According to a statement made by the Minister of Treasury and Finance Mehmet Şimşek on June 20, 2024, the Global Minimum Corporate Tax (“GMCT“) is expected to be among the tax regulations that will soon be submitted to the Turkish Grand National Assembly. This development is expected to have significant consequences for multinational companies operating in Türkiye and large-scale Turkish companies operating abroad.
As is well known, GMCT is one of the two outcomes of the Base Erosion and Profit Shifting (BEPS) Project, which was launched in 2013 under the leadership of the G20 and OECD. The GMCT, which was agreed upon by 137 out of 141 countries in the working group, aims to ensure that the profits of multinational and large-scale companies are taxed at a minimum level.
All multinational companies with a total turnover exceeding 750 million Euros in their global operations fall within the scope of GMCT. Large-scale Turkish companies headquartered in Türkiye and operating abroad with a global turnover exceeding 750 million Euros are also included in this scope. The regulation thus requires multinational companies, their subsidiaries, and branches with an annual total turnover exceeding 750 million Euros from both domestic and international activities will be required to have an effective tax rate of no less than 15% in the countries where they operate. In cases where subsidiaries or affiliates in foreign countries are taxed at a rate lower than 15%, the Turkish Revenue Administration will collect the difference in Türkiye.
GMCT has been in effect in European Union countries since January 1, 2024. However, six countries, namely Lithuania, Latvia, Poland, the Greek Cypriot Administration of Southern Cyprus, Portugal, and Spain, have not yet fulfilled their obligations. Among the countries that have implemented the GMCT are Canada, Japan, Malaysia, New Zealand, Korea, Switzerland, the United Kingdom, and Vietnam. In contrast, the United States has no plans to implement the regulation in the near future.
The introduction of GMCT raises a number of important questions in a range of areas, including the tax burden of companies, existing tax advantages, transfer pricing, and controlled foreign corporation income. In order to comply with this new tax regulation and minimise potential risks, companies must adopt a strategic approach.
Implementing the GMCT requires a comprehensive analysis of a company's existing tax structure, the tax laws of the jurisdictions in which it operates and the potential impact of the GMCT, as well as a careful assessment of the opportunities and risks presented by the GMCT, including a thorough evaluation of the potential impact on the tax burden, preservation or restructuring of existing tax benefits, review of transfer pricing policies and compliance with controlled foreign corporation rules. In addition, a full understanding of the necessary reporting procedures and legal obligations arising from the GMCT is important to ensure a seamless transition and compliance.
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