Restructuring of Customs Receivables

On 27 January 2023, the Draft Law on the Restructuring of Certain Receivables and Amending Certain Laws (“Draft Law”) was submitted to the Turkish Parliament. It includes provisions regarding the restructuring of various public receivables, including customs receivables. Considering the election calendar, the Draft Law is expected to be enacted by mid-February.

Recent development

On 27 January 2023, the Draft Law, which includes provisions regarding the restructuring of various public receivables, including customs receivables, was submitted to the Turkish Parliament.

You can find the details of the regulations of the Draft Law regarding the restructuring of tax receivables, the tax base increase and the business records’ correction introduced in our legal alert here. This alert only lays out the main regulations regarding the restructuring of customs receivables. The Draft Law may be amended prior to its enforcement.

What does the Draft Law introduce?

1. Finalized customs receivables

Regarding tax receivables not paid on time and tax receivables whose payment period has not yet expired as of the promulgation date of the Law:

• If the taxpayer pays the entire customs duty as well as the amount to be calculated based on the Producer Price Index (PPI) monthly rates until the promulgation of the Law and in accordance with the Law (if the unpaid receivable only consists of delay interest, the amount calculated, instead of delay interest, based on monthly PPI rates), the entire delay interests and administrative fines will be written off.
• If the taxpayer pays 50% of administrative fines not derived from a customs duty or tax penalty arising from the participation provisions of Misdemeanor Law No. 5326 and the amount to be calculated based on the PPI monthly rates until the promulgation of the Law and in accordance with the Law, the remaining 50% of the penalty will be written off.
• If the taxpayer pays 30% of administrative fines issued depending on the customs value of the goods and the entire customs duty and delay interests as well as the amount to be calculated based on the PPI monthly rates until the promulgation of the Law and in accordance with the Law, the remaining 70% of the penalty and the entire delay interests will be written off.

2. Customs receivables that are not finalized or are in litigation

a. Accruals related to customs duties in litigation before first-degree courts or whose deadline for filing a lawsuit has not expired as of the promulgation of the Law

If the taxpayer pays 50% of the customs duty as well as the amount to be calculated on 50% of the customs duty amount based on the PPI monthly rates until the promulgation of the Law and in accordance with the Law, the remaining 50% of the customs duty amount and the entire tax penalty (including delay interests and other penalties arising from the customs duty as well as delay interests related to these penalties) will be written off.

If the taxpayer pays 15% of administrative fines issued based on the customs value of the goods in accordance with the Law, the remaining penalty will be written off.

Customs duties that have been filed to administrative appeals fall within the scope above, provided the deadline for filing an administrative appeal has not expired.

b. Accruals related to customs duties whose deadline for filing an appeal or objection has not expired, that are in appeal or in correction of decision, or whose deadline for the correction of the decision has not expired

In these situations, the amounts written off depend on the last court decision rendered before the promulgation date of the Law as to the cancellation, approval or reversal. In this regard:

• Where the last decision cancels the tax assessments, if 10% of the customs duty and the amount to be calculated, instead of delay interest, over 10% of the customs duty based on monthly D-PPI rates applied until the promulgation date of the Law are paid within the periods and procedures stipulated in the Law, the remaining 90% of the tax principal and the entire tax penalties (as well as the remaining 90% of the penalties that are not derived from a tax principal if the remaining 10% thereof is paid) will be written off. If the taxpayer pays 5% of administrative fines issued based on the customs value of the goods in accordance with the Law, the remaining penalty will be written off.
• Where the last decision approves the tax assessments or approves them with amendment, if the entire approved customs duty, 10% of the reversed customs duty and the amount to be calculated, instead of delay interest, based on monthly PPI rates applied until the promulgation date of the Law are paid within the periods and procedures stipulated in the Law, the remaining 90% of the customs duty and the entire tax penalties (as well as the remaining part of the penalties that are not derived from a tax principal if 50% of the approved amount and 10% of the reversed amount thereof are paid) will be written off. If the taxpayer pays 30% of the approved fine amount and 5% of the reversed amount related to the administrative fines issued based on the customs value of the goods in accordance with the Law, the remaining penalty will be written off.
• Where the last decision reverses the decision, if 50% of the customs duty and the amount to be calculated, instead of delay interest, over 50% of the customs duty based on monthly D-PPI rates applied until the promulgation date of the Law are paid within the periods and procedures stipulated in the Law, the remaining 50% of the tax principal and the entire tax penalties (as well as the remaining 75% of the penalties that are not derived from a tax principal if 25% thereof is paid) will be written off. If the taxpayer pays 15% of administrative fines issued based on the customs value of the goods in accordance with the Law, the remaining penalty will be written off.
• If the last decision is on a partial approval and partial reversal:
  • For the approved part, if the entire approved customs duty, 10% of the reversed customs duty and the amount to be calculated, instead of delay interest, based on monthly D-PPI rates applied until the promulgation date of the Law are paid within the periods and procedures stipulated in the Law, the remaining 90% of the customs duty and the entire tax penalties (as well as 50% of the penalties that are not derived from a tax principal if the remaining part thereof is paid) will be written off.
  • For the reversed part, if 50% of the customs duty and the amount to be calculated, instead of delay interest, over 50% of the customs duty based on monthly D-PPI rates applied until the promulgation date of the Law are paid within the periods and procedures stipulated in the Law, the remaining 50% of the customs duty and the entire tax penalties (as well as 75% of the penalties that are not derived from a tax principal if the 25% thereof is paid) will be written off.
  • If the taxpayer pays 30% of the approved fine amount, 5% of the reversed amount and 15% of the reversed part related to the administrative fines issued based on the customs value of the goods in accordance with the Law, the remaining penalty will be written off.

3. Customs receivables under customs inspection or assessment

Customs inspections and assessments that were initialized but are incomplete by the promulgation date of the Law will continue to be carried out. Once these customs duty assessments have been completed, if the taxpayer pays the first 50% of the customs duty and the amount to be calculated on 50% of the customs duty based on the PPI monthly rates until the promulgation of the Law and in accordance with the Law, the remaining 50% of the customs duty, delay interests and the entire tax penalty (for penalties depending on the customs value of the goods if the 15% of the penalty is paid, the remaining 85%) will be written off.

4. Payment methods

To benefit from the restructuring opportunity, taxpayers should apply to their tax office by 30 April 2023. Taxpayers may pay the amounts calculated under the Law either in cash at once or in installments.

If taxpayers prefer to pay in installments, they should make the payment in a maximum of 48 equal installments on a monthly basis, with the first installment to be paid by the end of May. In this case, taxpayers should choose 12, 18, 24, 36 or 48 equal installments during the application. The amount to be paid will be multiplied by (i) 1.09 for the 12 equal installments option, (ii) 1.135 for the 18 equal installments option, (iii) 1.18 for the 24 equal installments option, (iv) 1.27 for the 36 equal installments option and (v) 1.36 for the 48 equal installments option.

If the entire calculated amount is paid in cash at once within due time for the first installment, the above ratios will not be applied and 90% of the amount calculated, instead of delay interest, based on monthly D-PPI rates applied until the promulgation date of the Law will be written off.

Conclusion

As the Turkish Parliament will have to remain closed for a certain period (in March-April) due to presidential and parliamentary elections, which are anticipated to be held on 14 May 2023, we expect the Draft Law to be passed by mid-February. Taxpayers with customs debts or disputes that fall within the scope of the Draft Law should consider the financial advantages provided by the restructuring.