Law on Reduction of Late Tax Paymen

In mid-August, the House of Representatives passed Law No. 174 of 2018 (“Law 174/2018”)[1] for the full or partial waiving of delay fines, late payment interest, and additional tax accrued up to the date of the issuance of the law, on the condition that the principal tax amount is settled. Taxpayers who have settled the principal tax amount arising from a list of tax related laws that have been paid in full prior to the application of the new Law are entitled to a full exemption from delay fines and late payment charges. Taxpayers who settle the principal tax amount following the application of the Law benefit from reduction of these fines up to 90, 70, or 50 percent depending on the timeliness of settlement following the issuance of the Law. In addition, Law 174/2018 has shortened the application of Law No. 79 of 2016 on the settlement of tax disputes[2] so that the last date for submitting tax disputes before a tax dispute resolution committee under said law is 31 December 2018.

Background

In September 2016, Law No. 79 of 2016 for the Settlement of Tax Disputes was issued to regulate cases that are filed before the courts concerning disputes arising between the tax authority and taxpayers. The law granted greater power to dispute settlement committees than that which used to be given to reconciliation committees under previous legislation. The scope of law No. 79 of 2016 made settlement available for lawsuits in existence at the time of its application, and those filed until a year after (i.e. until September 2017). Following the issuance of the Law, the Ministry of Finance issued decision No. 389 in November of 2016, forming tax dispute settlement committees, each according to a tax dispute specialization. The committees fall under the supervision of the Supreme Committee for the Settlement of Tax Disputes that is headed by the Deputy of the Minister of Finance for Tax Policy, and their formation may not include members from the tax authority. In February 2018, Law No. 14 of 2018[3] was issued amending the Law on the Settlement of Tax Disputes and extending its application for two more years. The amendment explicitly extended the scope of the law to include disputes arising with the Real Estate Tax Authority. Moreover, a statement by the Minister of Finance elaborated that the law was extended for two more years in order to expedite the resolution of tax disputes in relation to income tax, sales, VAT, and real estate taxes.

Law 174/2018

Law 174/2018, published on 14 August 2018, reduces delay fines and additional taxes accruing from the non-payment of due tax arising in relation to (1) Stamp Duty Tax Law No. 111 of 1980, (2) (repealed) Income Tax Law No. 157 of 1981, (3) [repealed] General Sales Tax Law No. 11 of 1991, (4) Income Tax Law No. 91 of 2005, and (5) Value Added Tax Law No. 67 of 2016. The scope of the exemption is delay fines, penalty taxes, and late payment interest charges accrued prior to the date of the application of the Law, being 15 August 2018. The reduction of these fines/additional taxes is on the condition that the taxpayer pays the principal tax amount in full, and the amount of the reduction is based on the timeliness of the settling of that payment starting the application of the Law. Taxpayers who had settled the principal tax amount in full prior to the date of the application of Law 174/2018 (15 August), can benefit from a waiver of delay charges in relation to the paid amount. As for settlement of the principal tax amount following the date of application of Law 174/2018, reduction of late tax charges/interest will be applied as follows:

1. A 90% reduction if the principal tax amount is paid within the first 90 days from 15 August 2018;
2. A 70% reduction if principal tax amount is settled within the following 45 days from the lapse of the 90-day period stipulated in point (1) above;
3. A 50% reduction if the principal tax amount is settled within 45 days following the lapse of the deadline stipulated in point (2) above.

The above rules also apply with respect to fines imposed by the Customs Authority (except for violations and custom crimes), given that the Minister of Finance is to determine the fines that could be waived in this respect. In addition, Law 174/2018 extends the application of Tax Dispute Settlement Law No. 79 of 2016 to customs lawsuits, and limits its scope to lawsuits filed prior to 31 December 2018.   [1] Law No. 174/2018 on the full or partial waiving of delay fines, late payment interest and additional tax and amending certain provisions of Law No. 14/2018 extending the application of Law No. 79/2016 on the Settlement of Tax Disputes, Official Gazette, Issue No. 32 (bis) (b), 14 August 2018. [2] Law No. 79/2016 on the Settlement of Tax Disputes, Official Gazette, Issue No. 38 (bis) (c), 26 September 2016. [3] Law No. 14/2018 amending certain provisions of Law No. 79/2016 on the Settlement of Tax Disputes and extending its application, Official Gazette, Issue No. 8 (bis) (e), 27 February 2018.