Sack law introduces radical changes to income tax system

The law readjusted the income tax slices and corresponding tax laws in accordance with the decision of the Constitutional Court’s annulment of a recent law on income tax and allowed salaried-workers to be included in the 35-percent tax bracket later.

The upper bound for the 27-percent tax bracket was raised from TL 50,000 to TL 76,200, lowering the tax burden of the wage-earners in the higher income brackets by around TL 2,000 per year.

The new law included dozens of changes to other issues in Turkey’s income tax regime. For instance, it eradicated the difference in withholding tax rates between domestic and foreign investors by lowering the tax discount rates by banks and intermediary institutions in the profits from securities and other capital market earnings, including investment funds, to 0 percent. Prior to this, domestic investors were paying 10 percent of their profits in tax while foreigners were paying nothing at all.

The law makes it possible for the Finance Ministry to send notifications to taxpayers online through suitable e-mail addresses. The ministry will also be able to carry out confirmations of chartered financial accountant operations electronically.

The new law also allows taxpayers to seek explanations from the Revenues Administration (GİB) or any other authorized institution relevant to income tax on matters that they deem vague.

Other major changes include:

•  The deputy presidents and the department heads of the GİB and the presidents of tax offices will be appointed by tripartite decrees.
•  Associations established solely for the public interest will not be able to sell real estate properties allocated for their utilization by the state in accordance with the relevant premises under the Public Procurement Law.They will also not be able to use them for purposes other than the purpose defined during the allocation. However, partial permission to use these properties for commercial purposes would be possible after 20 years of allocation, if the association used them appropriately during this time in accordance with the rules of utilization as determined at the time of the allocation. Even in such a case, the Finance Ministry will maintain the authority to set out the principles of using these real estate properties for commercial purposes and associations will have to transfer 30 percent of their revenue from them to the Treasury.
•  A tax inspection and auditing coordination board will be established. The board will work to make it more effective for the Finance Ministry to more effectively reach its targets of tax supervision and auditing. It will also be responsible to improve standards, principles, methods and techniques, determine the ethical rules that tax inspectors must abide by and will provide coordination and flow of information between different tax inspection units.
•  Procurements and services among public health institutions will be exempt from the value-added-tax (kdv).
•  National Lottery (MP) will be able to have subcontractors, founded in accordance with the rules of the Turkish Trade Law, for gambling games. MP will pick subcontractor companies through auctions by underbidding.
•  Legal personnel will be given travel allowances, fully exempt from tax exceptforstamp duty.
•  Treasury lands will be sold to other shareholders upon demand. The maximum size of these lands, however, is 400 square meters if 40 percent of it is in the municipal plans and 4,000 square meters if it is outside the building scheme of municipalities. In case of the existence of more than one shareholder, the sale will be conducted by bargaining.
•  Real estate which once belonged to foundations or public institutions but were later registered to the Treasury through bartering with other lands, will be granted to metropolitan municipalities or to the closest municipality in the case of an absence of demand by metropolises. In other provinces, the municipality having the land within its boundaries will be granted ownership of that land free of all charges.
•  Institutions established to provide loan collateral through technical cooperation deals with foreign countries or international financial institutions and which add their revenues to guarantee liability funds and deposit them in accounts of loan-extending banks without delivering to shareholders, will be exempt from corporate taxes.
•  Agricultural producers will be exempt from corporate taxes.

   Independent financial advisers will be able to take up positions as board managers in state economic enterprises under certain conditions.

•  GSM intermediary institutions will not pay any tax on their sales.
•  The terms of diplomatic passports will be determined by the Foreign Ministry.