Tax compliance is filing what the law requires by the date it requires. Tax advisory is everything decided before that filing — how a transaction is structured, whether a charge will be accepted, which exemption applies, and what to do when the administration disagrees. The second is where the money is, and it is the part most service pages describe only as a list of names.
This page sets out what we actually do under each heading, including the certification work that only a sworn-in certified public accountant can sign, the advance ruling procedure that provides protection against penalties, and the dispute resolution ladder that runs from an invitation to explain through to court.
Compliance, Advisory and Certification Are Three Different Things
Companies routinely ask for one and need another. The distinction matters because the work is performed by different people under different responsibility.
| Work | Question it answers | Who performs it |
|---|---|---|
| Compliance | What must be filed, and by when | The accountant who keeps the books |
| Advisory | What will the treatment be, and what is the exposure | A tax adviser, in writing, before the transaction |
| Certification | Confirming a position to the administration, with the professional accepting joint responsibility | A sworn-in certified public accountant |
| Independent audit | Whether the financial statements give a true and fair view | An audit firm authorised by the public oversight board |
| Representation | Defending a position once the administration has challenged it | A tax adviser, with counsel where the matter reaches court |
The third line is the one foreign groups most often overlook. Certification is not a stronger form of advice: it is a separate engagement in which the certifying professional accepts joint liability for the figures alongside the taxpayer. That is why it carries weight with the administration, and why it cannot be produced retrospectively to rescue a position taken earlier.
What Advisory Actually Covers
Whether a payment is a service fee, a royalty or a dividend; whether an arrangement is a supply of goods or of services; whether an activity creates a permanent establishment. Each answer carries a different rate, a different withholding and a different filing.
Entity choice, funding against the disguised capital ratio, the pricing of charges from the parent, and the effect of the domestic minimum tax on any incentive being relied on. Modelled together rather than separately, because they interact.
Review of recurring treatments before they accumulate: withholding on payments abroad, VAT on services received from abroad, non-deductible expenses, exemption conditions being met in fact rather than on paper.
Responding to an invitation to explain, settlement before or after assessment, penalty reduction, correction requests, and litigation where the position is worth defending. Each has its own deadline and they do not run in parallel.
Advance Rulings: the Protection Most Companies Never Use
Where the treatment of a transaction is genuinely unclear, a taxpayer may request an explanation from the administration under Article 413 of the Tax Procedure Law. The response is a written ruling addressed to that taxpayer on those facts.
A taxpayer who acts in accordance with a ruling obtained for its own situation is not subject to a penalty on that matter, and late interest is not calculated. That is a meaningful shield on a position that would otherwise sit unresolved for the whole five-year assessment period.
Two limits matter. A ruling binds in respect of the taxpayer who requested it and the facts presented; a ruling given to another company on similar facts provides no protection. And the facts presented must be complete — a ruling obtained on an incomplete description protects nothing.
The practical use is narrower than it sounds and more valuable than it is used. It is not worth requesting a ruling on a settled question, and the request itself draws attention to the transaction. It is worth requesting where the amount is significant, the position is genuinely arguable both ways, and the treatment will repeat for years — a group charging structure, an exemption claim, the characterisation of a recurring payment.
Certification Work a Sworn-in Certified Public Accountant Signs
| Report | Purpose | When it is needed |
|---|---|---|
| Full certification of tax returns | Certifying the corporate tax return and the accounts supporting it, with the professional accepting joint responsibility | Optional, but it changes how the file is treated and is a condition for certain other benefits |
| VAT refund certification report | Supporting a refund claim above the threshold without a tax inspection | Where the refund exceeds the limit set in the Communiqué and no guarantee is given |
| Exemption and incentive certification | Confirming that the conditions of an exemption or incentive have been met | Where the relevant legislation requires certification above a threshold |
| Capital increase certification | Confirming that capital has been paid in and the accounts support the increase | On registered capital increases and other registry filings requiring it |
The first row is the one worth deciding on deliberately. Full certification is a continuing engagement rather than a year-end report: the accounts are reviewed during the year, positions are raised before they become filings, and the certifying professional is answerable for the result. Companies that treat it as a compliance formality get very little from it; companies that use it as the mechanism for raising questions early get most of the advisory value out of the same fee.
A firm that signs the independent audit report is restricted from providing certain other services to the same client. Certification of tax returns is a different engagement performed under different legislation, and it is normally held by a different firm from the auditor.
The practical consequence is that a company within the scope of independent audit needs to plan two separate relationships, and needing one does not remove the other. Groups that assume the auditor can also certify the tax returns discover the conflict late, usually with a deadline already running.
When the Administration Disagrees: the Resolution Ladder
This is the part of tax advisory that clients need most urgently and find described least. Turkish law offers several mechanisms between a first query and a court judgment, each with its own deadline, and choosing one usually closes off another.
The mechanisms in order
- Invitation to explainWhere a preliminary finding suggests a loss of tax, the administration may invite the taxpayer to explain rather than proceeding straight to inspection. An explanation accepted as sufficient ends the matter without an inspection. Where it is not accepted, filing a corrected return and paying within the stated period attracts a substantially reduced penalty instead of the full one.
- Settlement before assessmentRequested while the inspection is still under way, before the report is issued. It covers the tax and the tax loss penalty. Where settlement is reached, the matter is closed and no action may be brought on it.
- Settlement after assessmentRequested within thirty days of service of the assessment notice. Irregularity and special irregularity penalties have also been brought within its scope. Reaching settlement closes the route to court on the same matter.
- Reduction in penaltiesAn alternative to settlement, also within thirty days of the notice. The taxpayer accepts the assessment and pays, and the penalty is reduced by a stated proportion. Faster and more predictable than settlement, but there is no negotiation on the tax itself.
- Correction and complaintWhere there is a clear error in the tax or in the person taxed rather than a difference of interpretation, a correction may be requested within the five-year assessment period. If the request is refused, a complaint may be made to the Ministry. This route exists for errors, not for arguable positions.
- LitigationAn action before the tax court within thirty days of service. Filing suspends collection in most cases. At the appeal stage, the taxpayer may also withdraw from the legal remedy in exchange for a reduction in the tax and penalty — a route worth modelling before the appeal rather than after.
Almost every route above runs from service of the notice and closes after thirty days. More importantly, they are alternatives rather than steps: a taxpayer who reaches settlement cannot then litigate the same matter, and one who applies for the penalty reduction has accepted the assessment.
The decision therefore has to be made on the merits within the first days, not at the end of the month. That means assessing how strong the position is, what the reduction is worth in cash, and whether the same issue will recur in later years — because settling one year on a recurring treatment does not settle the next.
What decides the route
- Strength of the position on the substance
- Whether the treatment recurs in later years
- Cash value of the reduction against the cost of litigating
- Whether collection would be suspended
- Time and management attention the dispute will absorb
- Effect on the group’s position in other jurisdictions
- Whether a ruling could have prevented it and can prevent the next one
- Statute of limitations on the remaining open years
Recurring Advisory Questions for Foreign-Owned Companies
| Question | What turns on it |
|---|---|
| Will the charge from the parent be accepted | Whether a management fee, royalty or cost allocation is deductible, priced at arm’s length and documented; and what withholding applies on payment |
| Are we funding the entity correctly | Interest above the disguised capital ratio is non-deductible and recharacterised as a dividend; the exposure accumulates quietly |
| Does our activity create a permanent establishment | Staff in Turkey, an agent concluding contracts or a liaison office exceeding its scope can make the foreign company taxable here, assessed back over the open years |
| Is the exemption still available | Conditions attached to free zone, technology zone and participation exemptions have to be met in fact each year, not only when first claimed |
| Does the incentive survive the minimum tax | Corporate tax cannot fall below 10% of profit before deductions and exemptions, so the headline benefit may be worth materially less |
| Are we treating services from abroad correctly | The reverse charge applies even where no Turkish supplier is involved; companies that have never filed the separate return are the most common finding on a handover |
| Can the carried-forward VAT be recovered | Whether the balance can be substantiated, whether a refund route exists, and whether certification is required above the threshold |
| How will profits be repatriated | Withholding, treaty relief and the conditions of the parent country’s participation exemption, decided before the distribution rather than after |
How We Work
- A defined question with a written answer, not open-ended retainer time
- Options set out with the exposure attached to each
- The Turkish position and the group’s position addressed together
- Positions raised before the filing rather than defended after it
- Coordination with the group’s own advisers rather than duplication
- Counsel engaged where the matter reaches court
- Implementation carried through to the filing
- Recurring treatments reviewed once and documented, not re-argued annually
Most engagements begin as a specific question — whether a charge will be accepted, whether a structure creates a permanent establishment, whether an incentive survives the minimum tax, what to do about a notice that arrived last week. The answer determines whether anything further is needed, and that is usually a better starting point than a broad review.
Frequently Asked Questions
What is the difference between tax compliance and tax advisory?
Can we obtain a ruling from the Turkish tax administration before a transaction?
Does a ruling given to another company protect us?
What can be done when a tax assessment notice is served?
What is settlement before assessment?
What is an invitation to explain?
Can the same firm audit our accounts and certify our tax returns?
How far back can the tax administration assess?
As the Ozbek CPA team, we provide tax advisory to foreign-owned companies in Turkey — characterising and structuring transactions before they are filed, pricing and documenting charges from the parent, assessing permanent establishment exposure, modelling incentives against the domestic minimum tax, obtaining advance rulings where a position will recur, and handling disputes from an invitation to explain through settlement, penalty reduction and litigation. See also our pages on the Turkish taxation system, value added tax and corporate tax incentives. Contact us.
