Financial Crime World

Turkey Introduces Beneficial Ownership Disclosure Rules

New Regulations Require Corporate Tax Taxpayers to Disclose Ultimate Beneficial Owners

In a recent move aimed at improving transparency and combating tax evasion, Turkey has introduced new rules requiring corporate tax taxpayers and certain other entities to disclose the identity of their ultimate beneficial owners. The regulations are outlined in a General Communiqué on the Tax Procedure Law.

Who is Considered an Ultimate Beneficial Owner?

The Communiqué defines an ultimate beneficial owner as a natural person or persons who ultimately control or have influence over a legal entity or unincorporated organization. The following individuals may be considered ultimate beneficial owners:

  • Natural Person Shareholders: owning more than 25% of the entity
  • Controlling Individuals: in cases where there is suspicion that the shareholder is not the ultimate beneficial owner or no such shareholder exists, the natural person or persons who ultimately control the entity
  • Highest Executive Authority: if the ultimate beneficial owner cannot be identified under the above clauses, the natural person or persons with the highest executive authority (CEO, CFO, general manager, etc.)

For Unincorporated Organizations

  • Controlling Individuals: The natural person or persons who ultimately control the organization
  • Highest Executive Authority: in cases where the ultimate beneficial owner cannot be identified, the natural person or persons with the highest executive authority within the organization

For Trusts and Similar Entities

  • Founders, Trustees, Managers, Auditors, Beneficiaries: or those who have influence over these entities

Who Must Make the Notification of Ultimate Beneficial Owner Information?

The following entities are required to make the notification:

  • Corporate Tax Payees: Corporate tax taxpayers
  • Partnership Representatives: The person or partner authorized to represent a partnership in collective partnerships
  • Commandite Company Partners: One of the partners in commandite companies
  • General Partnership Shareholders: The person holding the highest partnership share in general partnerships
  • Trustees and Directors: Directors, trustees, or representatives of trusts and similar entities established in a foreign country with a management center or resident manager in Turkey

Additionally, certain financial institutions and businesses are also required to report ultimate beneficial owner information:

  • Banks and Financial Institutions: Banks, institutions authorized to issue bank cards or credit card outside of banks
  • Finance and Factoring Companies: Finance and factoring companies
  • Capital Market Intermediary Institutions: Capital market intermediary institutions
  • Portfolio Management Companies: Portfolio management companies
  • Payment Institutions: Payment institutions
  • Electronic Money Institutions: Electronic money institutions
  • Investment Partnerships: Investment partnerships
  • Asset Management Companies: Asset management companies
  • Real Estate Businesses: Persons engaged in real estate buying and selling for commercial purposes, and intermediaries in such transactions

When Should the Notification be Made?

  • Corporate Tax Payees: Corporate tax taxpayers must include the ultimate beneficial owner information as an attachment to their annual corporate tax return and provisional tax returns
  • Other Entities: Taxpayers other than corporate tax payers and other persons required to make the notification must submit the ultimate beneficial owner information by the end of August each year through the internet tax office

What is the Penalty for Non-Submission of Ultimate Beneficial Owner Information?

Taxpayers who fail to report the required information or provide incomplete or misleading notifications will be subject to penalties as per Article 213 of the Tax Procedure Law. The penalty amounts are:

  • First Class Merchants and Self-Employed Persons: 11,800 TRY
  • Second Class Merchants: 5,800 TRY
  • Farmers Who Keep Books: 5,800 TRY
  • Others: 3,000 TRY

A special irregularity penalty will be applied.