Law Number 7491 which introduces new fees and tax regulations, went into effect on December 28, 2023, following its publication in the Official Gazette. Ship operators interested in this law in terms of fees and increases in administrative fines to be levied on ship certificate and registry log license.

However, Articles 8 and 58 of Law Number 7491 are more concerned with shipping businesses founded in offshore jurisdictions and owned by Turks than other issues. 82 percent of Turkish-owned vessels, based on tonnage, are registered with companies in offshore countries and fly foreign flags. Offshore company ownership is not restricted to our shipowners.  Many shipping companies that do business abroad, including chartering brokers, ship management organizations, and even ship maintenance and repair companies, are registered in offshore countries.

Until the passage of Law Number 7491, there was no permanent regulation exempting dividends obtained from institutions located abroad from income and corporate tax. Currently, through temporary amnesty-based agreements known as asset peace, fully taxed real or legal people who are owners or partners of such organizations have legalized the dividends they take out of their company accounts for their personal use. Without even considering taking advantage of these laws, many seafarers continued to make tax-free earnings in a very courageous (!) manner.

With the Law Number 7491, the legislator exempted 50 percent of the participation income obtained from corporate tax for legal entity partners and 50 percent of the profit share for real person partners from income tax in return for bringing these dividends obtained from abroad to Turkey in foreign currency, without relying on any tax policy base. The only requirements are that the share of the partner who will benefit from this exemption in the company abroad must be at least 50 percent and the dividend brought to Turkey must be declared within the period.

Even though this law is a permanent tax regulation, this statue gives the President the authority to reduce this exemption to zero or increase it to 100 percent. The delegation of such a wide power by the legislature to the executive pushes the limits of the principles of trust in the law and the legality of taxes. The President has the authority to either raise the tax burden by resetting the exemption or reset the income tax by making the exemption 100 percent. However, because the Law's aim is clearly stated to increase foreign exchange inflows, it can be foreseen that the tax rate should be kept in an attractive balance.

The fact that the partners of the maritime companies residing abroad, who receive profit shares/participation earnings from their bank accounts in the country or abroad, are real or legal persons also affects the tax to be paid.

The obligation is fulfilled by paying income tax between 15 percent and 40 percent on 50 percent of the profit share obtained from a foreign company whose partners are real persons. However, if the partner who earns participation income from a foreign company is a fully taxed Turkish company, corporate tax will be paid on 50 percent of the profit share obtained this time. On the other hand, the real person partners of the Turkish company will receive a dividend from this company and be required to pay 10 percent tax with income tax withheld.

Dr.Özkan Poyraz

navis@navisdanismanlik.com 

Co-Author: İnan Yurtseven

inan.yurtseven@yurtmusavirlik.com