Tax Newsletter 3/2018

Read below the latest legal developments in Turkey. This latest roundup provides insight on the latest amended and repealed laws and regulations affecting different sectors.

To discuss how these developments affect your business interests please contact Fethi Pekin, Managing Partner. Email: fpekin@pekin-pekin.com

 

TAX

Determination of the Late Fee on the Unpaid Portion of Public Receivables is as 2% per Month

  • Article 51 of the Law on the Collection of Public Receivables (Law No. 6183) includes a provision stating that the unpaid portion of the public receivable is subject to a 4% late fee for each month starting from the end of the maturity. Pursuant to such article, the President is authorized to reduce the rate by up to 10% or increase up to 2 folds.This authorization has been exercised by the President through the Decree No. 62 published in the Official Gazette dated September 5, 2018 and is determined as 2% per month starting from the date of publication to be calculated separately for each month.
  • Period applied Monthly rate
    21.04.2006 - 18.11.2009  2.50%
    19.11.2009 - 18.10.2010  1.95%
    19.10.2010 - 04.09.2018  1.40%
    As of 05.09.2018  2.00%

The Delay Interest Rate is Determined as 22%

  • Through the General Communique on Collections (Series: C, No. 3) (published in the Official Gazette dated September 6, 2018 and numbered 305), the delay interest rate which is currently applied at 12% is determined as 22% effective from September 6, 2018.Accordingly, pursuant to Article 48 of Law No. 6183, delay interest at a rate of 22% will be applied on public receivables that are postponed on the basis of applications to be submitted as of September 6, 2018.For the receivables to be postponed on the basis of applications submitted before September 6, 2018 and public receivables deferred before that date and paid in line with delay conditions, the previous delay interest rate (12%) is required to be applied as of the application date, as long as they are paid in line with the deferment conditions.
  • Period applied Annual rate
    28.04.2006 - 20.11.2009  24%
    21.11.2006 - 20.11.2009  19%
    21.10.2010 - 05.09.2018  12%
    As of 06.09.2018  22%

Extention of Period of Temporary Exemption Application concerning the Income Acquired Abroad by 6 months

  • The Law Regarding the Restructuring of Tax and Other Certain Receivables and Regarding Amendments to Certain Laws (Law No. 7143) had been published in the Official Gazette dated May 18, 2018. Sub-clauses (a) and (ğ) of the 13th clause within the Article 10 of the Law contain regulation on wealth amnesty while the provision on temporary exemption for certain income acquired abroad is covered within the sub-clause (h). Pursuant to such clause, income of fully amenable individuals and corporates indicated below, including those obtained until October 31, 2018 is exempt from income or corporation tax provided that they are transferred to Turkey as of May 18, 2018 until December 31, 2018. Gains from the sale of subsidiary shares concerning the corporations without legal and business centre in Turkey. Subsidiary gains obtained from corporations without legal and business centres in Turkey, Commercial gains obtained through business locations and permanent representatives located abroad. The concerning sub-clause also includes the regulation indicating that the gains of fully amenable real persons and corporates from the liquidation of corporations without legal and business centre in Turkey are exempted from income and corporation tax provided that they are transferred to Turkey until December 31, 2018. Through the Presidential Decision No. 48 published in the Official Gazette dated August 31, 2018, the periods above have been extended by six months as of their expiration. Accordingly, the date within the concerning provision for exemption indicated as October 31, 2018 is now extended to April 30, 2019 while the date of December 31, 2018 is extended to July 1, 2019 (since 30 June corresponds to the weekend).

Temporary amendments announced for deposit rates and withholding applied on profit share paid by participation banks.

  • Through the Presidential Decision No. 53 published in the Official Gazette dated August 31, 2018;Interest rates applied on the TL-denominated deposit accounts and withholding rates on profit share paid by participation banks over the participation accounts have been reduced,Interest rates applied on foreign exchange deposit accounts and withholding rates on profit share paid by participation banks over the foreign exchange participation accounts have been increased effective for certain terms.Accordingly;
    • Interest rates applied on foreign exchange deposit accounts and withholding rates on profit share paid by participation banks over the foreign exchange participation accounts will be subject to deduction rates of 20%, 16% and 13% depending on the maturity period,
    • Interest rates applied on the TL-denominated deposit accounts and withholding rates on profit share in TL paid by participation banks in return for the participation accounts will be subject to deduction rates of 5%, 3% and 0% depending on the maturity period.
    The new rates will be applied to demand and private current accounts limited to 3 months as of the publication date of the Decision (August 31, 2018) and to interest and profit share to be paid to term accounts opened or renewed within 3 months from the same date.

Decision of the Council of State regarding the Bonus Shares Obtained from the Addition of Profit Reserves to Capital to be regarded as Dividend

  • Section 5.6.2.4.3 of the Corporate Tax General Communique series No. 1 titled as “Status of earnings from the sale of bonus shares” previously contained a regulation as, “In case of capital increase by using reserves that are separated from profit for the period, there is no difference between granting bonus shares to these shareholders as a consequence of this transaction and actually distributing dividends. In either case, the shareholders have the opportunity of a right for disposal on the profits generated within the corporation. Therefore, in the event of the acquisition of bonus shares by the shareholders as a result of the capital increases provided from profit reserves, these equity shares acquired will be monitored in the nominal shareholding participation accounts and will not be subject to corporation tax due to the exemption of participation gains”. The aforementioned regulation was revoked through the verdict from the 4th Office of the Council of State dated 14.06.2017, No. 2013/2951, Decision No. 2017/5260.Council of State Tax Litigation Departments Board (DVDDK) has overturned the decision of the 4th Chamber of the Council of State summarized above through the merits No. 2017/626, Decision No. 2018/51, which was given by majority of votes on February 7, 2018 regarding the issue.

Exempting of Ceiling for Severance Pay from Income Tax and Child Benefit Amounts (July 1, 2018 - December 12, 2018)

  • Article 8 within the joint agreement contains a term concerning the payment for inflation adjustment. Pertaining to that term, in the circumstance that the six months rate change on the (CPI) June index for 2018 compared to the December 2017 index (CPI) exceeds 4%, coefficients should be increased as much as the exceeding portion effective from July 1, 2018.Within the context of the joint agreement’s aforementioned terms, the salary coefficient applicable to July 1, 2018-December 31, 2018 period is calculated as 0.11794 while the base salary coefficient is calculated as 1.8461.Concerning the July 1, 2018-December 31, 2018 period, through using these coefficients;
    • The ceiling for severance pay exempt from income tax will be implemented as TL 5,434.42,
    The monthly child benefit amount exempt from income tax will be implemented as TL 58.97 for children at the ages of 0-6 and TL 29.49 for other children.
This legal newsletter has been prepared for informational purposes only; it has not been prepared for advertising purposes or with the intention of creating an attorney-client relationship. It does not seek to provide information on all legal developments in Turkey with the quarter specified. None of the information contained in this legal newsletter shall constitute legal advice or anything akin thereto. To unsubscribe email the Editor: newsletter@pekin-pekin.com

ARTICLES | ABOUT | PRESS | CONTACT | MARKETING
PEKİN & PEKİN 10 Lamartine Caddesi Taksim 34437 Istanbul Turkey | Tel: +90 212 313 3500 | www.pekin-pekin.com