Within the framework of the 2024-2026 Medium-Term Economic Program, Law No. 7524 on Amendments to Tax Laws, Certain Laws and Decree No. 375 ("Law No. 7524"), which introduces comprehensive amendments to tax legislation, was published in the Official Gazette dated 2 August 2024 and numbered 32620.
This alert covers the key amendments to the Tax Procedural Law under Law No. 7524. You can access our alert covering the amendments made by Law No. 7524 regarding income tax, corporate income tax and VAT here. We will publish a separate detailed alert for global minimum corporate income tax introduced by Law No. 7524.
Key Amendments to Tax Procedural Law Introduced by Law No. 7524
- The original tax amounts are excluded from the scope of settlement applications:
As part of the amendments introduced by Law No. 7524, original tax amounts can no longer be subject to settlement, and the settlement applications will only be possible concerning tax loss penalties, irregularity fines and special irregularity fines exceeding TRY 23,000. The original tax amount can still be subject to lawsuit in cases of settlement for the penalties and fines. Additionally, the provision allowing a 25% reduction under Article 376 of Tax Procedural Law when the settled amount is paid on time has been repealed.
Meanwhile, the provisions before the amendments will be applicable for the taxes and penalties for which: (i) the taxpayer is expecting a settlement date for in relation to a settlement application made before the publication of Law No. 7524; (ii) the settlement date was appointed but the meeting has not been conducted yet; (iii) the settlement date was postponed for any reason; or (iv) the settlement application period has not lapsed; i.e., original tax amounts can be subject to settlement in mentioned cases.
- Expansion of reporting obligations for digital service providers and intermediaries:
Authorization granted to the Ministry of Treasury and Finance under bis Article 257 of Tax Procedural Law for regulating reporting obligations related to e-commerce has been expanded to include access providers, content providers, hosting providers and social network providers.
The Ministry of Treasury and Finance is also authorized to impose a requirement for intermediary service providers, e-commerce intermediary service providers, access providers, hosting providers, and/or social network providers to obtain information subject to reporting obligations regarding the conduct of economic and commercial activities for others, as well as information produced or provided by content providers.
- Valuation of precious metals based on exchange rates has been allowed:
The provision introduced by Law No. 7524 allows the valuation of precious metals held by corporations, which are traded on the precious metal exchange, according to exchange rates. If exchange rates are unavailable or if it is determined that the exchange rate was formed through collusion, the valuation will be based on cost value.
Additionally, corporations that hold receivables or debts in precious metals can also value these receivables or debts according to the exchange rates. Interest accrued until the valuation date on precious metals receivables linked to deposit or credit agreements will also be considered in the valuation.
- Increase in the tax loss penalty for those who do not establish taxpayer status:
Under amendments made by Law No. 7524, the tax loss penalty for those who engage in commercial, agricultural, or professional activities without establishing the required taxpayer status will increase by 50%.
- Various amendments to irregularity and special irregularity fines:
The changes made by Law No. 7524 to irregularity and special irregularity fines include the following:
- The amounts of irregularity and special irregularity fines have been notably increased.
- If it is determined more than once within a calendar year that documents required to be issued under the Tax Procedural Law were not issued, a special irregularity fine will be imposed for each determination according to the number of determinations, as listed in Table 2 amended to Law No. 7524. If it is found that multiple documents of the same type were not issued during a single determination, a fine will be imposed separately for each document, but this determination will be considered as one for the purposes of calculating the number of determinations in Table 2.
- If the required documents are not issued, and it is reported to the administration by those who are obliged to receive the mentioned documents within five days after the document's issuance period, and before the administration becomes aware of the situation, the applicable special irregularity fine will be multiplied threefold to those responsible for issuing the documents.
- If a document not specified in the Tax Procedural Law is issued instead of the required documents, the applicable special irregularity fine will be multiplied twofold, and if the situation is reported by the recipients within five days, the applicable file will be multiplied sixfold.
- The upper limit for special irregularity fines to be applied in a calendar year for the failure to issue required documents has been changed to TRY 10 million.
- Additionally, the special irregularity fine for those required to receive documents under the Tax Procedural Law but who fail to do so has been changed to TRY 5,000, with an upper limit of TRY 50,000 for the total of fines that can be imposed in a calendar year. If the failure to issue documents is reported by those required to receive the documents within five days after the issuance period and before the administration becomes aware of, no special irregularity fine will be applied to those required to receive the documents.
- If collections for the delivery of the goods or provision of the services are conducted by using another person's name and/or account in a bank or similar financial institution, payment institution, or the Turkish Post and Telegraph Organization, a special irregularity fine at 10% of the transaction amount will be imposed for each transaction. This special irregularity fine will be applied separately to both the provider of goods and services, and those whose account is used for the payment. The special irregularity fines under this scope cannot exceed TRY 20 million in a calendar year.
- If collections are made using payment tools such as credit cards, bank cards, prepaid cards, QR codes, electronic wallets, and similar payment tools through payment systems or gateways registered in another person's name, the mentioned special irregularity fine will be multiplied threefold. This fine will be applied separately to both the provider of goods or services, and those who allowed the use of such payment gateways. The applicable special irregularity fines under this scope cannot exceed TRY 20 million in a calendar year.
- If a single act leads to multiple special irregularity fines, the highest fine amount will apply.
- Amendments concerning those whose taxpayer status was canceled ex officio due to issuing forged documents
According to Article 153/A of Tax Procedural Law, taxpayer status is canceled ex officio for those found to have been established with the intent of issuing forged documents without engaging in any commercial, agricultural, or professional activity. If certain individuals associated with the taxpayers whose status was ex officio canceled (e.g., in the case of a terminated ordinary partnership, each shareholder; for a commercial company, the legal representatives, board members, individuals or entities holding at least 10% of the company's capital, or those who carried out the act of issuing forged documents) submit a notice of commencement of business, they must provide a deposit of no less than TRY 690,000 (for 2024) and 10% of the total amount of forged invoices issued.
The deposit required for these individuals to establish a taxpayer status has been capped at a maximum of TRY 10 million by Law No. 7524. If the deposit is not provided or completed, a special irregularity fine equal to the amount of the deposit will be imposed, and that special irregularity fine cannot be subject to a settlement.
Moreover, if these individuals acquire a similar status in another ordinary partnership, commercial company or enterprises without legal personality, or if they acquire such entities, or if they are transferred to or acquired by such entities wholly or partially, the deposit must be provided within 60 days; otherwise, the newly acquired status must be terminated. If the deposit is not provided within 60 days or the necessary legal steps to terminate the new status are not taken, the new taxpayer entity will be jointly and severally liable for all tax debts related to the mentioned individuals that have accrued as of the date the deposit is required. If the newly acquired status is terminated after 60 days, the deposit will be refunded to the taxpayer, provided that no other tax debt is outstanding.
The amendments to the Tax Procedural Law introduced by Law No.
7524 came into effect on its publication date (2 August
2024).
Conclusion
Law No. 7524 introduced various amendments to Tax Procedural Law that are particularly aimed at increasing the tax security. Taxpayers must carefully evaluate these amendments and take the necessary steps for compliance.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.