Our new legal briefing concerning the new tax restructuring scheme has been published.
The Law Numbered 7256 regarding the Restructuring of Certain Receivables and Amendments to Certain Laws published in the Official Gazette dated 17 November 2020 and numbered 31307 (“the Law Numbered 7256”) provides qualifying taxpayers with the opportunity to restructure their tax debts.
The Scope of the Restructuring
In Terms of the Nature of the Public Debt
Pursuant to the Law Numbered 7256, mainly the following public debt will benefit from the restructuring scheme:
- taxes, tax penalties and any relevant ancillary debt such as default interest and late payment fines under the Tax Procedural Law;
- administrative fines;
- customs duties and any related penalties;
- outstanding premiums of the Social Security Institution and any related penalties;
- public debt, any related penalties and any ancillary debt owed to special provincial administrations, municipalities and affiliated institutions, and certain other public entities.
Any public debt that is subject to a dispute may not benefit from the new restructuring scheme.
Any remaining instalments of any public debt which already benefitted from a restructuring scheme under the Law Numbered 7143 regarding the Restructuring of Taxes and Certain Other Receivables and Amendments to Certain Laws are excluded from the scope of the Law Numbered 7256 and accordingly will not benefit from the new restructuring scheme.
- In terms of the Term of any Debt
The scope of the restructuring scheme foreseen in the Law Numbered 7256 covers public debt and any related penalties that were levied on or prior to 31 August 2020.
The Law Numbered 7256 defines finalised public debt as such which was levied on or prior to 31 August 2020 but which remaind unpaid as of 17 November 2020 (i.e. the publication date of the Law Numbered 7256), due to the fact that either its due date passed or its due date is yet to arrive. Accordingly, any public debt, which has not yet become final as of 17 November 2020, will not benefit from the restructuring scheme.
Back in March this year, due to the Coronavirus pandemic, a force majeure event was declared by virtue of a new regulation and accordingly the due date for submitting declarations and making payments in respect of taxes and social security premiums was postponed. Accordingly, where the last day of payment for any postponed public debt is determined as October, November or December of 2020, such postponed public debt will equally not benefit from the restructuring scheme.
The Application Method of the Restructuring
Please see below the way in which the tax restructuring scheme will work in respect of various types of public debt.
As regards unpaid taxes or taxes which have not yet become payable, the full amount of the unpaid sum plus interest to be calculated based on the monthly rates of the domestic producer pricing index (the “D-PPI”) will be collected.
Any ancillary public receivables, such as default interest or late payment fines relating to such taxes will be written off.
- Ancillary Public Debt
If the overdue amount consists entirely of ancillary public debt such as default interest and late payment fines, an interest amount to be calculated based on the monthly rates of the D-PPI will be collected instead of the full amount of such ancillary public debt.
In other words, the actual default interest and late payment fines will be written off.
- Tax Penalties
For any unpaid tax penalties not levied on the basis of any tax principal, taxpayers will only be required to pay 50% of such penalties as well as an interest amount to be calculated based on the monthly rates of the D-PPI.
Any late payment fines relating to tax penalties will be written off.
- Late Payment Fines
If the unpaid public debt consists entirely of late payment fines, an interest amount to be calculated based on the monthly rates of the D-PPI will be collected instead of the actual amount of the late payment fine.
The Application Period and Pre-requirements
Any person seeking to benefit from the restructuring is required to apply to the relevant administration until 31 December 2020.
The President has the authority to extend the application deadline and the date for the payment in instalments by up to one month. Such deadline and date may also be extended in respect of taxpayers operating abroad in case of a force majeure event.
Taxpayers are requested not to initiate any lawsuit in relation to such taxes and public debts, withdraw any existing lawsuits and not to pursue any other legal remedy.
Payment Method and Terms
Pursuant to the Law Numbered 7256, restructured public debt can either be paid as a lump sum or in instalments. As regards any public debt to be collected by the collection offices of the Ministry of Treasury and Finance, the first instalment is due until 31 January 2021. As regards any public debt to be collected by the collection offices of the Social Security Institution, the first instalment is due until 28 February 2021.
- Lump Sum Payment
- Lump sum payment by the date foreseen for the first instalment
If a lump sum payment is contemplated by the date foreseen for the first instalment, no coefficient will be applied. Further, 90% of any amount to be calculated based on the monthly rates of the D-PPI will be written off.
If the pulic debt consists entirely of ancillary debt, then 50% of any amount to be calculated based on the monthly rates of the D-PPI will be written off.
- Lump sum payment by the date foreseen for the payment of the first two instalments
If a lump sum payment is contemplated by the date foreseen for the first two instalments, again no coefficient will apply but only 50% of any amount to be calculated based on the monthly rates of the D-PPI will be written off.
If the public debt consists entirely of ancillary debt, then 25% of any amount to be calculated based on the monthly rates of the D-PPI will be written off.
- Payment in Instalments
If a taxpayer chooses to make the payments in instalments, it will be presented with four different instalment options consisting of 6, 9, 12 or 18 instalments. A coefficient to be determined on the basis of the number of instalments will be applied on top of the total amount of the relevant public debt. The applicable rate of the coefficient will be as follows:
- 1.045 on payments to be made in 6 instalments over a 9-month period;
- 1.083 on payments to be made in 9 instalments over a 18-month period;
- 1.105 on payments to be made in 12 instalments over a 24-month period; and
- 1.15 on payments to be made in 18 instalments over a 36-month period.
Following the payment of the first instalment, subsequent instalments will need to be paid in two month intervals and at most in eighteen equal instalments.
The Law Numbered 7256 presents an opportunity for the restructuring of finalised public debts as of 17 November 2020. The deferral of public debts and certain partial discounts are intended to provide a slight relief to taxpayers that are struggling to keep up with their payment obligations due to the adverse economic impact of the coronavirus pandemic. However, the extent and the scale of the restructuring does not meet market expectations.
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 Published in the Official Gazettes dated 10 January 1961, 11 January 1961, 12 January 1961 and numbered 10703, 10704, 10705.
 Published in the Official Gazettes dated 18 May 2018 and numbered 30425.