The Turkish government on April 24 submitted a bill to the Grand
National Assembly (parliament), proposing a tax amnesty that would
allow taxpayers to declare offshore assets and pay a 2 percent tax.
Turkey's normal individual tax rates range from 15 percent to
The government hopes to tap into an estimated $130 billion in
untaxed assets hidden offshore by Turkish taxpayers. The larger
hope is that through an influx of Turkish-owned capital, Turkey
could rely more heavily on domestic money, rather than
international assistance, to lift the economy. Prime Minister Recep
Tayyip Erdogan has said he wants to accelerate economic growth to
around 4 percent this year after hitting 2.2 percent last year. But
with foreign direct investment falling by 23 percent in 2012,
according to statistics from the Ministry of Economy, the
government is eager to find new sources of revenue.
In addition to the low tax rate under the amnesty, tax
authorities would not question taxpayers about the origin of the
assets, and no tax investigations or reassessments would be
launched. In return, taxpayers would have to declare all offshore
assets by July 31 and transfer the assets to Turkish banks or
brokerage houses by the end of the month in which the declaration
is made. The 2 percent tax would be due by the end of the month
following the month in which the declaration and transfer are
Selman Koç, tax manager at the Cerrahoglu Law Firm in
Istanbul, told Tax Analysts that the proposed law includes
"money, gold, foreign exchange, securities, and other capital
market instruments deposited abroad, or real estate assets located
abroad as of April 22, 2013."
Koç said the goal is to bring those assets -- whether
held by Turkish residents or by nonresident Turkish taxpayers --
into the official record. Once they have been declared, however,
there is no restriction on retransferring the assets abroad.
Finance Minister Mehmet Simsek, speaking at a press conference
in Istanbul on April 25, reiterated that there would be no tax
investigations or retroactive tax assessments, saying the
government "will not chase the money that will be
But Koç pointed out that although the
no-investigation/no-reassessment provision is part of the draft
law, government officials could launch criminal investigations if
there is a suspicion of money laundering. "This point is a gap
in the draft tax amnesty law that needs to be taken into
account," he said.
Further, the new proposal, which is no different from the
previous amnesties, "has little chance of success, given the
absence of a way, like FATCA in the case of the U.S., for the
Turkish government to tax foreign assets," Koç said.
(Model II Agreement to Implement FATCA .)
The bill now must be approved by the parliament, where
Erdogan's ruling Justice and Development Party holds a
comfortable majority (about 60 percent). Koç said his firm
expects the bill to pass within a "couple of weeks."
Turkey used previous tax amnesties to regularize about $27
billion in assets in 2008 and 2009. Those amnesties allowed
taxpayers to pay a 2 percent tax on assets held abroad and a 5
percent tax on undeclared assets in Turkey. The assets declared
during the amnesties were about evenly split between offshore and
domestic holdings. (Prior coverage .) But overall, the amnesties
were not as successful as expected, Koç said.
Deputy Prime Minister Ali Babacan told the Anatolia news service
on April 26 that the new amnesty would have a better chance of
success because the Turkish economy is now in better overall shape.
"Money held in Europe or tax havens is no longer safe,"
Babacan said. "Turkey stands in a very, very different
position in 2013 with its reputation, the strength of the Turkish
banking sector, and interest from money that will be brought to
Originally published on Tax Analysts, 2013.
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