Tax base increase

The “Law on Restructuring of Certain Receivables and the Amendment of Some Laws” no. 7326 dated 9 June 2021 has been published in the Official Gazette Issue no. 31506. The tax base increase that comes with this Law should be considered as a type of insurance.

Dear Fortune readers, in this article, I would like to share with you my assessments on the tax base increase included in the Law no. 7326 entitled Law Amnesty.

Tax base increases aim at preventing additional tax payments and tax inspections by way of increasing to a certain rate tax bases declared in certain tax types and periods. In this respect, this practice should be thought of as a sort of insurance. Furthermore, inspections that are still ongoing for the period and tax type for which a tax base increase has been made have to be concluded until 2 August 2021. Tax inspections that are not completed until that date will be automatically deemed finished.

The tax base increase has been limited to only certain withholdings subject to Income Tax, Corporate Tax, Value-Added Tax and tax declarations and a tax base increase is not possible for other tax types.

Income and corporate taxpayers who wish to do so will be able to make an increase of 35%, 30%, 25%, 20% and 15% for the years 2016, 2017, 2018, 2019 and 2020 respectively. Additionally, in case the increase is under minimum tax bases, the increase will be made based on the former. The minimum amounts in question for income taxpayers have been determined separately for financial statements and balance sheet basis, self-employment (professional) earnings, commercial earnings based on the simple earnings basis, real property incomes, fees, security incomes and gains from appreciation.

50% of the losses pertaining to the years for which income and corporate taxpayers make tax base increases will not be deducible from the profits of the year 2021 and years that follow.

As for the Value-Added Tax, taxpayers have to make tax base increases of at least 3%, 3%, 2,5%, 2% and 2% on total declared value-added tax calculated annually for the years 2016, 2017, 2018, 2019 and 2020 respectively. If no declaration has been made at all or a value-added tax declaration has been made for one or two periods, an increase of value-added tax of 18% will be possible based on the increased tax base on the condition that a tax base increase has also been made for income and corporate taxes for the relevant year.

A tax increase will only be possible in certain withholding types in the increase related to Income Tax and Corporate Tax Withholding. For example, a tax increase will be possible on fees, construction and repair works extending to years, self-employment payments and rent payments. Aside from these, hidden income distributions by way of transfer pricing with services purchased from abroad will be kept out of the scope of the tax base increase. Deadline for application for the tax base increase is 31 August 2021.

As I have explained above, the practice should be considered as an insurance. In this regard, I do advise taxpayers to benefit from that opportunity if they do not wish to face any inspections or think they might have had some risky transactions in previous periods.