A new Repatriation of Capital regulation was made with law numbered 7186 and dated 19 July 2019. After the first Repatriation of Capital regulation made in 2008, this new Repatriation of Capital is the fifth regulation.
I think that the benefits of this regulation should be questioned in terms of tax applications.
Dear Fortune readers, in this article I would like to share with you my assessment of the repatriation of capital regulations that have been made so far.
The first Repatriation of Capital regulation was made in 2008 with the law numbered 5811 and the main purpose of the law was to register registration of money, gold, foreign exchange, securities and other capital market instruments, which are present at home or abroad, but are not included in the legal records and to prevent tax losses arising from these assets.
Following the aforementioned regulation, five separate Repatriation of Capital regulations have been made in various years to date.
Therefore, in the last eleven years, it is seen that the Repatriation of Capital practice is done every two years and shows some kind of continuity.
The beneficiaries of the Repatriation of Capital regulations got an opportunity both to reconcile with the administration and to freely dispose the assets in question by generally paying a tax of 5% on the value of the declared domestic assets and 2% on the value of the foreign assets.
In the Repatriation of Capital regulation numbered 6736, no tax was imposed on the declared asset value and even the repatriation of assets to the country were not obligatory.
As for the last Repatriation of Capital regulation numbered 7186, which will be applied until 31.12.2019, the tax rate to be charged on the declared value of domestic or foreign assets has been determined as 1%.
Although it is stated by the authorities that no such regulation will be made after each Repatriation of Capital regulation, it is observed that a new Repatriation of Capital regulation is made as soon as the declaration period ends.
For example, in the last Law numbered 7143, the period of implementation regarding the declaration of foreign assets expired in June of this year, and on July 19, 2019, a new Repatriation of Capital regulation was made with the law numbered 7186.
Although the regulation made with the law numbered 7143 includes rather an intent to eliminate the tax risks by declaring the assets that are present in abroad and whose revenues are not declared before Turkey starts to exchange information with other participating countries under the automatic exchange of information, immediately after this regulation, the establishment of a new Repatriation of Capital regulation with law numbered 7186 brought some problems to the agenda.
The most important of these is to pay a tax of 1% on the declared asset value and to subject the income from these assets to a different taxation regime other than the taxation system of income or corporate tax.
In other words, an uneven structure emerges in the context of tax burden between those who declare their income from foreign assets with their income or corporate tax return and those who declare within the scope of Repatriation of Capital.
In addition to this, the fact that tax inspection cannot be made in relation to the declared assets of the declarers within the scope of Repatriation of Capital while those who make a normal declaration is subject to inspection for a period of five years indicates that there is an unequal structure regarding the inspection of the revenues obtained.
When all these are taken into consideration, the Repatriation of Capital regulations are evolving towards a different structure than expected in practice.
Therefore, such applications should be re-evaluated because of their results.