NEWS AND INSIGHT

NEW LEGAL OBLIGATIONS ON CRYPTO ASSET SERVICE PROVIDERS


19 August 2021

NEW LEGAL OBLIGATIONS ON CRYPTO ASSET SERVICE PROVIDERS

            With the Tax Procedure Law Communique published on 13 July 2021, legal entities and unincorporated entities are obligated to notify the real beneficiary information in an up-to-date, complete and accurate manner. The procedures and principles regarding the; determination of the aforementioned real beneficiaries and the scope of the obligants who are obligated to notify these, the time, period and the procedure of the notifications to be made are also regulated with this Communique.

            The purpose of this Communique is the aim and activities of Organization for Economic Cooperation and Development Global Forum for Transparency and Information Exchange for Tax Purposes and of Financial Action Task Force to detect and deter the tax evasion and financing of terrorism.

            First of all, it is important to determine who the real beneficiary is. According to the Communique, the real beneficiary is the real persons or persons who ultimately control over or have influence over the legal entities or unincorporated entities. The Communique also determined some principles and procedures for the determination of the real beneficiary. The procedures for determination of real beneficiary differs for legal entities and unincorporated entities, and this is how:

For the entities who has legal personality:

  • Natural person partners owning more than twenty-five percent of the legal entity,
  • In the cases when it is suspected that natural person who owns more than twenty-five percent of the legal entity is not the real beneficiary, or in the event that there is no natural person who has that amount of share, natural persons or persons who ultimately have control over the legal entity,
  • In the situations where it is not possible the determine the real beneficiary according to the procedures set forth above, natural persons or persons with the highest executive authority,

will be considered as real beneficiary and will be subject to the notification.

For the entities such as business partnerships with no legal personality which are stipulated under the Article 12 of the Regulation on Measures Regarding the Prevention of Laundering Proceeds of Crime and Financing of Terrorism:

  • Natural persons or persons who have ultimate control over the entities with no legal personality,
  • In the event that the real beneficiary cannot be determined according to the procedure stated above, natural persons or person with highest executive authority in the entity,

will be considered as real beneficiary as senior manager and will be subject to the notification.

            As well as determining the real beneficiary in the entities with legal personality and the ones with not, The Communique also regulates how to determine the real beneficiary in Trust and similar entities. According to Communique, Trust is defined as a legal relationship that provides the transfer of specified assets for the benefit of a specific beneficiary or beneficiary groups from the owner of the specified assets which happens to be the founder of the contract to the trustee’s control for the purposes of executing management, usage or the other dispositions specified in the contract. In Trust and similar entities; founders, trustee, manager, auditor or beneficiaries or the ones who have influence over these entities, considered as real beneficiary and will be subject to the notification.

            So, who are the obligants that are obligated to notify the aforementioned real beneficiary? According to the Communique, the obligants to make a notification are those who are active as of August 1, 2021 which is the start of the period of making a notification, including the ones whose liquidation procedures are in progress;

  • Corporate taxpayer
  • Persons or partners who are authorized to represent the unlimited company
  • One of the limited partners in limited partnership companies
  • In ordinary partnership, the one with the highest percent of shares
  • For the Trust and similar entities that are founded in a foreign state who has an operation center in Turkey or who has a manager who resides in Turkey, managers, trustees or representatives of the entity

Secondly, financial institutions and other institutions and organizations that are deemed liable for the implementation of the Law No. 5549 on the Prevention of Laundering Proceeds of Crime who are listed in the Communique in 27 sub-articles, and it should be noted that crypto asset service providers are one of these, and branches, agencies, representatives, commercial agents of aforementioned entities are obligated to inform the Revenue Administration upon the request of Revenue Administration regarding the real beneficiary information of the its customers’ transactions. Lastly, the branches, agencies, representatives, commercial agents and the similar organizational units of the obligant whose operation center is located abroad must make a notification regarding the real beneficiary information of its customers’ transactions upon the request of the Revenue Administration.

            The period and time of making the notification is again regulated in the Communique with its Article 6. According to the Communique, corporate taxpayers must notify the real beneficiary information with the annex of provisional tax return and annual corporate tax return. The other obligants and persons who does not fall under this scope, must notify the real beneficiary information to Revenue Administration via a form through electronic media until the last day of August, every year. In the event that obligants that are aforementioned in the previous paragraph establish new obligations or there is a change in the information that has been notified before, underlying changes must be notified within one month following the change.

            The form of notification is regulated under Article 7 of the Communique. According to that, (i) corporate taxpayers notify these via the annexes of annual and provisional tax returns, (ii) the ones that are not within the scope of corporate taxpayers and (iii) the other persons who are obligated to make a notification, by filling the “notification form regarding the real beneficiary” through Internet Tax Office must notify the followings matters;

  • Name and surname of real beneficiary,
  • Citizenship,
  • ID number and addresses,
  • If there is, telephone, fax and e-mail addresses,
  • Reason of being real beneficiary

It is mandatory to make the notification electronically. Therefore, tax offices/revenue departments do not accept the notifications that are made in paper in no condition. The notifications that are made in any way except in electronic way will be considered as not made. Also, aforementioned notifications can be made by the obligants themselves or by the independent accountant and financial advisor or by the sworn financial advisors who have an income or corporate tax return certification agreement in the respective time period.

In the event that after the notifications are made, it is realized that there is mistake, error or incompleteness regarding the notifications, the notification shall be made again in due form to correct it.

The persons possessing legal personality or not who are obligated to make a notification, shall kept the relevant information about the notification for 5 (five) years. Also, it shall not be forgotten that, obligants are responsible to make the notifications accurate, complete, and up to date. The obligants who made a misleading and incomplete notification will be fined with special irregularity penalty according to the repeating Article 355 of Law No. 213 on Tax Procedure Law. Finally, in the event of realization of inaccurate records of obligants who are obligated to make a notification due to the examinations and inspections of the Financial Crimes Investigation Board and other authorized authorities, authorities will inform the Revenue Administration for the necessary criminal proceeding and changes in the registry records to be made.

First notification regarding the real beneficiary must be made electronically and in compliance with the principles and procedures mentioned above to the Revenue Administration by all taxpayers and other persons including the corporate taxpayers, by the end of the day of 31/08/2021. The following notifications will be made through the annexes of the provisional tax returns and corporate tax returns. Also, it should be noted that, upon the request of the Revenue Administration, crypto asset service providers are obligated to notify the Revenue Administration regarding the real beneficiary information of the transactions concluded by their customers.