Introduction Of Some Assets To The National Economy

In reaction to the recent financial turmoil, Turkey has

adopted a new law introducing tax benefits for taxpayers who

repatriate or declare their unrecorded assets, including cash,

foreign currency, securities and other capital market instruments,

and even real estate. These benefits will cover both domestic and

foreign-source income, and no tax inspections or reassessments will

be made based on the declared assets.

Turkey previously made two unsuccessful attempts to encourage

declaration of unrecorded assets. In 1998, the government promoted

recording of undeclared assets without tax exposure, and in 2002

assets injected into the share capital of companies were exempt

from tax inspection. Following the failure of these laws, the

Turkish parliament enacted Law No. 5811 on the Introduction of Some

Assets to the National Economy ("Law"),

which entered into force on 22 November 2008. The rationale behind

the new Law, which apparently commingles the laws of 1998 and 2002,

is the promotion of asset repatriation with little or no tax

exposure, and injection of such assets into the share capital of

companies, thereby enhancing their capital cushion.

Applicable Assets

The tax benefits apply to cash, foreign currency, gold,

securities and other capital market instruments, real estate owned

abroad, and the same type of assets owned in Turkey, which are not

recorded as shareholders' equity. Additionally, capital gains

and periodic revenues obtained from foreign participations, or

branches and gains arising from liquidation, can benefit from the

tax exemptions afforded by the Law. Existence of applicable assets

must be evidenced by a credible document, such as records kept by,

or under the protection of, the State, or issued by banks,

brokerage companies and other financial institutions, or certified

by notaries public, or Turkish embassies and consulates in the

relevant foreign jurisdiction.

Timeline for Declaration / Repatriation

In order to benefit from the Law, the first group of assets must

be acquired before or on 1 October 2008 and

declared to banks, brokerage companies or tax offices by the close

of business on 2 March 2009 (i.e., within three months of

the entry into force of the Law). Foreign-source movable assets

must be repatriated or transferred to a bank or brokerage company

within one month following the declaration. Capital gains and

periodic revenues, including those obtained at any time up until 30

April 2009, are tax exempt if...