Numara : 7
Tarih : 17.3.2023

TAX NEWS

NO: 2023/7

Subject: Application of the Additional Tax for Corporate Taxpayers

Law No. 7440, published in the Official Gazette on 12 March 2023, introduced an additional tax of 10% for corporate taxpayers.

Due to the recent earthquake disaster experienced by Turkey, the new legislation introduces an additional tax in order to generate additional funding for the government. 

The "deductions" referred to in this new regulation include the deductions provided for in Article 10 of the Corporation Tax Law and other special laws. In this respect, it is considered that deductions arising from the following should not be treated as within the scope of the said additional tax:

  • differences between TPL and IFRS,
  • severance pay provisions,
  • amounts arising from periodicity, late invoices and alike. 

Clarification on this issue is expected in the Communiqué to be issued.

In relation to this new legislation:

  • 10% of other deductions and exemptions from the corporate tax base of fiscal year 2022 and tax bases subject to reduced corporate tax rate (due to Investment Incentive Certificate) in accordance with the Corporate Tax Law and other laws,
  • 5% of dividends from local participations , and from those derived from foreign participations, which have a tax burden of at least 15% in the source country that benefit from participation exemptions. 

Other deductions and exemptions listed below are not subject to this additional tax:  

  • Exemption for investment funds and partnerships (CIT Law Art. 5/1-d)
  • Exemption of dividends in cooperatives (CIT Law Art. 5/1-i)
  • Exemption of gains from the sale and leaseback of movable and immovable property (CIT Law Art. 5/1-j)
  • Exemption of gains from the sale of assets and rights to asset leasing companies (CIT Law Article 5/1-k),
  • Exemption of income from currency protected bank deposit accounts (Provisional Article 14 of the CIT Law),
  • Sponsoring expenses (Article 10/1-b of the CIT Law),
  • Gifts and contributions, made against a receipt, to the following: public administrations within the scope of general and special budgets, special provincial administrations, municipalities and villages, foundations granted tax exemption by the President, associations operating in the public interest and institutions and organisations engaged in scientific research and development (CIT Law. Art. 10/1-c).
  • Donations and subsidies for the construction of schools, health institutions, student hostels, kindergartens, orphanages, nursing homes, care and rehabilitation centres and places of worship, as well as donations and subsidies for the continuation of the activities of existing institutions (CIT Law. Art. 10/1-ç).
  • Donations and subsidies made to certain activities of public administrations within the scope of general and special budgets, special provincial administrations, municipalities and villages, foundations granted tax exemption by the President, associations working for the public good and institutions and organisations engaged in scientific research and development activities, (CIT Law. Art. 10/1-d),
  • Donations, against a receipt, to aid campaigns initiated by the President  (CIT Law. Art. 10/1-e),
  • Donations or aid made against a receipt to the Turkish Red Crescent Society and the Turkish Green Crescent Society, excluding their economic enterprises (CIT Law. Art. 10/1-f),
  • The part of the amounts allocated as venture capital funds according to Article 325/A of the Tax Code.
  • The portion of the amounts allocated as venture capital funds pursuant to Article 325/A of the Tax Procedure Code, which does not exceed 10% of the declared income (CIT Law. Art. 10/1-g),
  • Deductions related to sheltered workplaces established in accordance with the Disabled Persons Act (CIT Law. Art. 10/1-h),
  • Investment allowance (Income Tax Act. Art. Provisional 61),
  • Donations and aid that may be deducted from the corporate tax base in accordance with the relevant laws, as well as the income subject to exemptions and deductions of technology development zones and R&D and design centres of micro and small enterprises defined within the scope of Article 407 of the Presidential Decree on the Organisation of the Presidency dated 10/7/2018 and numbered 1.

It is calculated as an additional tax. The tax is paid in two equal instalments in April and August.

For taxpayers with accounting period other than calendar year, this additional tax will be applied in corporate tax returns for periods ending in 2023. 

This additional tax will be treated as a non-deductible expense and cannot be offset against other taxes.

As of 6/2/2023, corporate taxpayers that have their tax registration in Adana, Adıyaman, Diyarbakır, Elazığ, Gaziantep, Hatay, Kahramanmaraş, Kilis, Malatya, Osmaniye and Şanlıurfa provinces and Gürün district of Sivas Province are exempt from additional tax.

 

Yours sincerely,

Deloitte Turkey

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