Just as gold or money in a safe at your home can become an inheritance if you know its location and have the key to the safe, bitcoin in your personal crypto wallet can also become an inheritance in the same way. If your cryptocurrency is on an exchange, then the situation can be thought of like money in a bank.
The subject of today's news is the opinion prepared by the Edirne Tax Office and approved by the Revenue Administration. According to the opinion, while defining Bitcoin, it started as a security but then continued as money and promissory note. In essence, this report is somewhat contradictory, but what is important is that the subject has started to take its place in our legal system. This situation signals the future recognition of bitcoin and other blockchain protocols. In the Ministry of Finance's opinion, the comparable values to be used as a basis for taxation were not specified as exchange values, but the comparable value or the value registered on an exchange should be included in the inheritance and transfer tax return.
In essence, our Ministry of Finance has also stated that naming cryptocurrencies is important in terms of taxation. I have also conducted studies and presentations on this subject at the Turkey Tax Council. The most important issue is to define what cryptocurrency is. The Capital Markets Board (CMB) and the Central Bank are also debating the concepts of commodity, security, and currency on this matter. Evaluating it as currency would not be correct because the current volatility, the fact that it is used for investment rather than transactions, and its deflationary structure do not allow it to be classified as currency. For example, the United States and Australia have chosen to view it as a commodity and tax it accordingly. The United Kingdom, on the other hand, was applying foreign currency taxation rules. I can say that opinions favoring a commodity classification are also prevalent in our country.
The subject should not be viewed solely from an inheritance perspective. In debt collection cases, divorce proceedings, and in injunction requests in other lawsuits, injunctions on bitcoin and similar crypto assets are frequently requested. If the assets are in crypto wallets, this injunction cannot be enforced, but if they are on exchanges, it can be.
There is an important point here; the taxation of cryptocurrencies must be handled very carefully. Because tracking these currencies is currently difficult. If taxation in Turkey is hasty and erroneous, foreign exchanges may be preferred over crypto exchanges established in Turkey. This could cause both billions of liras of liquidity to flow abroad and to become completely uncontrolled on foreign exchanges. As a result, when implementing these taxation measures, precautions should be taken to prevent Turkish investors' savings from shifting to international exchanges. Strategic thinking must absolutely be employed when making tax legislation or practices.
The opinion of the Edirne Tax Office mentioned in the article above is provided below.
Att. Kadir Kurtulus, LL.B, MBA
Number : 60938891-120.01.02.09[GVK: 3-1]-33826
Date : 23/09/2020
REPUBLIC OF TURKEY
REVENUE ADMINISTRATION
Edirne Tax Office Directorate
Income Tax Laws Group Directorate
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60938891-120.01.02.09[GVK: 3-1]-E.33826 |
23.09.2020 |
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Evaluation of the Amount to Be Paid to Heirs in Exchange for Bitcoin Assets in Terms of Inheritance and Transfer Tax. |
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Upon examination of your private ruling request form and its annexes referenced above, it has been understood that your spouse … passed away on May 31, 2019, that the decedent was a user of … Inc., a company engaged in the purchase-sale and transfer of Bitcoin via the internet, and that in their account registered with the company's system under account no. …, there was 0.02 TL and 0.40420899 Bitcoin, and that the total value of the said Bitcoin assets in the decedent's account as of the date of death was 20,540.30 TL, and that you requested an evaluation of the payment of the equivalent of the said assets to the heirs in terms of inheritance and transfer tax.
Article 1 of the Inheritance and Transfer Tax Law No. 7338 stipulates that assets belonging to persons of Turkish citizenship and assets located in Turkey are subject to inheritance and transfer tax upon transfer from one person to another by way of inheritance or gratuitously in any manner whatsoever; subparagraph (b) of the first paragraph of Article 2 stipulates that the term "Property" denotes all movable and immovable things that may be the subject of ownership, as well as all other rights and receivables that may be included in one's estate; Article 5 stipulates that the taxpayer of the inheritance and transfer tax is the person who acquires property by way of inheritance or gratuitously.
Article 17 of the same Law provides,
"Public administrations and institutions, banks, bankers, safe deposit box renters, insurance companies, other companies and institutions, courts, and enforcement offices must first request a certificate issued by the tax office confirming that the tax has been paid in order to be able to pay money and promissory notes to beneficiaries in connection with any transaction falling within the scope of this tax.
If the beneficiaries do not present a certificate, they may withhold five percent for transfers by inheritance and fifteen percent for gratuitous transfers as a tax equivalent, and then pay the remainder. Those who make withholdings are obligated to deposit the withheld money at the nearest treasury within one week at the latest and to notify the tax office to which they are affiliated in writing.
From those who pay money and promissory notes without making withholdings and those who do not deposit the withheld money at the treasury within the above-specified period (excluding judges), the amounts they were obligated to withhold and deposit shall be collected with a delay penalty applied pursuant to the Law on the Collection Procedure of Public Receivables. A separate penalty of 10% of the amounts the responsible persons of the relevant organizations were obligated to withhold and deposit shall also be collected from those who fail to fulfill these duties on time."
Accordingly, for the transfer of money and promissory notes held at the institutions and organizations enumerated in the said Article 17 to the heirs, a certificate confirming that the tax has been paid must first be requested, and if heirs who fail to present a certificate must have five percent withheld from their entitlements before payment is made, and the withheld funds must be deposited at the treasury within one week at the latest and the situation must be reported to the relevant tax office.
Within the framework of the above explanations, it is required that the total value of the Bitcoin assets held in the account of the decedent … at … Inc. be declared by the heirs through an inheritance and transfer tax return and that a clearance certificate be issued upon payment of the assessed tax; in the event that the heirs do not file a return, it is possible for … Inc. to withhold (five percent) 5% to be offset against future tax payments and then pay the remaining amount to the heirs. Furthermore, it is understood that the withheld funds must be deposited at the nearest tax office within one week at the latest and the situation must be reported to the tax office authorized to assess the tax.
Please be informed accordingly.
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*) This Private Ruling has been issued pursuant to Article 413 of the Tax Procedure Law No. 213.
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**) If incorrect information has been provided regarding this matter while it is under examination, adjudication, or settlement, this private ruling is invalid.
(***) If you act in accordance with this private ruling issued upon your request, and if it becomes necessary to assess tax due to your actions, no tax penalty will be imposed on you and no default interest will be calculated on the assessed tax.
Source: https://www.gib.gov.tr/mirascilara-bitcoin-varligi-karsiliginda-odenecek-tutarin-veraset-ve-intikal-vergisi-yonunden
