following the first instalment payment (up to 18 instalments in 36 months are possible on a two-month payment basis).
Restructured debt should also be paid in advance, or in six, nine, twelve or eighteen equal instalments as well. However, depending on the choice of instalments, the amount to be paid will be multiplied by a coefficient:
- 045 for 6 equal instalments
- 083 for 9 equal instalments
- 105 for 12 equal instalments
- 15 for 18 equal instalments
If paying the restructured debt in advance during the first two-month instalment period, the coefficient is not calculated and 90% of the amount to be calculated based on the D-PPI monthly rate change will be waived.
If paying the restructured debt in advance during the second two-month instalment period, the coefficient is not calculated and 50% of the amount to be calculated based on the D-PPI monthly rate change will be waived.
Debtors must not file a lawsuit or take legal action, or must waive any lawsuit, in order to benefit from the provisions of Law No. 7256 in Turkey.
If you would like to know more about the provisions of Law No. 7256 or other tax issues in Turkey, please visit the homepage of WTS Turkey!
