In October 2011, the Turkish Tax Administration started publishing tax rulings on its website. Below are a couple of the rulings shared with the taxpayers through the website.

Tax Ruling No. 1
According to the Ruling of the Turkish Tax Administration dated July 8, 2011, commission paid by non-resident companies for brokerage services rendered to the liaison offices of such non-resident companies for the payment of miscellaneous expenses in Turkey shall be subject to VAT as such services have been provided in Turkey. 

Tax Ruling No. 2
A tax ruling dated April 19, 2011 regarding commission charges applicable to bank letters of guarantee in terms of VAT has been published by the Tax Revenue (the “Ruling”). According to the Ruling, VAT shall not be applicable over expenses and commission arising out of the bank letters of guarantee issued in favour of and delivered to suppliers.

On June 29, 2011 the Council of Ministers passed a decree (dated April 26, 2011 and No. 2011/1854) (published in the Official Gazette dated June 29, 2011 and No. 27979) (the “Decree”)  in connection with different tax laws in order to amend the withholding rates imposed on lease certificates issued abroad by asset lease companies resident in Turkey and lease certificates issued by asset lease companies within the scope of the Communiqué on Principles regarding Lease Certificates and Asset Lease Companies (Communiqué Serial No. III/43) (published on the Official Gazette dated April 1, 2010 and No. 27539) (the “Communiqué”) issued by the CMB. Specifically, the Decree envisages (i) 10% withholding tax over lease certificates issued by asset lease companies with a maturity of less than one year; (ii) 7% withholding tax over lease certificates issued by asset lease companies with a maturity from one to three years; (iii) 3% withholding tax over lease certificates issued by asset lease companies with a maturity from three to five years and (iv) 0% withholding tax over the lease certificates issued by asset lease companies with a maturity of more than five years. Thus, the Decree provides the non-resident certificate holders with an opportunity to pay reduced tax for their income derived from these securities.

The Decree of the Council of Ministers numbered 2011/1854 and dated April 26, 2011, entered into force upon being published in the Official Gazette dated June 29, 2011 and numbered 27979 (the “Decree”). Pursuant to the Decree, new regulations have been enacted regarding lease certificates issued abroad by asset lease companies resident in Turkey and lease certificates issued by asset lease companies within the scope of the Communiqué on Principles regarding Lease Certificates and Asset Lease Companies (Serial No. III/43) issued by the CMB.  In this regard, the provisions regarding withholding tax rates under Article 94 and Provisional Article 67 of the Income Tax Law (Law No. 193), Article 15 and Article 30 of the Corporate Tax Law (Law No. 5520) and the banking and insurance transactions tax rates under Law regarding Expenditure Taxes (Law No. 6802) have been reduced (to zero percent in some cases) in relation to gains derived from the aforementioned securities.

In general, the Omnibus Law (Law No. 6111) regulates the restriction of unpaid taxes until 31 December 2010, restructures public receivables and introduces amendments primarily regarding tax and social premium receivables. Accordingly, the Omnibus Law regulates taxes and tax penalties, interest on default and default fines concerning such tax liabilities related to the period prior to -and including- 31 December 2010 and to declarations that should have been submitted (for declaration based taxes) before –and including- 31 December 2010, tax liabilities for the year 2010 and accrued prior to –and including- 31 December 2010 and penalties, default interest and default fines related to such tax liabilities, tax penalties related to the main tax liabilities and other certain public receivables regarding the determinations made prior to the date of 31 December 2010.

The Omnibus Law also envisages that those who have previously made respective declarations, but have not brought their assets to Turkey timely will by no means be subjected to any tax examination or tax assessment with regard to the terms prior to the date of 1 January 2008, on the condition that such persons either bring their assets in cash, foreign currency, gold, security and other capital market instruments into Turkey, or transfer the said to a respectively opened bank account in Turkey no later than two months after the effective date of this Omnibus Law. Taxpayers who wish to benefit from the provisions of the said Law should submit an application to the relevant tax administration bythe actual ending of the second month following the date of its promulgation. (Since the second month following promulgation is April, taxpayers would normally have until the last day of April for such applications. However, since the last day of April and the first day of May are not business days, the due date for the submission of such application is 2 May 2011.) A taxpayer who applies for the Omnibus Law but fails to pay the related instalments (i.e. reduced amounts of tax or a tax penalty under Law No. 6111) loses his right for any reductions or write-offs under the amnesty brought by the Amnesty Law and will have to pay all taxes, tax penalties and interest as before and, in some cases, with additional penalties.

The Council of Ministers Decree No. 2010/1182 (published in the Official Gazette dated 29 December 2010 and numbered 27800) (“Decree No. 2010/1182”) has proved to be another breakthrough in terms of further encouraging cross-border private debt issues (bonds) by Turkey-resident corporates. The Decree No. 2010/1182 has introduced reduced rates (up to a zero rate) for withholding tax on cross-border corporate bond issues applicable to both resident and non-resident investors based on a band of a one- to five-year maturity.

As explained in our Legal Newsletter Q3/2010, the amendment of Temporary Article 67 by Law No. 6009 (published in the Official Gazette dated 1 August 2010 and numbered 27659) (“Law No. 6009”) authorised the Council of Ministers to specify rates to be applied on specific types of security and related gains. Following the amendment, the Council of Ministers was expected to clarify rates to be applied on the basis of specific securities and investors (e.g. non-resident/resident banks, mutual funds, etc.). However, the Decree No. 2010/926 issued by the Council of Ministers on 27 September 2010 (published in the Official Gazette dated 30 September 2010 and numbered 27715) (“Decree No. 2010/926”) failed to provide much depth to the current legislation by repeating, to a large extent, the existing wording of Temporary Article 67.

The inclusion of warrants among instruments that will benefit from 0% withholding (previously, the Tax Revenue’s view was that a 10% withholding should be applied to income Turkish residents derived from such warrants) could be pointed to as one of the few significant specifications introduced by Decree No.2010/926.