Recent Development 

you may remember from our previous legal alert regarding the new tax amnesty, individuals and legal entities are allowed to bring their money, gold, foreign currency, securities and other capital market instruments into Turkey by or before 31 December 2016 without being subject to any tax audit, tax assessment or investigation under Article 7 of Law No. 6736 on the Restructuring of Certain Receivables (Law).

In order to provide further details regarding the principles and procedures that apply to the tax amnesty for assets held abroad, the Ministry of Finance released the Communiqué No. 4 Regarding Law No. 6736 on the Restructuring of Certain Receivables (Communiqué), which was published in the Official Gazette No. 29906 on 2 December 2016.

What the Communiqué says

  • Individuals and legal entities can freely dispose of their money, gold, securities and other capital market instruments held abroad if they bring these assets into Turkey by 31 December 2016. As these assets brought into Turkey under the Law cannot be subject to any type of tax inspection or tax assessment in Turkey, they will not trigger any tax liability in Turkey.
  • The dates on which the concerned assets were acquired do not affect their eligibility to benefit from this tax amnesty.
  • Assets that are outside of the scope of Article 7 of the Law (e.g., immovable properties) can be brought into Turkey under the tax amnesty by converting them into the assets within the scope of this article.
  • These assets will either be transferred to the existing or newly opened accounts in Turkish banks or intermediary institutions, or be brought into Turkey physically. However, for securities and other capital market instruments held abroad, a declaration to Turkish banks or intermediary institutions will be sufficient in order to benefit from Article 7 of the Law. In that respect, securities and other capital market instruments abroad that have been declared to Turkish banks or intermediary institutions will be considered brought into Turkey under the Law, and transferring these assets to Turkish accounts or bringing them physically into Turkey will be optional.
  • If money, gold, securities and other capital market instruments held abroad are transferred to the existing or newly opened accounts in Turkish banks or intermediary institutions, the bank receipts or forms received from intermediary institutions can be used to document that these assets were brought into Turkey.
  • If these assets are brought into Turkey physically, the documents received from the Customs Authority can be used to document that the assets were brought into Turkey.
  • If securities and other capital market instruments are only declared to Turkish banks or an intermediary, documents obtained from the relevant institutions abroad, such as bank receipts or extracts, will be sufficient for documentation purposes. The banks and intermediary institutions are not obliged to check the authenticity of these documents and no certification by Turkish embassies or consulates abroad is required.
  • The declaration form attached to the Communiqué should be submitted to Turkish banks or intermediary institutions when bringing money, gold, securities and other capital market instruments into Turkey under the Law or when declaring securities and other capital market instruments to Turkish banks or intermediary institutions. The submission of this form will be optional for those who declared their assets before the publication of the Communiqué.
  • The assets that seem to be held by their legal representatives, shareholders or proxies, but in reality belong to companies, can be brought into Turkey under Article 7 of the Law. Companies can bring the assets that actually belong to them through their legal representatives, shareholders or proxies (provided they were authorized by a power of attorney or representation contract before 19 August 2016). In that case, under the tax amnesty, the assets that are transferred by the company's legal representatives, shareholders or proxies to the accounts opened on behalf of the company will be deemed to have been brought into Turkey by the company itself. When bringing these assets into Turkey, related documents such as a copy of the decision taken by company's competent bodies, power of attorney or presentation contract should be submitted along with the declaration form.
  • No tax inspection, tax assessment or investigation will be conducted for those who benefit from Article 7 of the Law or for their legal representatives. Moreover, no retrospective tax inspections or tax assessments can be conducted and no further information can be requested related to gains obtained from these assets in the past or to the resources used for their acquisition.
    • The Communiqué provides an informative illustration on how this relief will be implemented: "In 2011, Turkish resident individual (K) purchased a share certificate from the London Stock Exchange through an investment company in London, and paid in cash. He obtained dividends in 2012 and capital gain from the sale of those share certificates in the same year. Afterwards, (K) spent all of his assets abroad, including the dividend/capital gain derived from these mentioned transactions for buying Eurobonds. Then, he received interest during the holding period of those Eurobonds and capital gain from the sale of a portion of the Eurobonds. (K) brings all or a portion of his assets attained in the above mentioned manner into Turkey (i.e. all of his assets including the income derived through those assets abroad) in cash or Eurobond (i.e., in their final form) by 31 December 2016 within the scope of Article 7 of the Law. No tax assessment or tax inspection will be conducted for any type of taxes under any circumstances in relation to (K)'s income generated abroad for the period starting from 2011 to 2016 for the assets brought into Turkey."
  • There will be no inspection, investigation or prosecution related to these assets within the scope of other legislations, such as capital markets, customs or foreign exchange law.
  • If legal persons bring these assets into Turkey, their legal representatives, shareholders or proxies will also be immune to any tax inspection, tax assessment or any type of investigation related to these assets.
  • If real persons bring these assets into Turkey, the companies of which the real person is a shareholder or participates in the management will also be immune to any tax inspection, tax assessment or any type of investigation related to these assets.
  • Money, gold, foreign currency, securities and other capital market instruments held abroad will be valued by applying the following valuation criteria as of the date when they were brought into Turkey or declared:
    • Currency in Turkish Lira: nominal value.
    • Gold: market value.
    • Foreign currency: the foreign exchange purchase rate of Central Bank of Turkey.
    • Securities and other capital market instruments:
      • Share certificates, debt instruments such as bonds and Eurobonds and derivatives such as futures and option contracts: stock exchange price, if any; if there is no stock exchange price, market value; if the market value cannot be identified, purchase price; if purchase price is uncertain, nominal value.
      • Mutual fund documents: the closing price in the relevant market.

The market value corresponds to the purchase-sale price determined as of the date when these assets were brought into Turkey or declared. When determining the stock exchange price, the values at the domestic or foreign stock markets where the assets are dealt as of the date when these assets were brought into Turkey or declared will be taken into consideration. For foreign currencies, the foreign exchange purchase rate of the Central Bank of Turkey on the date when these assets were brought into Turkey or declared will be taken into consideration.

Conclusion

Article 7 of the Law provides a tax amnesty in the real sense of the word. Affected taxpayers should be aware of this amnesty that enables them to bring their income that was previously not taxed into Turkey without triggering any tax liability, by 31 December 2016.