Türkiye has introduced new regulations mandating that all payments exceeding ₺7,000 (approx. $205) for goods and services must be made through banks or financial institutions. This measure is part of the government's broader strategy to increase tax transparency and combat the informal economy. With significant penalties for cash transactions over the specified amount, the regulation is designed to ensure that economic activities are more easily traceable, creating a more transparent financial environment.
New Regulations Targeting Cash Payments to Strengthen Tax Transparency
In an effort to broaden its tax base, Türkiye’s Revenue Administration (GIB) has published a draft regulation under the Tax Procedure Law General Communique (Serial No: 459). According to this draft, all payments above ₺7,000, whether by businesses or individual consumers, must be processed through recognized financial institutions, such as banks or the Turkish postal service (PTT).
This move underscores the importance of tax transparency in Türkiye's economic reforms. By tracking high-value payments, the government aims to reduce the shadow economy, making it easier to monitor financial transactions and ensure compliance with tax obligations.
Why the Focus on Tax Transparency?
The new regulation's focus on tax transparency stems from a need to enhance the accountability of financial transactions. Emre Kartaloğlu, president of the Union of Chambers of Certified Public Accountants Türkiye (TURMOB), emphasized that this policy would help broaden Türkiye's tax base and reduce reliance on the informal economy. "This will make economic activities easier to track and broaden the tax base," Kartaloğlu said.
The increased transparency is expected to simplify the process for tax authorities to monitor and verify transactions, leading to a reduction in tax evasion and an increase in reported income.
Penalties for Non-Compliance
Under the new guidelines, individuals or businesses that violate the regulation by making cash payments above ₺7,000 will face substantial fines. Non-compliant transactions will incur a penalty equal to 10% of the payment amount, with a minimum fine set at ₺5,000.
However, there is a provision for self-reporting. If individuals report their cash transactions within five business days, they will avoid the penalty. This grace period encourages self-correction and aligns with the government’s objective of fostering tax transparency through cooperative compliance rather than punitive action alone.
Exemptions and Additional Measures to Support Tax Transparency
The regulation includes some exemptions for individuals who are not registered taxpayers, allowing them to conduct transactions between themselves without following the new payment requirement. This exemption reflects the government’s understanding of the unique needs of non-business individuals while maintaining the focus on tax transparency for all significant transactions.
In addition, Türkiye's Social Security Institution (SGK) has announced that it will collaborate in setting credit card limits based on individuals’ income levels. This measure aims to prevent over-extension of credit in an economy where inflation and credit card demand are high. By setting limits on credit availability, the SGK hopes to create a more balanced and sustainable financial environment that also aligns with tax compliance goals.
How the New Regulation Enhances Tax Transparency and Economic Stability
As Türkiye navigates a complex economic landscape, tax transparency remains a cornerstone of its fiscal policy. By mandating financial institution involvement in high-value payments, the government can track economic activity more accurately, reduce tax evasion, and contribute to a stable economy. This regulation is expected to strengthen Türkiye’s economic credibility, both domestically and internationally, as it signals a commitment to transparency and regulatory integrity.
This move toward regulated payments for large transactions represents a proactive approach to reducing the shadow economy. With increased financial transparency and penalties for non-compliance, Türkiye is poised to make substantial progress in its fight against the informal economy, ultimately benefiting both the tax system and the wider economic landscape.
Need Expert Guidance on Türkiye’s New Banking Regulations?
Kurucuk & Associates is a leading banking law firm in Turkey, specializing in compliance, tax transparency, and banking law. Our experienced Turkish banking attorneys provide comprehensive legal support to navigate Türkiye’s evolving financial regulations. Contact our banking lawyers in Turkey today to ensure your business meets compliance standards effectively.
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