Turkey proposes a new tax amnesty with zero tax for repatriation of foreign assets

Last week, the Turkish government sent a new draft law to the Turkish Parliament covering a new tax amnesty for repatriation of foreign assets such as money, gold, foreign exchange, securities, and other capital market instruments.

This is Turkey’s fourth tax amnesty in the last five years. The measure is expected to be first ratified by the Parliament and then approved by the President in the coming weeks.

This latest measure reflects how Turkey repeatedly tries to tax the foreign assets of Turkish residents to stimulate the Turkish economy. Further, it shows how the Turkish government continues to allow Turkish investors to benefit from zero taxation for their foreign assets.

Meaning of new tax amnesty for Turkish investors

The new tax amnesty program will be applicable for individual and corporate investors that have undeclared overseas assets.

Accordingly, Turkey resident investors can benefit from this favourable tax amnesty provided that they meet all conditions. Under newly proposed tax amnesty, if Turkish investors declare their foreign assets to a financial institution incorporated in Turkey and repatriate them, there will be no tax on the value of such assets.

It is worthy to underline that, similar to previous tax amnesties, it is not sufficient to only declare foreign assets to benefit from the tax amnesty provisions of the new law but also one must repatriate the foreign assets to Turkey to benefit from the zero taxation.

Due dates for the new tax amnesty

Based on the draft law, Turkish investors who have foreign assets should declare these assets before June 30, 2021.

Accordingly, the first condition to benefit from the new tax amnesty program is that Turkish investors declare their overseas assets to a financial institution in Turkey by the due date.

As a second condition to benefit from the program, Turkish investors must also repatriate their foreign assets to Turkey within 3 months of the declaration date.

For instance, if one resident taxpayer owns a capital market instrument in an overseas account and declares his assets to a Turkish bank on the date of May 31, 2021, under the new tax amnesty law, he must actually repatriate his assets to Turkey and transfer these assets to the account opened at a Turkish bank or brokerage house until August 31, 2021.

Proving repatriation of foreign assets

Turkish tax authorities are expected to publish the procedures of the new tax amnesty program through general statements or circulars. Nevertheless, we expect that, as in the previous tax amnesties, a bank receipt or intermediary institution transaction result forms could be used to prove that the foreign assets have been transferred to Turkey in line with the new tax amnesty program.

In the previous tax amnesties, a special form was used when the foreign assets were repatriated, or the securities and other capital market instruments were notified to banks or intermediary institutions.

Potentially, the new law will be implemented in the same manner and the same bank receipt or intermediary institution transaction result forms or special forms will be used to prove that foreign assets have been repatriated to Turkey by the respected taxpayer.

No tax assessment and investigation

Turkish investors that have repatriated their foreign assets under the newly proposed tax amnesty program will not be investigated by Turkish tax authorities and any tax assessment, tax penalty, and administrative fines will not be applicable due to such transfers.

That means that Turkish tax authorities will not carry out retrospective tax examinations or any other type of tax assessment on those foreign assets.

This will be also applicable to companies that repatriate their overseas assets: no tax investigation or tax assessment shall be retrospectively carried out by the Turkish tax authorities against the legal representatives, partners, and deputies of such companies.

In conclusion, we recommend that Turkish individual and corporate taxpayers repatriate their assets and benefit from this program with zero taxation. Thus, they will have a tax shield for the past years and can reinvest those assets into overseas investments without any tax issue.

Please contact us for your questions regarding our International Tax Bulletin and new tax amnesty in Turkey.

Please click to download our full international tax bulletin in PDF format.

Ramazan Biçer

Level Tax, Partner

ramazan.bicer@level-tax.com

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