Guidance that details how the Turkish tax authorities will
determine whether to call a taxpayer to justify his declaration
before initiating a tax audit have finally been released,
almost year after this new mechanism was put in place.
Turkey introduced an audit mechanism into the Turkish Tax
Procedure Code in late 2016, named the "Call for
Justification". It allows Turkish tax authorities to conduct a
preliminary examination to decide whethera tax audit should be
initiated for a taxpayer.
However, a detailed guidance on how to implement these new
audit rules has only been provided recently. On July 25 2017, a
general communique to provide guidance and explain how to
conduct the call for justification process was published in the
What is the justification mechanism?
The justification mechanism allows the tax authority to
invite a taxpayer, who has a potential to make a tax loss based
on a preliminary determination, to justify their tax returns.
By means of this mechanism, either taxpayers are not audited if
no loss of tax is determined or taxpayers are allowed to
benefit from reduced tax penalties in case a loss of tax by the
respected taxpayer is confirmed.
Hallmarks to call for justification
The General Communique issued by the tax authorities
indicates 16 different hallmarks to call taxpayers to justify
their tax position. Some of these hallmarks include:
- No withholding tax application on the
- Misapplication of previous year's
- Thin capitalisation implementation;
- No interest application for the
receivables from the shareholders; and
- Underreporting of real estate purchase and
Who has authority to call a taxpayer to justify?
Under the new legislation, the tax audit board and
evaluation committee at the Turkish Revenue Administration have
an authority to invite a taxpayer to justify their tax
position. Also, it is envisaged that evaluation committees will
be established at the tax audit board and local tax offices.
These committees will consist of three members.
Conditions to call a taxpayer for justification
Calling a taxpayer to justify his tax position is applicable
provided that the following conditions are met:
- A preliminary determination has been made
by those who authorised to conduct a tax audit or/and to
collect information from taxpayers and other individuals and
corporates engaging transactions with taxpayers;
- No tax audit or no dispatching to tax
valuation committee has been initiated for the taxpayer;
- No denouncement has been made about the
How can taxpayers will justify their tax position?
To benefit from this mechanism, a taxpayer must explain his
tax position to the respected committee within 15 days after
receiving the invitation letter.
The explanation can be carried out either orally or in
writing. For oral explanations, the taxpayer and the committee
mutually take statements down through minutes of the meeting.
Written statements may be delivered by postal service or
courier to the committee.
The outcome of the statements
If the committee concludes that the taxpayer's explanations
justify his tax position, then the committee can decide not to
initiate a tax audit on the taxpayer. In case the taxpayer
admits that his tax position reasoned a loss of tax, he may
benefit from the reduced tax penalty (20% of tax loss) under
the condition that he files additional declarations, pays the
loss of tax and late payments interest in 15 days.
Similarly, even though the committee does not accept the
taxpayer's justification he may benefit from 20% reduced tax
penalty provided that the above-mentioned conditions are met.
Finally, if the taxpayer does not file his tax return in 15
days, the committee will decide to initiate a tax audit.
Burçin Gözlüklü (firstname.lastname@example.org)
and Ramazan Biçer (email@example.com)
Tel: + 90 216 504 20 66 and + 90 216 504 20 66