RESTRUCTURING SOME PUBLIC RECEIVABLES UNDER LAW 7256 IN 5 QUESTIONS
With the Law No. 7256 on Restructuring of Some Receivables and Making Amendments to Some Laws (“Law”), which was enacted on 11.11.2020 and published in the Official Gazette dated 17.11.2020; some public receivables were restructured with favorable interest rates and flexible payment terms. Thus, the aim is to collect many uncollected receivables and to provide easy terms of payment to debtors who have difficulty in payment.
In this study, the issue of “restructuring some receivables” introduced by the aforementioned Law is briefly discussed with five (5) questions.
1. Which Public Receivables Are Covered Under The Law?
The Law covers many public receivables. With the Law, principal receivables of the Ministry of Treasury and Finance, Ministry of Trade, Social Security Institution, Provincial Special Administrations, Municipalities, and Investment Monitoring and Coordination Directorates, such as taxes, tax penalties, administrative fines, customs duties, insurance premiums, community insurance premiums, pension deductions, corporate provisions, unemployment insurance premiums and social security support premiums, on the condition that they were accrued until 31.8.2020, and they are already finalized at the date of publication of the law; and all kinds of interest, increase, delay increase, default interest, penalty interest, delay penalty related to these receivables; and the receivables that are followed and collected within the scope of Law No.6183; and the receivables of municipalities such as water, wastewater, and solid waste receivables are restructured.
Some public receivables are excluded from the scope of the Law. According to this;
- Administrative fines regulated under the Public Health Law No. 1593 (The most common examples are mask and social distance penalties),
- Administrative fines imposed according to Law No. 4207 on the Prevention and Control of the Harmful Effects of Tobacco Products,
- Administrative fines imposed by the regulatory and supervisory institutions in the table (III) attached to the Public Financial Management and Control Law No. 5018 (These are: Energy Market Regulatory Authority, Competition Authority, Radio and Television Supreme Council, Information Technologies and Communication Authority, Capital Markets Board, Banking Regulation and Supervision Agency, Public Procurement Authority, Public Oversight, Accounting, and Auditing Standards Authority, Personal Data Protection Authority, Nuclear Regulatory Authority, Insurance and Private Pension Regulation and Supervision Agency),
- Judicial fines,
- Receivables about the periods after 31.08.2020,
- Disputed receivables, receivables under compromise or receivables of ongoing (not finalized yet) proceedings,
are out of the scope of the restructuring stipulated by this Law.
2. What are the receivables waived and facilities provided by restructuring?
According to the Law, the collection of accessory receivables such as fines, interests, delay increases and delay interests based on the principal receivables will be waived, on the condition that the principals of taxes, insurance liabilities, and other public debts are paid in the period and manner that specified in the Law.
Instead of these waived amounts, the amount to be calculated according to the monthly rate of change of the domestic producer price index (D-PPI) until the publication date of the Law (17.11.2020) should be paid. If this amount is paid, interest, default interest, and delay increases will be deleted.
Under the Law; D-PPI monthly change rates reflect; Turkey Statistical Institute’s determinations of the Wholesale Price Index (WPI) change up to 31/12/2004 for each month, monthly change of the Producer Price Index (PPI) since the date 1/1/2005, the monthly rate of change of domestic producer price index (D-PPI) as of 1/1/2014, and 0.35% per month as of 1/11/2016 (including the month this Law was published).
The collection of 50% of the accessory receivables (e.g. tax penalties), which do not depend on principal receivables, are waived.
3. Who can benefit from the restructuring?
On the condition that they remain within the scope of the disclosure, debtors or taxpayers who have finalized and undisputed debts to public legal entities can apply to benefit from the ease of payment provided by Law No. 7256.
4. Where and in what period should the application be made?
According to Article 3 of the Law, the taxpayers/debtors who want to benefit from the restructuring should apply to the relevant administration until 31.12.2020 and have paid the first installment until 31.01.2021 for tax debts and 28.02.2021 for insurance debts. Applicants will also be able to make their applications through E-Devlet and Interactive Tax Office website.
5. How will payments be made under restructuring?
Those who have applied for the restructuring will be able to pay in advance, in two installments or 6, 9, 12, or 18 equal installments, and will be able to benefit from the restructuring so that each installment is paid every 2 months.
If the applicant chooses one of the options other than cash or two installments, the installments will be increased with a certain coefficient depending on the payment period. The amount calculated will be increased according to these rates;
- 1,045 for payments to be made in 12 months in 6 installments,
- 1,083 for payments to be made in 18 months in 9 installments,
- 1,105 for payments to be made in 24 months in 12 installments,
- 1,15 for payments to be made in 36 months in 18 installments.
If all the calculated amounts are paid within the first two installments payment period, the rates above will not be applied. Besides, if advance payment is made within the first two installments, a discount will be made on the amounts to be calculated based on the D-PPI monthly rate of change. In this context, debtors who prefer to pay in advance will be reduced by 90 percent from the calculated D-PPI amount, and those who have paid the entire debt within the first two installments of payment will receive a 50 percent discount for the calculated D-PPI amount.
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BOSCA Law is a full-service Turkish law firm with major international and local clientele. This note is to inform our clients and others concerned about current legal developments in Turkey. It does not constitute a legal opinion or advice. In special cases where necessary, please obtain legal advice.