The Force Majeure Declaration by the Ministry of Treasury and Finance and its Impact on Tax Liabilities and Other Agreements

In order to control the COVID-19 pandemic, The Ministry of Internal Affairs has published communiques suspending the activities of many workplaces operating in various sectors. Although workplace owners are granted a short work allowance following the COVID-19 pandemic, they have faced tough challenges in maintaining their businesses. In response, the Ministry of Treasury and Finance has declared the current pandemic circumstances as a force majeure incident in respect of such workplace owners to lighten their liabilities with General Communique No. 524 on Tax Procedure Law No. 213 published in the Official Gazette numbered 31375 on 25 January 2021 (“the Communique”). You can see the original Communique via this link (Available in Turkish only).

1. Who does the force majeure declaration apply to?

The Communique declares the current circumstances as a force majeure incident for taxpayers operating in sectors in which the Ministry of Internal Affairs has suspended workplace activities temporarily or permanently under the measures taken against the COVID-19 pandemic. Consequently, taxpayers of workplaces such as cinemas, coffee shops, internet cafes, video game arcades, billiards halls, tea shops, AstroTurfs, swimming pools, Turkish baths, saunas, and amusement parks are considered to be subject to a force majeure incident from 12 January 2021, until such time that workplaces begin to operate again.

2. What impact will the force majeure declaration have on taxpayers?

Following the Ministry of Treasury and Finance’s force majeure declaration, according to Article 15 of Tax Procedure Law No. 213, taxpayers’ obligations to submit necessary statements and notifications (such as withholding tax return statements, contributions statements, value-added tax statements, and other tax statements) are suspended during the force majeure period. Accordingly, taxpayers can submit these statements and notifications until the 26th day of the month following the date when the force majeure declaration terminates (i.e., the date when workplaces begin to operate again). The Communique also suspends the payment of taxes that arise from statements relating to the period beginning on 1 December 2020, and ending when the force majeure declaration terminates (i.e., the force majeure period).

3. Will the Communique have any impact on agreements concluded by workplace owners?

The Ministry of Treasury and Finance has declared force majeure through a Communique under the Tax Procedures Law. In this regard, the Communique and the force majeure declaration are not applicable to other areas of law. That being said and bearing in mind that all areas of law consider the concept of force majeure in a similar manner, we are of the view that the COVID-19 pandemic does also constitute a force majeure incident in respect of other areas of law. The most important outcome of such an event will occur under Article 138 of the Turkish Code of Obligations No. 6098.  (“TCO”) that regulates the revision and termination of contracts when parties experience serious difficulties in fulfilling their obligations due to unforeseeable extraordinary situations. 

In line with the force majeure declaration, the COVID-19 pandemic should be regarded as an unforeseeable extraordinary situation under Article 138 of the TCO in terms of workplace owners whose activities are suspended. The COVID-19 pandemic was not foreseeable for workplace owners, and thus they could not anticipate the suspension of their activities due to a worldwide pandemic at the time of concluding agreements. In this regard, workplace owners can file a lawsuit under Article 138 of the TCO to request the revision of a contract’s terms (especially in the case of lease agreements and business agreements, depending on their scope) in line with the current circumstances. In cases where contracts cannot be revised in line with current circumstances, workplace owners have a right to terminate the contract. That being said, in order to file a lawsuit requesting the revision of a contract, the obligations set out in the contract must not have been fulfilled or must be fulfilled with a clause that reserves workplace owners’ rights arising from Article 138 of the TCO relating to the revision of the contract. Therefore, workplace owners should fulfill their obligations with a clause stating "rights arising from the excessive difficulty of performance are reserved”. This statement has great importance in preventing any loss of rights for workplace owners.