Tax

Scope

Tax law covers the taxation process extending from the taxable event to assessment, notification, accrual and collection, and the disputes arising in this process between the tax administration and the taxpayer or the person liable for tax. Procedural rules are largely contained in Tax Procedure Law No. 213 (VUK); the substantive principles of each type of tax are regulated in their own laws, the principal ones being Income Tax Law No. 193, Corporate Tax Law No. 5520 and Value Added Tax Law No. 3065. Tax actions are heard by the tax courts under Administrative Procedure Law No. 2577 (İYUK); the collection of public receivables is subject to Law No. 6183 on the Procedure for the Collection of Public Receivables.

The principle of legality applies in taxation; a tax obligation may be imposed only by law. The communiqués, circulars and advance tax rulings of the Revenue Administration (GİB) provide guidance in practice. Advance tax rulings do not bind the taxpayer or the judicial authorities; however, where the taxpayer complies with an advance tax ruling concerning its own situation, no tax penalty is imposed even if a different tax assessment is made subsequently (VUK Arts. 369, 413). Where the tax consequences of transactions are not assessed at the contract stage, subsequent corrections may give rise to new tax, penalty and interest burdens.

Frequently encountered matters

• Assessment of the tax consequences of corporate transactions and contracts.
• The tax dimension of mergers, demergers, share transfers and transfers of a business.
• Tax audits; assessment of audit minutes and reports.
• Pre-assessment and post-assessment tax settlement.
• Actions before the tax court against tax loss penalties and irregularity penalties.
• Disputes concerning VAT deduction, VAT refunds and allegations of false documents.
• Corporate tax matters such as transfer pricing and thin capitalisation.
• Voluntary disclosure, rectification and correction of tax errors; tax amnesty and restructuring arrangements.
• Applications against payment orders, attachment and precautionary attachment measures.
• Liability of legal representatives for public receivables.

Process and points to note

The most important element in tax disputes is time limits. The time limit for bringing an action before the tax court against notices relating to tax assessments, tax loss penalties and irregularity penalties is thirty days from the date of notification (VUK Art. 378, İYUK Art. 7). The Tax Procedure Law provides for tax settlement; a request for tax settlement may be made before or after the tax assessment, and the effect of this request on the time limit for bringing an action is regulated separately in the law. For this reason, the manner and date of notification of the notice, and the time limits for tax settlement and litigation, are checked against the text of the law at the first stage.

In a tax audit, the books and documents requested should be submitted on time, the minutes drawn up should be read carefully, and the taxpayer’s right to submit written observations should be exercised. The limitation period for tax receivables is five years from the beginning of the calendar year following the calendar year in which the tax should be assessed (VUK Art. 114). Appeal (istinaf) and appeal on points of law (temyiz) are available against tax court decisions under the conditions laid down by law.

At the collection stage, Law No. 6183 contains special provisions against payment orders, attachment and security measures; the time limit for an action against a payment order and its limited grounds are examined separately under this Law. The liability of company executives for public receivables depends on conditions such as legal representative status and ability to pay (Law No. 6183 Art. 35). As tax amnesty and restructuring laws are enacted periodically, their scope and application deadlines are checked against the relevant law. This information does not constitute tax planning or investment advice.

Our office’s approach

In tax files, the notice, the audit report and the book and document records are examined together; the time limits relating to the tax settlement, litigation and collection stages are set out in writing. Opinions on the tax consequences of transactions are prepared with reference to the relevant statutory provisions and case law.