Tax Advisory

An invitation to explain (izaha davet) is a request from the tax office for an explanation of an inconsistency it has found in a return or transaction (Tax Procedure Law, Art. 370). A written explanation must be submitted within 15 days of notification. If it is found sufficient, no penalty is imposed; if not, a corrective return can be filed within the additional period set by the Law, with a reduced tax loss penalty. As the deadline is short, we recommend reviewing the documents together as soon as the letter arrives.

If the error is noticed before the tax administration detects it, a corrective return can be filed under the voluntary disclosure (pişmanlık) provisions of Article 371 of the Tax Procedure Law. In that case no tax loss penalty is imposed; the unpaid tax is paid together with a late payment surcharge. Voluntary disclosure does not apply once an audit has started or a report has been filed.

A return not filed on time incurs an irregularity penalty under Article 352 of the Tax Procedure Law, and if the tax is paid late, late payment interest accrues under Law No. 6183. Penalty amounts are updated each year by the revaluation rate. If the last day of the filing period falls on a weekend or public holiday, the deadline moves to the end of the next business day.

A lawsuit can be filed at the tax court within 30 days of notification of the notice. Alternatively, where the conditions are met, you can request a settlement with the tax office: pre-assessment settlement (Tax Procedure Law, additional Art. 11) and post-assessment settlement (additional Art. 1) are separate routes. Because matters settled cannot later be taken to court (Tax Procedure Law, additional Art. 9), choosing the right route from the start matters.

Advance tax (geçici vergi) is a prepayment made in quarterly periods, credited against annual income or corporate tax. Businesses with commercial income, self-employed professionals and corporate taxpayers pay it; taxpayers under the simplified method and those with only salary or rental income do not. Filing and payment are due on the 17th of February, May, August and November.

Exemptions depend on the person and the activity. For example, the young entrepreneur exemption under Article 20/B of the Income Tax Law applies to first-time taxpayers under 29; exporters may use the exemption in Article 11 of the VAT Law; and those serving clients abroad may use the service export exemption under Article 12/2 of the VAT Law. Most exemptions require the conditions to be met before starting business.