A new asset peace regulation entered into force with the article 50 of Law No. 7417 on Certain Amendments to Civil Servants Law and Certain Laws and Statutory Decree No. 375 [the “Law No. 7417”] which was published in the Official Gazette numbered 31887 on 5 July 2022.
The previous regulation regarding asset peace was introduced with the Law No. 7256 and the deadline for taxpayers to benefit from the said regulation was 30 June 2022. Following the repeal of the previous regulation, the asset peace regulation will be re-enforced with the Law No. 7417.
What Does the Asset Peace Mean?
Asset peace was initially implemented in our law with the Tax Peace Law No. 4811, and then new regulations were introduced with the following laws. Accordingly, from 2008 to the present, a total of eight pieces of asset peace legislation came into force together with the recent Law No. 7417.
In a nutshell, asset peace regulation aims registration of unregistered domestic or foreign assets by natural persona and legal entities with certain tax advantages, so as to include those assets within the domestic economy. Especially in times of crisis, it is of great importance to record domestic and foreign resources in order to eliminate the financing gap in the economy.
Scope of the New Asset Peace Regulation
With the Law No. 7417, the asset peace regulation has re-entered into force. Accordingly, the Law brings different rules for (i.) foreign assets subject to notification, (ii.) domestic assets subject to declaration, and (iii.) capital premiums.
It should be emphasized that the taxes paid regarding the notification/declaration of assets cannot be stated as expense and cannot be deducted from any other tax. In addition, taxpayers will not be able to make any corrections regarding the notification/declaration of these assets.
- Notification of Foreign Assets to Banks or Intermediary Institutions
Natural persons or legal entities will be able to benefit from asset peace by notifying banks or intermediate institutions regarding the cash, gold, foreign currency, stocks, and other capital market instruments abroad until 31 March 2023. In addition, it is clearly stipulated in the regulation that it can be used to repay the loans received from banks or financial institutions abroad in order to encourage recording of the said assets. However, this is only possible in repaying loans registered with the statutory books as of 5 July 2021 until the effective date of the regulation, i.e., 31 March 2023. Even if there is no requirement to transfer the declared loans to Turkey, the tax rate will be applied as 0% provided that they are transferred and/or deposited to a bank account in Turkey or to accounts opened at intermediary institutions and kept in such accounts for at least one year.
Various tax benefits are contemplated under the regulation depending on the notification dates. Accordingly, banks and intermediary institutions will charge different upfront tax amounts as per the notification date based on the value of assets reported to them, as follows: (i.) 1% if notified until 30 September 2022; (ii.) 2% if notified between 1 October and 31 December 2022; (iii.) 3% if notified until 31 March 2023. Additionally, as tax supervisor, they are required to declare and pay the tax they collect to the tax office they are registered with until the evening of the fifteenth day of the month following the date of notification.
In order to clarify the asset peace regulation, the Turkish Revenue Administration prepared a draft communiqué titled “General Communiqué on Bringing Certain Assets to the Economy (Serial No. 1)” [the "Draft Communiqué"] and submitted it to the approval of the Grand National Assembly of Turkey on 8 July 2022. According to the Draft Communiqué, it is expected that some assets located abroad but are not covered by the asset peace, for instance real estates, to benefit from it. Also, any assets that normally do not fall under the scope of the asset peace may be transferred to Turkey until 31 March 2023 by having been exchanged gold, foreign currency, stocks, and other instruments of the capital markets to cash and still benefit from asset peace.
- Declaration of Domestic Assets to the Tax Office
If income and corporate taxpayers declare their assets and real estates mentioned in the above title to tax offices until 31 March 2023, a tax of 3% will be levied on the value of such assets, regardless of the declaration date. Transactions involving the registration of real estates and their transfer to the enterprise are exempt from title deed costs as long as they fall within the scope of the asset peace regulation.
- Capital Premia
In order for capital premia registered in the legal books as of the effective date of Law No. 7417 to benefit from asset peace, cash, gold, foreign exchange, securities, and other capital market instruments abroad must be transferred to Turkey before the effective date and such capital premium must be fully paid with these transferred assets.
It is aimed that taxpayers who will benefit from the asset peace regulation introduced by the Law No. 7417 will bring their assets located abroad to Turkey or have them registered in Turkey, thereby relieving the financing deficit in the country to some extent. In addition, with the said regulation, the Ministry of Treasury and Finance of the Republic of Turkey is authorized to determine the information and documentation to be sought regarding notification of and transferring the assets within the scope of the regulation to Turkey together with their transfer to the enterprise. With the Draft Communiqué coming into force soon, it is expected that the provisions regarding the asset peace regulation will be further clarified.
By Yasemin Keskin, Senior Associate, and Beliz Boyalikli, Legal Intern, Guleryuz & Partners