Not forgetting that local governments, OIZs, printed books and periodicals were also included in the tax package.
The objectives of the regulations in this tax package are “ensuring tax security and fighting informality, strengthening tax justice and increasing the share of direct taxes, broadening the tax base, simplifying taxation and strengthening tax compliance, removing some exceptions or changing the tax methodology,” which “will increase the effectiveness of penalties, eliminate VAT deferrals, reduce VAT refunds, contribute to reducing the volume of imports, harmonize import and domestic taxes, improve collection efficiency and resolve some issues that are sources of disputes.”
The proposed tax code, which will be drafted and submitted to the Turkish Grand National Assembly, includes restrictions on fraud and special penalties for fraud. The fines for fraud and special fraud will be increased annually by the reassessment rate. However, it was proposed to increase the penalties for fraud and special fraud and to apply heavy penalties to some special frauds that are repeated, as “at present, the deterrent effect of these penalties appears to be declining.” Penalties.
Penalties for specific offences will be strengthened
Some items related to penalties for fraud and special fraud, as well as current and anticipated increases in penalties, are as follows:
Failure to comply with the obligation to prove collection and payment by means of documents issued by a bank, similar financial institution or the post office: the fine imposed at the rate of 5% of the amount subject to the transaction will be increased to 10%, with a maximum penalty of 10%. Increased from TL 8.7 million to TL 20 million.
Failure to keep any of the required books (capital companies): 1,100 TL to 20,000 TL
Incomplete, irregular or confused books and records of self-employed persons and related documents: 660 TL to 10,000 TL
If you do not notify us of your business start-up by the deadline (type 2 business): from 330 TL to 5,000 TL
For non-compliance with the provisions on the form and content of tax returns, notices, documents, papers and attachments (capital companies): from 580 TL to 10,000 TL
Incomplete or non-submission of certain documents (Type 2 businesses): 150TL to 3,500TL
Print Books and Periodicals
The proposed tax regime developed by the Ministry of Finance will also abolish the VAT exemption applicable to the delivery of books and periodicals. Pursuant to Law No. 3065, the delivery of printed books and periodicals is exempt from VAT. It was proposed to abolish this exception on the grounds that in practice, the exception also applies to publications and stationery products that are not included in the scope of the exemption, and taxpayers are entitled to a refund of the normal purchase price. Expenses and ATİK obligations due to the exception. It was assumed that VAT would be applied at a reduced rate, as in the period before the exemption, and its application would be valid for transactions performed as of the date of entry into force of the legal regulation. In 2023, the total transaction volume is expected to be TL 64.1 billion and total revenues TL 2.3 billion once this exception is abolished.
Increased penalties for unregistered hires
According to the package, loss penalties will be applied in a phased manner for unregistered activities. Losses imposed on employees without the knowledge of the tax authorities are recommended to be penalized at 1.5 times the amount of tax in cases where the loss is 100% of the amount of tax, and 4.5 times the amount of tax in cases where the loss is 300% of the amount of tax.
Bankruptcy Regulation
The tax code also includes regulations on bankruptcy. In order to ensure the safety of the collection of official debts and prevent the occurrence of disputes, the term fraudulent bankruptcy in law will be changed to insolvency.
VAT reinstated on feed and fertiliser deliveries
It was requested to remove the VAT exemption for the delivery of feed and fertilizer. The reasons were as follows: “In reality, importers and those who trade these products benefit from this exception, this exception does not have a positive impact on the purchase price for farmers, this exception makes imports attractive (about 100 billion TL in 2023). The delivery of these goods at each stage will be an exception, so intermediaries who take buying, selling, transportation, etc. within the scope of the exemption will not be included. “It is difficult to track refund requests regarding expenses and ATIK’s promises, natural gas is a basic input for fertilizer, and the VAT on natural gas will be refunded within the scope of the exception.” Since the expected effect was not achieved, the tax exemption measure proposal included the content that “it is appropriate to make additional payments as direct support to farmers from the Ministry of Agriculture and Forestry budget.” And, as before, a VAT of 10 percent will be applied to the delivery of feed and a VAT of 20 percent will be applied to the delivery of fertilizer. “
It was highlighted that the total trade costs of feed in 2023 is TL 394.2 billion, and the total impact amount would be TL 15.1 billion if the exceptions were removed. It was highlighted that the total trade costs of fertilizer in 2023 is TL 254.7 billion, and the total impact amount would be TL 18.8 billion if the exceptions were removed.
Local governments’ current debt will be reduced first through the percentage allocated to their general budgets
The tax bill also includes a proposal to “prevent the accumulation of debts of local governments”. The proposal, entitled “Deducting current debts of local governments, mainly from the local government shares allocated from the general budget tax revenues”, states that both the tax and SSI insurance premium debts of local governments, their affiliates and municipalities are constantly increasing, and even though 10%. – It was stated that although the annual opportunity to pay is provided within the scope of the reorganization law, the conditions of these laws are not met and the reorganization provisions are violated. It was explained that, based on Law No. 5779, the total tax revenues of the general budget collected monthly on behalf of these administrations for taxes, insurance premiums, receivables from the state treasury, debts arising from past settlements, debts of special state administrations and local governments, affiliated organizations to the law and state banks are allocated to these administrations and their legal entities, and deductions are made from the amounts paid to creditor administrations. It is emphasized that the tax bill allows a deduction of up to 40 percent of the share given for these debts, and that the President has the power to determine the deduction rate according to various criteria, such as the type of debt and the type of creditor. It turns out that the entity is unable to pay the amount.
In light of this situation, the tax system has made provisions in Law No. 5779 to collect taxes accruing on income (withholding) tax and value-added tax returns of special state administrations, local authorities, entities belonging to these administrations, and local public authorities. Since social insurance contributions must be paid the month following their due date, it was proposed that the collection should be deducted from the contributions paid to these public authorities. This would prevent the accumulation of new debts, and therefore make a positive contribution to budgetary revenues and insurance premium income.
The VAT exception applicable to the delivery of goods and services for the construction of donated facilities is converted into a partial exception.
Currently, deliveries of goods and services related to the construction of facilities donated to general and special budgetary administrations, special state administrations, municipalities and villages are exempt from VAT. The tax package stated that this exception increased the amount of VAT transferred because taxpayers did not claim refunds, and called for the continuation of this exception as a partial exemption in order to reduce the amount of VAT transferred.
The total impact of this practice, with a total trade volume of TL 2.5 billion in 2023, is estimated to be TL 107 million if some exceptions are made.
VAT shifting provisions
The tax package also includes a proposal to consider VAT carried forward for more than five years as an expense or cost price, and if the VAT paid by a taxpayer at the time of purchase is higher than the VAT collected at the time of sale, the difference will be deducted. It was explained that the VAT carried forward for more than five years will not be refunded to the taxpayer, but will be offset against the VAT calculated at a later date.
Instead, the package proposed that if the VAT amount credited in the taxpayer’s VAT return cannot be deducted through the five-year deduction, this transferred VAT amount should be considered as an expense for income or corporate tax purposes and subject to tax audit at the end of this period. Furthermore, in merger, transfer and division transactions, it was required that the transferred VAT and refund rights associated with these transactions should be allowed to be transferred to the new company through tax audit, regardless of the five-year threshold or the statute of limitations.
It is proposed that the VAT exemption related to organized industrial zones be converted into a partial exception
Delivery of goods to or from organized industrial zones (OIZs) and small industrial sites for the construction of water supply, sewage, water purification, natural gas, electricity, communications, renewable energy facilities, other energy facilities, road construction, and the construction of workplaces on small industrial sites. The services they establish are exempt from VAT. In addition, deliveries to land and workplaces are currently exempt from VAT. The package, which states that this exception should continue as a “partial exception”, states that “the number of OIZs registered with the Ministry of Industry and Technology and obtained legal entity status is 361, of which 269. 92 of them continue project, expropriation and construction work, with a total transaction value of 13 billion TL in 2023, and the total impact of partial exceptions is estimated at 616 million TL. TL.”
