TAX NEWS
NO: 2023/10
SUBJECT: The Law Numbered 7456 Entered Into Force
The "Law on Additional Motor Vehicles Tax for Compensation of Economic Losses Caused by Earthquakes Occurring on 6/2/2023 and on the Amendment of Some Laws and Decree Law No. 375" (Law No.7456) was published in the Official Gazette of 15 July 2023, number 32249.
Among other provisions, this law introduces the following changes to the tax regulations.
- Increasing the corporate tax rate by 5 points and reducing the corporate tax rate on export earnings by 5 points.
- Elimination of exemptions for the sale of immovable property,
- Elimination of the exemption for institutional income from other investment funds,
- The introduction of a one-off additional motor vehicle tax (MTV) for the year 2023,
- A new authorisation is given to the President of Turkey to increase the fixed tax amounts of the goods included in the list (I) attached to the Special Consumption Tax Law,
- A new authorisation is given to the President of Turkey to double the amounts of the Recycling Fee,
- Exemption from VAT until 31.12.2024 on supplies and services provided to professional organisations operating as public institutions for the construction of houses to be donated to earthquake victims.
- Providing minimum wage support to employers.
1) Increase in Corporate Tax Rate by 5 Points and Reduction of Corporate Tax Rate by 5 Points for Earnings from Exports
Pursuant to the first paragraph of Article 32 of the Corporate Tax Law No. 5520, corporate tax is levied at the rate of 20% on corporate income. However, corporate tax is levied at the rate of 25% on the corporate income of banks, companies within the scope of Law No. 6361, electronic payment and money institutions, authorised foreign exchange institutions, asset management companies, capital market institutions, insurance and reinsurance companies and pension companies.
With Article 21 of this Law, the corporate tax rate has been increased from 20% to 25%.
In addition, this rate will be applied as 30% for the corporate earnings of banks, companies within the scope of the Financial Leasing, Factoring, Financing and Savings Financing Companies Law No. 6361, electronic payment and money institutions, authorised foreign exchange institutions, asset management companies, capital market institutions, insurance and reinsurance companies and pension companies.
On the other hand, the 1 percentage point reduction in the corporate tax rate on profits from exports has been increased to a 5 percentage point reduction.
This regulation entered into force on 15/7/2023 to be applied to the earnings of the corporations obtained in 2023 and the following taxation periods, starting from the declarations to be submitted as of 1/10/2023; and to the earnings of the corporations subject to the special accounting period, obtained in the special accounting period starting in the calendar year 2023 and the following taxation periods.
2) Abolition of the Exemptions related to Sale of Immovable Properties Held in Balance Sheets of Companies for at least Two Full Years
Pursuant to Article 5/1-(e) of the Corporate Tax Law, 50% of the gains from the sale of immovable assets that have been part of the assets of corporations for at least two full years are exempted from corporate income tax.
In addition, pursuant to Article 17/4-(r) of the Value Added Tax Law, transfers and deliveries realised through the sale of immovable property that has been in the assets of institutions for at least two full years are exempted from value added tax.
2.1) Regulation in terms of Corporate Tax
Pursuant to Article 19 of this Law, the exemption application for the transfer and delivery of immovables that are in the assets of the institutions for at least two full years has been abolished. (Effective Date: 15 July 2023)
Pursuant to Article 22 of the same Law, in the sales for the immovables that were in the assets of the institutions before the regulation took place, it is regulated that the 50% exemption rate is decreased to 25% according to the 5/1-(e) of the Law Numbered 5520. (Effective Date: 15/7/2023)
On the other hand, within the scope of Article 19, paragraph 3, subparagraph (b) of the Corporate Tax Law; immovable property, participation shares and production and service companies may be subject to a partial division process under certain conditions. Article 20 of this Law excludes immovable property from the scope of partial division. (Effective date: 1/1/2024)
2.2) Regulation in terms of Value Added Tax
Pursuant to Article 7 of this Law, VAT exemption has been abolished in the transfers and deliveries realized through the sale of immovables that are in the assets of the institutions and held for at least two full years.
In addition to this regulation, with Article 8 of this Law, it has been regulated that VAT exemption will be valid for the transfers and deliveries realised through the sale of immovable properties that are included in the assets of the institutions before the effective date of this article and held for at least two full years.
3) Elimination of the exemption for institutional income from other investment funds
Another provision of Article 19 of this Law is the abolition of the exemption provided for income from other investment funds, except for income from shares in venture capital investment funds and shares in venture capital investment trusts.
This regulation has entered into force to be implemented for mutual fund units acquired from 15.7.2023.
4) Additional Motor Vehicle Tax
Pursuant to Article 1 of this Law, vehicles registered on or after 15.7.2023 and vehicles to be registered for the first time by 31.12.2023 will be subject to a one-time additional motor vehicle tax equal to the amount of motor vehicle tax (MTV) accrued in 2023.
From 15/7/2023, the additional MTV for vehicles registered in the relevant registers will be paid in two equal instalments, the first by the end of August and the second by the end of November 2023. Between the dates 15.7.2023 and 31.12.2023, the additional MTV for the vehicles to be registered for the first time in the relevant registries will be paid in cash, together with the vehicle tax of these vehicles.
5) New Authorization Regarding the Increase of the Fixed Tax Amounts of the Goods in the List (I) Attached to the Special Consumption Tax Law
Pursuant to the Article 12 of the same Law, the authority given to the President to increase the tax amounts of the goods included in the list (I) attached to the Special Consumption Tax Law is amended.
Accordingly, the Turkish President can increase the fixed tax amounts in the list (I) up to a highest tax amount of five times more or reduce it to zero, within these limits, the President is authorized to determine different amounts of tax for each good depending on its type.
In addition, the fixed tax amounts included in the list (I) or the latest fixed tax amounts determined by the Turkish President, in January and July, is going to be updated from the announcement of this change, according to the rate of change in the domestic producer price index announced by the Turkish Statistical Institute (TÜİK) in the last six months. (Effective on 15/7/2023)
6) New Authorization to the Turkish President to Double the Recycling Contribution Fee
With the article 6 of the same law authorises the President of the Republic to increase by up to two times or to reduce by up to half the amounts of the recycling contribution fee in the list (1) annexed to Law No. 2872. (Effective on 15/7/2023)
7) Exemption from VAT until 31/12/2024 for the Deliveries and Services for the Construction of the Houses to be Donated to the Earthquake Zone
Pursuant to the Article 9 of this Law, deliveries and services made to professional organizations operating as public institutions are exempted from VAT until 31/12/2024 due to the construction of houses to be donated to the earthquake victims within the scope of the protocol signed with the Disaster and Emergency Management Presidency (AFAD).
Pursuant to the Article 32 of this Law, the taxes incurred due to the deliveries and services will be deducted from the tax, calculated over the taxable transactions. Taxes that cannot be compensated through deduction will be refunded upon the request of the taxpayer within the scope of exemption. (Effective on 15/7/2023)
8) Minimum Wage Support to Employers
To support employers to protect and increase employment rates by reducing their labour costs, minimum wage support has been provided starting from 2016 to the end of 2023 June period.
Pursuant to the Article 17 of this Law, the temporary Article 96 was added to the Social Security and General Health Insurance Law numbered 5510, to reduce the labour costs and to support the employment in 2023 July until 2023 December, to the employers specified in the text of the Article daily 16,66 TL will be deducted from the insurance premium they will pay. And a minimum wage support of 500 TL per month is provided. In addition, according to the Law numbered 6356, the daily earning amount subject to the premium stated above will be considered as 647 TL for workplaces belonging to private sector employers subject to collective labour agreements.
This regulation entered into force on 15 July 2023, to be implemented as of 1 July 2023.
Yours sincerely,
Deloitte Turkey
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