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Do You Know the Period of Limitation for Tax Liabilities?

MuhasebeNews — Fri, 26 Oct 2018 07:00:53 +0000

The period of limitation for tax liabilities is indicated below;

1- The taxes that are not imposed and conveyed to the taxpayer within 5 years (from the beginning of the year when the tax is regulated) will be prescribed.
2- The application to the valuation commission for the assessment by the tax office stops the prescription. The deactivated prescription will resume since the date when aforementioned commission decision is submitted to the tax office. However, this deactivated period cannot be longer than 1 year in any case.
3- The prescription period relating to the taxes that cannot be collected or partly collected because of conditional exemption will start in the beginning of the year when the exemption conditions is broken.
4- If one takes advantage of the document provision subject to stamp tax and whose penalty is prescribed after the period of limitation of imposition expires, The tax claim belonging to aforementioned document will come out again.
5- The application to the valuation commission for the assessment by the tax office stops the prescription. The deactivated prescription will resume since the date when aforementioned commission decision is submitted to the tax office.
6- If the investor violate the special conditions about the investment allowance in the investment and operating period, the prescription start in the beginning of the year when these conditions are violated.

Sample 1: The taxpayer had not submitted VAT return concerning July 2017.
The tax office applied for the assessment to the related valuation commission in 30.10.2009 and the valuation commission submitted the decision to the tax office in 16.05.2011.

The prescription period belonging to July 2007 ends in 31.01.2012 under normal circumstances.
In the present case, elapsed time in valuation commission is more than 1 year.
Due to the fact that inactive period cannot be longer than 1 year according to the new provisions in any case, the prescription period will end in 31.12.2013.

Sample 2: It is necessary for taxpayers to apply to the valuation commission in 20.09.2011 in order income tax base to assess and the decision of the commission should be submitted to tax office in 10.04.2012.

The prescription period belonging to calendar year 2006 ends in 31.12.2011 under normal circumstances.
In this case, the prescription period will end in 22.07.2012 that is found adding the inactive period (inactive, because of forwarding it to the valuation period) to 10.04.2012 when the commission decision is submitted to the tax office.

Sample 3: It is necessary for taxpayers to apply to the valuation commission in 30.09.2011 in order income tax base to assess and the decision of the commission should be submitted to tax office in 30.11.2012.

The prescription period belonging to July 2006 ends in 31.12.2011 under normal circumstances.
In the present case, elapsed time in valuation commission is 1 year 2 months.
However, The inactive prescription will be processed in 30.09.2012 and the prescription will end in 31.12.2012 according to the new provisions, because the inactive period shouldn’t be more than 1 year in any case.

Source: Article 15 the Labor Law No. 4857
Date: 6 January 2017

Legal Notice: The information in this article is intended for information purposes only. It is not intended for professional information purposes specific to a person or an institution. Every institution has different requirements because of its own circumstances even though they bear a resemblance to each other. Consequently, it is your interest to consult on an expert before taking a decision based on information stated in this article and putting into practice. Neither MuhasebeNews nor related person or institutions are not responsible for any damages or losses that might occur in consequence of the use of the information in this article by private or formal, real or legal person and institutions.

According to Turkish Laws, Should the Overpaid Tax be Paid Back if the Liquidation Period Ends with Loss?

MuhasebeNews — Thu, 16 Aug 2018 08:00:57 +0000

1- WHICH PERIOD IS VALID FOR THE TAXATION OF COMPANIES THAT ARE IN LIQUIDATION PERIOD?
Liquidation Period: The taxation of a company going into liquidation (whatever the reason is) will be done in liquidation period instead of financial period.

2- WHEN DOES THE LIQUIDATION PERIOD BEGIN AND END?
Liquidation begins when general assembly resolution about the liquidation of the company is recorded and ends when liquidation decision is recorded. For the period from the starting date to the end of the same year and each calendar year after that period and the ending of the liquidation; the period from the beginning of the related calendar year to the end of the liquidation period is regarded as an independent liquidation period.

If the liquidation period ends within the year when the liquidation begins, liquidation period begins from the liquidation date and lasts until the end of the liquidation.

2- IF THE LIQUIDATION PERIOD ENDS WITH LOSS, SHOULD THE OVERPAID TAX BE PAID BACK?
If the liquidation period ends with loss, the results in liquidation should be corrected and the overpaid tax should be paid back to the taxpayer in aforementioned period.

3- IF THE LIQUIDATION LASTS MORE THAN ONE YEAR, WHEN DOES THE ASSESSMENT TIMEOUT BEGINS?
If the liquidation lasts more than one year, assessment timeout will begin one year later after the liquidation period ends.

4- IF ONE GIVES UP LIQUIDATION, CAN THE LIQUIDATION PROVISIONS BE APPLIED?
If one gives up liquidation, the liquidation provisions will not be applied to the company.
4.1- The decision about giving up liquidation is valid from the beginning of the period when the decision is made.
4.2- Liquidation returns that are done until the date when one gives up liquidation will be regarded as normal returns.
4.3- The obligations related to the advance tax of a company that gives up liquidation will begin from the beginning of advance tax period including the date when the liquidation is given up.

Source: Corporate Tax Law

What are the Meanings of Legally Obligated and Limited Taxpayer in Turkey?

MuhasebeNews — Mon, 19 Mar 2018 16:00:56 +0000

1- WHAT IS THE MEANING OF LEGALLY OBLIGATED?
Companies whose registered office [1] or business center [2] is in Turkey will be subjected to tax through their incomes that they gain both in Turkey and abroad.

If registered office or business center of institutions listed below is in Turkey, they will be subjected to tax as legally obligated.
    1.1- Company with share capital,
    1.2- Cooperatives,
    1.3- State-owned economic enterprise,
    1.4- Commercial enterprise belonging to associations or foundations,
    1.5- Joint ventures,

Sample-1: Fontaine citizen of France,
– He was employed on 20 March 2010 in Turkey and then he went on leave on 15 May 2016. (6 years 1 month 26 days).
– He came back to Turkey on 20 October 2016 and he kept at his job until 31 December 2016. (2 months 2 days).
Liabilities of Fontaine for 2016 are explained below.
Explanation-1:
Fontaine is legally obligated.
Even though he stayed in Turkey less than 6 months separately, the duration of his staying for a calendar year is more than 6 months.
Legal Basis-1:
Article related to “Legally Obligated” of the Income Tax Law is stated below;
Persons listed below are regarded as domiciled in Turkey and they are considered as legally obligated:
1- Person whose residence is in Turkey. (Residence is a place stated in article 19 and its consecutive articles of the Civil Law.)
2- Person who persistently resides in Turkey more than 6 months in a calendar year. (Provisional leaving does not affect time of settlement in Turkey.)

2- WHAT IS THE MEANING OF LIMITED TAXPAYER?
Companies whose registered office and business center are not in Turkey will be subjected to tax through their incomes that they gain only in Turkey.

If registered office and business center of institutions listed below are not in Turkey, they will be subjected to tax as limited taxpayer.
2.1- Company with share capital,
    2.2- Cooperatives,
    2.3- State-owned economic enterprise,
    2.4- Commercial enterprise belonging to associations or foundations,
    2.5- Joint ventures,

3- CORPORATE INCOME CONSISTS OF INCOMES AND REVENUES STATED BELOW IN LIMITED LIABILITY TO TAX;
3.1- Commercial incomes gained through businesses made with foreign institutions whose registered office or business center in Turkey or through these kinds of institutions.
(Even though they carry abovementioned conditions, if they gain incomes through goods purchased in Turkey for export and they send them to abroad without selling them in Turkey, their incomes will not be regarded as obtained in Turkey. Selling in Turkey means that either customer or supplier or both of them should be in Turkey or sales agreement should be made in Turkey.)
(In line with Tax Procedure Law provisions numbered 04.01.1961 – 213)
3.2- Incomes gained in Turkey from agricultural enterprise,
   3.3- Self-employment earnings gained in Turkey ,
   3.4- Revenues gained by renting estate and assets and rights in Turkey,
     3.5- Income from moveable capitals gained in Turkey
3.6- Other incomes and revenues gained in Turkey.

Sample 2: Mr. John citizen of USA,
– He was in Turkey between the dates of 01.10.2015-10.12.2016 and he gained commercial income from commercial activities that he carried out in Turkey and America in that period. (1 year 2 months 10 days)
– By 2015, he gained 100.000 TL in Turkey and 200.000 TL in USA
– By 2016, he gained 300.000 TL in Turkey and 500.000 TL in USA.
The income being subjected to tax is explained below.
Explanation -2:
Mr. John resided in Turkey less than 6 months in calendar year 2015, he was regarded as limited taxpayer.
During that period of time, his income gained in Turkey and valuing at 100.000 TL would be subjected to tax in Turkey.
However, by 2016 he resided in Turkey more than 6 months, so he will be regarded as legally obligated.
Total amount of income is 800.000 TL (300.000+500.000), which he gained both in USA and in Turkey, and income tax would be calculated through that amount.
If a taxpayer is subjected to tax in the ratio of income that he gained in America, it can be deducted from the tax calculated in Turkey.
Legal Basis-2:
Article related to “Legally Obligated” of the Income Tax Law is stated below;
Persons listed below are regarded as domiciled in Turkey and they are considered as legally obligated:
1- Person whose residence is in Turkey. (Residence is a place stated in article 19 and its consecutive articles of the Civil Law.)
2- Person who persistently resides in Turkey more than 6 months in a calendar year. (Provisional leaving does not affect time of settlement in Turkey.)

[1] Registered Office: It is an office stated in law of establishment, regulations, main status or agreements of institutions being subjected to tax.
[2] Business Center: It is a center where all businesses are gathered virtually and managed.

Source: Corporate Tax Law Numbered 5520 (Article 3)

Taxes

MuhasebeNews — Mon, 13 Mar 2017 10:15:54 +0000

1. TAXES
Turkey has one of the most competitive corporate tax rates in the OECD region. The Turkish corporate tax legislation has noticeably clear, objective and harmonized provisions which are in line with international standards.

The Turkish tax legislation can be classified under three main headings:

1.1. Income Taxes
The Turkish tax legislation includes two main income taxes, namely individual income tax and corporate income tax. Although individual income tax and corporate income tax are governed by different laws, many rules and provisions pursuant to individual income tax also apply to corporations, particularly in terms of income elements and the determination of net income.

1.1.1. Individual Income Tax
Real persons’ income is subject to individual income tax. Income is defined as the net amount of all earnings and revenues derived by an individual within a single calendar year.
As per the Income Tax Law, income may consist of the elements listed below:

Business profits
Agricultural profits
Salaries and wages
Income from independent personal services
Income from immovable property and rights (rental income)
Income from movable property (income from capital investment)
Other income and earnings
According to the Turkish tax legislation, there are two main types of tax statuses regulated on the basis of residence:
- resident taxpayers and
- non-resident taxpayers.
Resident taxpayers (those who reside in Turkey, and those who spend more than a continuous period of six months in Turkey within a calendar year) are taxed on their earnings and incomes derived in and outside Turkey, whereas non-residents (those who do not reside in Turkey and those who do not spend more than a continuous period of six months in Turkey within a calendar year) are taxed only on their earnings and incomes derived in Turkey.
Individual income tax rate varies from 15% to 35%.

Individual income tax rates applicable for 2017 are as follows:

1.1.2. Corporate Income Taxes
In case income elements specified in the Income Tax Law are derived by corporations, taxation is applicable on the legal entities of these corporations.
Corporate taxpayers defined in the law are as follows:
- Capital companies
- Cooperatives
- Public economic enterprises
- Economic enterprises owned by associations and foundations
- Joint ventures
Corporations with legal or business centers located in Turkey are qualified as residents and are subject to tax on their income derived in Turkey and other countries. If both the legal and business centers are not located in Turkey, then these corporations are qualified as non-residents and subject to tax only on their income derived in Turkey. The legal center is the place stipulated in the Articles of Association or the incorporation law of corporations that are subject to tax, while the business center is defined as the place where business activities are concentrated and managed.

In Turkey, the corporate income tax rate levied on business profits is 20%.

Resident corporations are subject to a 15% withholding tax when dividends are paid out to shareholders. However, dividends paid by resident corporations to resident corporations are not subject to withholding tax. As a share capital increase by the corporation using the retained earnings is not considered to be a dividend distribution, no withholding tax applies to dividends. Similarly, non-resident corporations are subject to a 15% withholding tax during remittance of such profits to the headquarters. Withholding tax is applied on the amount after the deduction of corporate income tax from taxable branch profits.

1.2. Taxes on Expenditure
1.2.1. Value Added Tax (VAT)
The generally applied VAT rate is set at 1%, 8%, and 18%. Commercial, industrial, agricultural, and independent professional goods and services, goods and services imported into the country, and deliveries of goods and services as a result of other activities are all subject to VAT.

VAT exemptions include, but are not limited to, the following:
- Exports of goods and services
- Roaming services rendered in Turkey for customers outside Turkey (i.e. non-resident customers) in line with international roaming agreements, where a reciprocity condition is in place
- Contract manufacturing for clients operating in free zones
- Petroleum exploration activities
- Services rendered at harbors and airports for vessels and aircrafts
- Supply of machinery and equipment within the scope of an investment certificate
- Transit transportation
- Deliveries and services made to diplomatic representatives and consulates on condition of reciprocity, international organizations with tax exemption status and to their employees
- Banking and insurance transactions which are subject to Banking and Insurance Transactions Tax

1.2.2. Special Consumption Tax (SCT)
There are four main product groups that are subject to SCT at different tax rates:

Petroleum products, natural gas, lubricating oil, solvents, and derivatives of solvents
Automobiles and other vehicles, motorcycles, planes, helicopters, yachts
Tobacco and tobacco products, alcoholic beverages
Luxury products
Unlike VAT, which is applied on each delivery, SCT is charged only once.

1.2.3. Banking and Insurance Transaction Tax
Banking and insurance company transactions remain exempt from VAT but are subject to a Banking and Insurance Transaction Tax. This tax applies to income earned by banks, such as loan interest. Although the general rate is 5%, some transactions, such as interest on deposit transactions between banks, are taxed at 1%. No tax is levied on sales from foreign exchange transactions since 2008.1.2.4. Stamp Duty
Stamp duty applies to a wide range of documents, including;
- contracts,
- notes payable,
- capital contributions,
- letters of credit,
- letters of guarantee,
- financial statements, and
- payrolls.
Stamp duty is levied as a percentage of the value of the document at rates ranging from 0.189% to 0.948% and is collected as a fixed price (a pre-determined price) for some documents.

1.3. Taxes on Wealth
There are three kinds of taxes on wealth:
- Property taxes
- Motor vehicle tax
- Inheritance and gift tax
  Buildings, apartments and land owned in Turkey are subject to real estate tax ranging at a rate between 0.1% and 0.6%, while Contribution to the Conservation of Immovable Cultural Property is levied at a rate of 10% of this real estate tax. Motor vehicle taxes are collected on the basis of fixed amounts that vary according to the age and engine capacity of the vehicles every year. Meanwhile, inheritance and gift taxes are levied at a rate of 1% to 30%.
  
  2. TAX INCENTIVES
  Effective as of January 1, 2012, the investment incentives system comprises four different schemes. Local and foreign investors have equal access to:
  - General Investment Incentives Scheme
  - Regional Investment Incentives Scheme
  - Large-Scale Investment Incentives Scheme
  - Strategic Investment Incentives Scheme

Date: 13 March 2017