The new tax bill prepared by the Ministry of Finance includes many details, ranging from tip income to rental income, increasing penalties to removing VAT exemptions on feed and fertilizers. The package envisages a simplification of taxation on tip income, with VAT and SCT exemptions and discounts being eliminated. A fee of 3,000 TL is proposed for international departure flights.
The new tax code, drawn up by the Ministry of Finance and due to be presented to the Turkish Grand National Assembly in early July, includes many detailed items, ranging from tip income to rental income, increasing fines to eliminating the VAT exemption for feed and fertilizer.
The increase in overseas exit fees to TL 3,000 is expected to bring in revenue of TL 12.5 billion in the remaining six months of 2024.
The fee charged for each departure of Turkish citizens traveling abroad is expected to be increased from TL 150 to TL 3,000. It was proposed that the fee should be increased by a reassessment rate every year and the powers given to the President should also be regulated accordingly.
In 2023, 8,743,760 people paid fees to go abroad. If we assume that the same number of people will pay fees to go abroad in 2024, the impact on revenues for six months is calculated to be TL 12.5 billion.
Tenants who pay rent directly will also be penalized.
The tax system, which laid down detailed arrangements for real estate rental, envisaged imposing special violation fines on tenants when paying rent directly in case of renting out residential property. Thus, a fine of 10% of the price paid in cash, with a minimum of 7,500 TL and a maximum of 20 million TL, will be imposed. In the case of residential and workplace rentals, if the tenant notifies the management authorities that he paid the rent directly before being discovered, no fine will be imposed on the tenant’s behalf.
The package includes the elimination of exemptions for housing rent, the obligation to pay rent through banks regardless of the amount, and a 20% deduction by banks on payments if rental income does not exceed the third income bracket. It was proposed that declarations should remain optional in the case of tariffs reaching 2024 (TL 580,000), and that deductions should be given in that case and offset. It is estimated that the implementation of this app will generate TL 40 billion.
According to the data for 2023, the number of people with rental incomes above TL 580,000 was found to be 12,833, while the number of people with rental incomes below TL 580,000 was approximately 1.8 million. The regulation was proposed to come into force on January 1, 2025.
Self-employment activities and commercial income are monitored at least 12 times a year.
Regulations will also be established with the aim of strictly monitoring taxpayers engaged in commercial and self-employed activities. Freelancers such as doctors, dentists, restaurants, hairdressers, cafes, etc. The income of the owners will be determined by audits at least three times a month, a total of 12 times a year. If there is a 20 percent difference between the income declared by the taxpayer and the income determined by the public opinion poll, the taxpayer will be asked for an explanation. If the explanation is deemed insufficient and the taxpayer does not correct the declaration, the tax office will make an ex officio assessment based on the determination of income or subject the taxpayer to a tax audit.
Taxing tip income is also included in the package.
The tax package envisages simplifying the taxation of tip income.
The package states, “Tips left by recipients of services to service personnel are gifts and are therefore not subject to income tax. When tips are reflected in bills, or tips collected in other ways are distributed to workers according to the standards established by the employer, they are considered part of wages and these payments must be added to the wages and taxed by withholding on a wage basis.”
It further stated that “the gratuity charge collected by the business operator in addition to the service charge by issuing a receipt/invoice shall be recognised as an element of the basis of service and shall be subject to VAT,” and continued:
“Tip income. Voluntary tax compliance. Provided, That these incomes are kept in a bank account opened separately by the employer, do not exceed 10% of the amount of the invoice/receipt, do not exceed the monthly gross minimum wage per employee and are remitted to the employee by way of deduction of 10% from tip income “with reinforcing effect.”
The regulations are expected to come into effect as soon as the law comes into force.
The VAT exemption applicable to sea-transported vehicles will be abolished
The new tax regime will also revise the VAT exemption applicable to maritime transport vehicles. In addition, the VAT exemption applicable to transport vehicles used for activities such as travel, entertainment, sports and amateur fishing will also be eliminated. The revenue impact of this regulation is expected to be TL 1 billion.
The merchant exemption will require documentation and has a revenue target of TL 1 billion.
To enjoy the trader tax exemption, it will be mandatory to obtain a “Trader Tax Exemption Certificate”. Furthermore, an “Income Limit” restriction will be introduced to benefit from the exemption for traders. Occupations such as wickerwork, basket weaving, kisspet making, miniaturist, etc. will also be added to the traditional occupations within the scope of trader exemption.
The regulation aims to determine the number of tax-exempt businesses. In this regard, the number of people who receive tax-exempt certificates is estimated to be about 1 million, which, if a fee of 1,000 TL per year is imposed, is estimated to have a revenue impact of 1 billion TL.
It is envisaged that the provision will include 124,000 taxpayers operating under simplified procedures in districts with a population of 30,000 or less in the scope of tax-exempt businesses. It is assessed that switching around 700,000 taxpayers to full-fledged procedures will have a revenue-increasing effect and support voluntary compliance. It is estimated that the application of the minimum income tax and the determination of daily income may have a revenue impact of TL 7.9 billion. It is recommended that the regulation come into force on January 1, 2025.
The special consumption tax exemption that disabled people can receive every five years when purchasing a car will be extended to 10 years.
In addition, the special consumption tax deduction for disabled people who purchase cars will also be streamlined, and the period, which is currently every five years, is expected to be extended to ten years. In connection with this, it was proposed that in the case of the transfer of a car through inheritance, the exempt tax would be borne by the heir, and the annual revaluation rate for the sale price of the car would be increased by half. It was proposed to increase the revaluation rate and to abolish the President’s power to increase the revaluation rate increase by up to 50%.
Another alternative on this issue was to completely abolish the special exemption from consumption tax and provide incentives in the form of social assistance. The Ministry of Family and Social Services was supposed to provide cash assistance based on criteria such as the income status of the disabled person and whether the vehicle they purchased was locally produced.
Tax regulations also coming to POS devices
In the tax system, the regulation on POS devices given by the bank to the taxpayer means any person who uses a POS device registered in the name of the taxpayer to sell goods or services to other taxpayers or non-taxpayers, or who uses another person’s POS device. A fine of three times the special violation fine is imposed for each detection. In this regard, a fine of 90,000 TL is imposed for those who keep their books on a balance sheet basis, 45,000 TL for those who keep their books on a business account, and 22,500 TL for other taxpayers.
Increased penalties for those who do not file invoices and increased bonuses for those who do
The payment to the whistleblower will be increased if the workplace is not issuing invoices. The package states that “a notification bonus of 15% of the amount collected due to the determination of the original tax and losses subject to notification will be paid, and a penalty will be imposed on the informer. For special violations (failure to issue invoices, ÖKC vouchers, etc.) a 5% penalty will be imposed,” suggesting the payment of a notification bonus of “i amount.” The maximum bonus paid to the same informant within a calendar year cannot exceed 20,000 Turkish liras.
If a seller fails to issue or receive invoices etc. that are required to be issued under tax law, the seller is likely to be subject to a special fraud penalty of three times the amount.
Tax regulations will also be introduced for online buying, selling, renting and advertising.
According to the package proposal, the Tax Procedure Act will include regulations to obtain notifiable information on the activities of entities engaged in commercial activities such as buying, selling, renting, posting and advertising in any kind of digital media.
In this context, “taxpayers receiving information” are service providers, e-commerce service providers, intermediary service providers, e-commerce intermediary service providers, access providers, content providers, hosting providers, and social network providers. “Information received” is redefined as any transaction based on economic or commercial purposes, such as advertising, promotion, sales, rental, or e-commerce on any digital media, including the Internet.
Taxpayers who do not provide the requested information are subject to a special fraud penalty for each piece of information that is the subject of a notice: a fine of 30,000 TL for each piece of information, but not exceeding 10 million TL for any one notice.
Increase in administrative fines deferral
The tax system also envisages the application of penal late interest to all public debts, subject to regulations on public debts not paid on the due date. Currently, a late interest of 3.5% per month is applied to debts not paid on the due date. The late interest applies in full to losses from public debts and half to judicial penalties.
In addition, a provision will be added to the Minor Offenses Act to apply late interest to all penalties, including penalties under the Enforcement and Bankruptcy Acts.
Source: Anka
