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2022-61 / August 2022 Financial/Tax Bulletin

Find out the latest developments on tax regulation and be updated on regulatory changes along with their effects on your business through our tax bulletins. The important financial news of last month are briefly explained below.

We are glad to share these summaries with our clients and network. As a result of productive and comprehensive research, we present you the August 2022 bulletin.

Let’s briefly start with the headings and then examine the details. We will share information about Turkish economy in general, and the latest figures in labor, inflation, growth, main tax developments, social security obligations, banking and financial issues, R&D and incentives, and other issues below.

Main Economic Indicators

The balance of payments statistics for June 2022 is announced by the Central Bank of Turkiye.

• The current account recorded a deficit of USD 3,458 million, increasing by USD 2,269 million compared to the same month of the previous year, hence bringing the 12-month rolling deficit to USD 32,667 million.
• Click to view the announcement.

Turkish Statistical Institute announced inflation figures for August 2022.

• Consumer price index increased by 80.21% annually and 1.46% monthly.
• Domestic producer price index increased by 143.75% on annual basis, by 2.41% on monthly basis.

Ministry of Finance and Treasury announced the domestic borrowing strategy and debt statistics September-November 2022.

• Central Government Debt Statistics were published as well by currency, interest and instrument type.
• Click to view the domestic borrowing strategy.

Major Tax Issues

The normal construction costs for buildings in terms of square meters – to be used as a basis for property tax – has been determined for 2023.

The General Announcement regarding the Repatriation of Capital program has been published.

Guidance on the Tax Responsibilities of Inheritors and the brochure on the Declaration of Inheritance and Succession Tax has been updated by the Revenue Administration.

• The following issues are explained in the aforementioned documents.
  • The scope of inheritance and succession tax
  • Exemptions
  • The time and method of declaration
  • Documents to be added to the declaration
  • Liabilities and expenses that can be used as tax discounts
  • Tax rate
  • Payment information

A brochure on the Invitation to Explain program has been published by the Revenue Administration.

• The program endeavors to increase voluntary compliance to taxation, decrease compliance costs, and to combat counter-economic activity.
• The program aims to proactively decrease the disputes between the Administration and the taxpayers.
• The following issues are explained in the brochure.
  • The scope of the program
  • The advantages to the taxpayers
  • Requirements
  • Resulting processes
  • The topics relevant to the application of the program

Supreme Court Case

The 10% penalty on objections to payment summons deemed to be fully or partially invalid has been ruled to be unconstitutional.

Draft Legislation

The Revenue Administration published a communique draft regarding the taxation of recourse and salvage processes as done by insurance companies.

Social Security Issues

The Circular regarding the Private Pension System has been amended.

• A new chapter titled “The Principles and Procedures of earning a Turkish Citizenship for foreigners through the Private Pension System” has been added.
  • The chapter is about the program allowing for the grant of Turkish Citizenships for foreigners in exchange for holding the equivalent of USD 500k for at least 3 years in pre-determined mutual funds through the Private Pension System.

An amendment has been made in the Social Security Agreement between Turkiye and Azerbaijan.

Banking & Finance

Circular on Capital Movement has been updated by the Central Bank of Turkiye.

• It is very important to track this regulation after the financial turmoil in 2018. As it is not published in the Official Gazette, we follow for our clients.

The Central Bank lowered the interest rates.

• The award rate for one week expiry repurchase agreements has been decreased to 13% (down from 14%).

Commercial Regulations

Land vehicles cannot be listed or sold on the second-hand market prior to six months and six-thousand-kilometer mileage after the initial listing or sale.

Housing projects sold through pre-purchase agreements are to be delivered within 48 months (previously 36 months) on the date pre-determined on the agreement.

Other Issues 

Regulation on R&D Incentives has been updated.

• With the new Bylaw, some definitions and practices are revised to be in line with the recent changes in R&D Law. As a new instrument for the start-up companies necessary fund practice (2% of the Tax Credit) is defined.
• An important amendment is made for the pharmaceutical companies to be eligible for R&D tax credits.

The principles regarding the obtaining of citizenship or residence through foreign investment into the Private Pension System have been determined.

• The foreign currency denominated funding provided by the foreign individual, which is to be greater than or equivalent to USD 500k and to be held for at least 3 years, is to be sold to a Turkish bank which will be selling the currency to the Central Bank thereafter before the Private Pension System transaction. The details of this process is determined by the Central Bank.
• A “compliance certificate” will be awarded to the individual to attest that the requirements have been met – to be used during the application for citizenship or residence.
• To ensure compliance, individuals must invest in the Private Pension System through a pension institution based in Turkiye.

Best regards,

Partners, Taxia