On July 16, 2024, the "Draft Bill on Amendments to the Tax Laws and Certain Laws" ("the Draft Bill") was presented to the Presidency of the Grand National Assembly of Türkiye and was approved by the Plan and Budget Commission on July 18, 2024. The Draft Bill is expected to be discussed and enacted by the Grand National Assembly of Türkiye within a short period of time.
The Draft Law introduces the Global Minimum Corporate Tax ("GMCT") which is of close interest to multinational foreign companies operating in Turkiye and Turkish corporate groups operating abroad. The GMCT, developed under the Base Erosion and Profit Shifting ("BEPS") Project, launched in 2013 under the leadership of the G20 and OECD, requires that the effective tax rate in the countries where these companies, whose annual total turnover exceeds 750 million Euros, operate is at least 15%.
The GMCT affects both multinational companies operating in Türkiye and Turkish corporate groups operating abroad. For this reason, the Local Minimum Complementary Corporate Tax and the Global Minimum Complementary Corporate Tax are regulated in the Draft Law in parallel.
In addition to this regime for global companies, the bill provides for the calculation of a minimum domestic corporate tax of 10% on the amount resulting from the addition to the commercial balance sheet profit of expenses that are not legally recognised, before deducting discounts and exemptions from corporate income. From a tax technical and socio-economic point of view, subsidiary income, emission premiums, cooperative returns, gains from transfers for the purpose of leaseback and to be taken back at the end of the contract within the scope of Law no. 6361, profits from sales to asset leasing companies for the purpose of issuing leasing certificates and to be taken back at the end of the contract, investment and partnership income (excluding income from the sale of real estate), amounts allocated as venture capital funds and wages paid to mentally or physically handicapped employees employed in sheltered workplaces who are difficult to integrate into the labour market are deducted from corporate income.
The proposal protects the existing rights of taxpayers who benefit from the reduced corporate tax application by obtaining an investment incentive certificate, while including investment incentives to be received after the implementation of the application within the scope of the minimum corporate tax. The Plan and Budget Commission has kept free zone earnings, Technopark earnings, and R&D center credits outside the scope of the minimum corporate tax. Newly established companies will be exempt from the minimum corporate tax for 3 years.
Another change for investment funds and partnerships investing in real estate is the introduction of the obligation to distribute half of the profit they obtain from real estate sales. In addition, the corporate tax rate applied on the earnings of companies operating in build-operate-transfer and public-private partnership projects is increased from 25% to 30%.
For tech-startups, a regulation is introduced regarding the benefits they provide to their employees. The portion of the share certificates given free of charge or at a discount by tech-startups to their employees, which are considered as wages, that does not exceed the annual gross wage amount of that year at the current market value on the date of issue will be exempt from income tax.
In order to enhance tax security, the Ministry of Treasury and Finance will be required to enforce notification obligations on service providers and intermediaries operating in electronic commerce and other digital platforms for advertising, listing, sales, and leasing purposes.
Changes are also anticipated in tax penalties and reconciliation processes. In general, it is planned to increase the irregularity penalties and special irregularity penalties that are currently regulated in the Tax Procedure Law.
In this context, a special irregularity penalty is imposed on those who use other people's accounts and those who allow their accounts to be used by others in cases where collections related to the delivery of goods and services are made through accounts registered in the name of other people instead of the taxpayer's own registered account. Accordingly, the same penalty will also be applied to collections made without an account registered in the name of the person concerned, through methods such as name, identity number, etc. Similarly, a special irregularity penalty is imposed on those who make collections using credit cards, debit cards, prepaid cards, QR codes, electronic wallets, and similar payment instruments for the delivery of goods or services through electronic devices/systems (POS and similar devices) of other taxpayers or non-taxpayers, and those who allow the use of these electronic devices/systems.
Taxes assessed in the name of the taxpayer as a result of tax audits are excluded from the scope of reconciliation, and reconciliation is made possible only for penalties.
Regarding VAT, it is envisaged that if the VAT carried forward amount in the VAT returns of taxpayers cannot be deducted by way of discount within five calendar years, this amount will be removed from their records and taken into account as an expense in the determination of income or corporate tax through a tax audit. In addition, in order for the VAT amounts transferred to the next period by taxpayers who cease their activities, are divided, or dissolved to be used as a deduction in the transferee company, a tax audit will be required regardless of the statute of limitations.
The VAT exemption for rental, maintenance, and similar services provided to marinas for non-commercial, touristic, entertainment, and sports sea vessels is removed.
Finally, the exit fee for leaving the country is determined as 500 liras, and it is made possible to increase this amount annually at the revaluation rate.
You can access the full text of the Draft Bill via the following link:
Draft Bill on Amendments to the Tax Laws and Certain Laws
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.