About the New Asset Peace Regulation Adopted by the Grand National Assembly of Türkiye (TBMM)

Asset peace (“Varlık Barışı”) refers to the declaration and registration of assets that are located in Türkiye but have not been recorded, or assets located abroad (such as money, gold, securities, etc.), by reporting them to banks, intermediary institutions, or tax offices in Türkiye and bringing them into Türkiye within the specified periods.

Following the previous asset peace regulation, which expired on 30 June 2022, a new asset peace regulation has been adopted by the Grand National Assembly of Türkiye (“TBMM”). This information note examines the details of the new asset peace regulation.

1. WHICH ASSETS CAN BE DECLARED?

According to the regulation, assets located in Türkiye that may be declared include money, gold, foreign currency, securities, capital market instruments, and real estate that are not included in statutory books and records.

Assets such as money, gold, foreign currency, and capital market instruments located abroad and owned by individuals or legal entities are also covered by the regulation.

Accordingly, relevant persons may ensure that such assets are recorded by declaring them to banks and intermediary institutions.

According to the General Communiqué on Bringing Certain Assets into the Economy (“Communiqué”), published in the Official Gazette dated 09.08.2022, assets located abroad that do not fall within the scope of the regulation may be converted into covered assets and brought into Türkiye until 31.03.2023.

For example, it may be possible to benefit from these provisions by converting a real estate asset located abroad into cash and declaring the resulting amount.

2. WHO CAN BENEFIT FROM THE ASSET PEACE REGULATION?

Firstly, Turkish or foreign individuals, as well as Turkish companies with domestic or foreign shareholders, may benefit from this opportunity.

It is not mandatory to be a taxpayer in order to bring assets covered by the regulation from abroad into Türkiye. Both companies and individuals may benefit from the asset peace regulation.

However, for declaring assets located in Türkiye, the declarant must be subject to income tax or corporate tax.

According to the Communiqué, individuals or legal entities wishing to benefit from the asset peace regulation, as well as their representatives or legal representatives, may carry out the declaration procedures.

3. WHERE WILL THE DECLARATION BE MADE?

Assets located abroad that are subject to declaration shall be reported to banks or intermediary institutions.

Declarations regarding assets located in Türkiye shall be submitted to tax offices.

4. HOW IS THE VALUE OF DECLARED ASSETS CALCULATED?

According to the Communiqué, the valuation criteria for declared assets, regardless of whether they are located in Türkiye or abroad, are as follows:

Type of Declared AssetValuation MethodMoney in Turkish LiraNominal valueGoldFair market valueForeign currencyForeign exchange buying rate announced by the Central Bank of the Republic of TürkiyeSharesStock exchange market value, if available; otherwise fair market value; if unavailable, acquisition cost; if this cannot be determined, nominal valueDebt instruments such as bonds, bills, eurobondsStock exchange market value, if available; otherwise fair market value; if unavailable, acquisition cost; if this cannot be determined, nominal valueInvestment fund participation sharesClosing price determined in the relevant marketDerivative instruments such as futures and options contractsStock exchange market value, if available; otherwise fair market value; if unavailable, acquisition cost; if this cannot be determined, nominal valueReal estateFair market value

5. HOW WILL ASSETS LOCATED ABROAD BE TAXED?

The regulation provides for three different tax rates. These tax rates apply only to assets located abroad that are declared under the regulation.

The tax rates are determined according to the date of declaration:

• 1% tax for assets declared until September 2022;

• 2% tax for assets declared between October 2022 and 31.12.2022;

• 3% tax for assets declared between 01.01.2023 and 31.03.2023.

Money, foreign currency, gold, shares, bonds, and other securities held abroad must be declared to banks or intermediary institutions and brought into Türkiye within three months.

6. HOW WILL ASSETS LOCATED IN TÜRKİYE BE TAXED?

A fixed 3% tax rate has been introduced for assets located in Türkiye that are declared under the regulation.

According to the relevant regulation, 31.03.2023 is the final date for declarations. Unless a new regulation is introduced in the future, declarations after this date will not be possible.

Income tax and corporate tax taxpayers may declare these assets and real estate holdings that are not recorded in their books to the tax office. They must pay a 3% tax calculated over the declared value in the month following the declaration date and record these assets in their accounts.

Non-taxpayers must prove the existence of their assets by depositing them into banks or intermediary institutions and pay a 3% tax over the value of the assets.

No tax audit or tax assessment will be conducted based on asset peace declarations and notifications.

7. WHEN AND HOW WILL THE TAXES BE PAID?

Under the new regulation, the payment methods differ depending on whether the assets are located in Türkiye or abroad.

• Taxes applicable to assets located abroad shall be collected in advance by the bank or intermediary institution where the declaration is made.

• The fixed 3% tax applicable to assets located in Türkiye must be paid until the end of the month following the month in which the declaration is submitted.

8. IS THERE ANY TAX EXEMPTION?

The applicable tax rates for declared assets are explained above.

According to the new regulation, if declared assets are brought into Türkiye and kept in Türkiye for at least one year, the applicable tax rate will be reduced to 0%, and the tax paid during the declaration process will be refunded.

To benefit from this exemption, after the declaration, the relevant assets must be transferred to accounts opened with a bank or intermediary institution in Türkiye and kept in those accounts for at least one year.

Taxes collected in advance by banks or intermediary institutions during declarations concerning assets located abroad and paid to the tax office will be refunded upon application by the declarant to the tax office.

9. WHAT KIND OF PROTECTION DOES THIS REGULATION PROVIDE?

This regulation allows individuals and legal entities to bring their assets into Türkiye with very low tax costs.

It also enables assets located in Türkiye that were previously undeclared to be declared by paying a certain amount of tax.

In other words, under this regulation:

• The source of the declared assets will not be questioned;

• A significantly lower tax rate will be applied compared to ordinary taxation rates.

Furthermore, the regulation guarantees that tax offices will not conduct examinations regarding declarations made by individuals and/or legal entities or the transfer of their assets into Türkiye.

Therefore, it also provides protection against potential future tax investigations concerning the declared assets.

CONCLUSION

The asset peace regulation introduced to mitigate the effects of recent economic conditions provides significant advantages for eligible persons.

Individuals and legal entities may register their previously undeclared assets either by paying very favorable tax rates or, if they keep such declared assets in Türkiye for one year, without any tax burden.

This information note examines the details of the new regulation. Please contact us for further information regarding the regulation.

Presented for your information and evaluation.