TAX NEWS
NO: 2024/1
Subject: Tax Amendments Introduced Through the Law No. 7491
Law No. 7491 "Law on Amendments to Certain Laws and Decree Laws" was promulgated in the Official Gazette dated 28/12/2023 and numbered 32413.
Among other provisions, this law introduces the following changes to the tax regulations.
The participation income exemption will be applied at the rate of 50% for companies participating in foreign companies
As it is known, pursuant to Article 5/1-b of Corporate Income Tax Law earnings derived from the participations in the capital of joint-stock and limited companies whose legal and business headquarters are not located in Turkey are exempt from corporate income tax if the following conditions are satisfied:
- The company in Turkey must own at least 10% of the paid-up capital of the foreign participation.
- The participation share must be held continuously for a period of at least one year as of the date the income is earned.
- The foreign participation earnings, including taxes paid on profit distributions from the earnings that contribute to dividend distribution, must bear a total tax burden of at least 15% in accordance with the tax laws of the country where the participating company operates.
- The participation earnings must be transferred to Turkey until the submission deadline of corporate income tax return for the relevant accounting period.
Article 5/1-b of the Corporate Tax Law has been amended by Article 58 of the Law No. 7491. With the amendment to Article 5/1-b of the Corporate Tax Law, the opportunity is provided for companies participating in joint-stock and limited companies without legal and business headquarters in Turkey to apply a 50% exemption on participation gains even if the conditions determined in Article 5/1-b of the Corporate Tax Law, provided that:
a. They own at least 50% of the paid-up capital of the foreign participation, and
b. The earnings for the accounting period in which they are obtained have been transferred to Turkey by the deadline for filing the corporate income tax return.
Additionally, the President is granted the authority to reduce the rates related to tax burden to zero or increase them up to the corporate income tax rate, reduce other rates to zero or increase them up to 100%.
This amendment came into effect on 28.12.2023, as published in the Official Gazette, and is applicable to gains obtained as of 01.01.2023 onwards.
The deduction rate applied to income from the export of services is increased from 50% to 80%
With the amendment made in Article 10 titled "Other Deductions" of the Corporate Tax Law with Article 59 of this Law, the deduction rate applied to the earnings obtained from certain services such as architecture, engineering, design, software, medical reporting, accounting record keeping, call center, product testing, certification and education and health services provided to foreigners has been increased from 50% to 80%; However, in order to benefit from this deduction, all of these earnings must be transferred to Turkey until the submission deadline of the corporate tax return for the accounting period in which they are earned.
This regulation came into force on 28/12/2023 and applies to income and gains received from 1/1/2023.
Application of 5-point discounted corporate tax rate to profits derived from export activities based on an intermediated export contract
According to the current regulation, the corporate tax rate of 25% is applied as 20% to the export earnings of exporting companies.
With the amendment made in Article 32 of the Corporate Tax Law with Article 62 of this Law, it is ensured that manufacturing or supplying companies based on an intermediary export contract can also benefit from a 5-point deduction on the income from export activities carried out through foreign trade capital companies or sectoral foreign trade companies.
This regulation came into force on 28/12/2023 and applies to income and gains received from 1/1/2023.
The corporate tax exemption for currency protected deposit extended
The corporate tax exemption applied to currency protected deposit and participation accounts was due to expire on 31/12/2023.
With the amendment made in the provisional Article 14 of the Corporate Tax Law by Article 63 of this Law, the corporate tax exemption applied to currency protected deposit and participation accounts has been extended until 30/6/2024.
Inflation adjustment application for banks and financial institutions
With the paragraph added to the provisional Article 33 of the Tax Procedure Law with Article 17 of this Law; banks, companies within the scope of Law No. 6361, payment and electronic money institutions, authorized foreign exchange institutions, asset management companies, capital market institutions, insurance and reinsurance companies and pension companies will not take into account the profits or losses that will arise as a result of the inflation adjustment in the accounting periods 2024 and 2025, during the calculation of corporate tax base including advance corporate tax periods.
The President was authorized to abolish or reintroduce, in whole or in part, the VAT refund right and to determine the goods or services for which the VAT refund right is thus limited
By Article 31 of this Law, the phrase "right to deduct" in Article 36 of the VAT Law was changed to "right to deduct or refund" and the phrase "right to deduct" was changed to "right to deduct or refund".
This amendment empowers the President of the Republic to partially or completely abolish or reintroduce the right to a VAT refund and to determine the goods or services for which the right to a refund is limited in this way.
The deadlines for the declaration and payment of the reverse-charge VAT have been brought forward
The deadline for the submission of Value Added Tax (VAT) declarations and payment of the taxes accrued on these declarations was the end of the 28th day of the month following the relevant taxation period.
With the amendment made to Article 41 of the VAT Law by Article 32 of this Law, the deadline for submission of the value added tax returns of taxpayers who are held responsible for decleration and payment of VAT on behalf of other party on the transaction (VAT 2 Returns) has been brought forward and set as the 21st day of the month following the taxation period.
In addition, with the amendment made to Article 46 of the VAT Law by Article 33 of this Law, the date of payment of the value added tax amounts declared by those who are held responsible for making tax deductions has been brought forward and set as the 23rd day of the month following the taxation period.
It is stated in the SCT Law that the deliveries made from Turkey to free trade zones are not covered by the export exemption
The export exemption is regulated in Article 5 of the SCT Law titled "Export Exemption", and although there is no statement in the Law that the deliveries to free trade zones are within the scope of the exemption, in some cases that have come to the judiciary, disputes arise that the deliveries made to free zones, which are accepted to be outside the customs territory of Turkey, should be treated within the framework of the export exemption provisions.
With the amendment made in Article 5 of the SCT Law by Article 44 of this Law, the fact that the deliveries made to the free zone are not within the scope of the export exemption is clearly written in the Law and the disputes that may arise are prevented.
Yours sincerely,
Deloitte Turkey
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