Significant Reform In Tax Legislation With Law No. 7524 On Amendments To Tax Laws And Certain Laws And Decree Law No. 375

Law No. 7524 on the Amendment of Tax Laws, Certain Laws and Decree Law No. 375 ("Law No. 7524"), published in the Official Gazette on August 2, 2024, and made major reforms in tax legislation. This regulation has been prepared with the aim of increasing tax security, fighting against the informal economy and strengthening tax justice; and has resulted in radical changes in Law No. 6183 on the Procedure for Collection of Public Receivables ("LPL"), Law No. 193 Income Tax Law ("ITL"), Law No. 213 Tax Procedure ("TPL"), Law No. 3065 Value Added Tax ("VAT Law"), Law No. 4760 Special Consumption Tax ("SCT") and Law No.5520 Corporate Tax ("CVL"). Among these regulations, the implementation of a minimum corporate tax (Global Minimum Corporate Tax) for multinational companies and local minimum corporate tax regulations stands out to comply with international standards.

Detailed information and explanations are presented below.

The Amendments to the Law No. 6183 on the Procedure for Collection of Public

Including Payments Made upon Court Decisions and Payment Orders within the Scope of Document Verification: According to Article 22/A-f.1, the phrase "in all kinds of payments" has been amended to "in all kinds of payments (including payments made upon court decisions and payment or execution orders of enforcement offices)." This change now requires that payments made upon court decisions and payment orders from enforcement offices be accompanied by a document stating that there is no overdue debt to the collection offices affiliated with the Ministry of Treasury and Finance.

The Amendments to Law No. 193 Income Tax Law (“ITL”)

1. Wage Exemption for Share Certificates Granted to Employees of Techno-Initiative Companies: With this amendment, which entered into force on August 2, 2024, Article 17 of the Income Tax Law has been revised. The portion of the fair value of share certificates granted free of charge or at a discount to employees of techno-initiative companies, which does not exceed one year's gross wage, shall be exempt from income tax.
2. New Procedure for Determining Income Tax Base for Commercial and Professional Earnings: Article 3 of Law No. 7524 introduces a new method for determining daily revenue and income tax base for commercial and professional earnings, with specific provisions for monthly and annual revenue calculations based on audit results.
3. Tax Deduction on Payments Realized on E-Commerce Platforms: Payments made by intermediary service providers and electronic commerce intermediary service providers will be subject to income tax withholding starting January 1, 2025, as per Article 94 of the Income Tax Law.

The Amendments to the Law No. 213 Tax Procedure Law ("TPL")

1. Conditions for Re-establishing Taxpayer Liability for Forged Document Issuance: The regulation stipulates that taxpayers who have been found liable for issuing forged documents, despite not engaging in any commercial, agricultural, or professional activities, will have their taxpayer status automatically canceled if confirmed by a tax inspection report. However, Article 5 of Law No. 7524 has revised the conditions for re-establishing taxpayer status in such cases. Before the amendment, re-establishing taxpayer status required providing collateral of at least 690,000 TL for 2024 or 10% of the total amount of the forged documents issued. The new requirement is to provide collateral equal to 10% of the total amount of the forged documents issued, with a maximum limit of 10 million TL.
   Article 153/A-3 has been revised to specify that individuals such as legal representatives, board members, managers, or shareholders with at least 10% interest, who are involved in issuing forged documents, must provide collateral or resign within sixty days of the tax office's notification. Failure to do so will result in their personal assets being used to cover the tax debts. If a taxpayer starts legal proceedings to remove these individuals within the sixty-day period and provides proof, they will not be held personally liable for the debts if the status is terminated. If the status is terminated after the sixty days, any collateral will be refunded if there are no other tax debts, without needing to meet additional conditions.
2. Amendment to the Obligation to Certify Collections and Payments: Article 6 of Law No. 7524 amends Article 257 of the Tax Procedure Law (TPL) to broaden the scope of entities responsible for proving the accuracy of collections and payments. This update extends the responsibility beyond just taxpayers to include other parties involved in transactions. The changes aim to enhance data collection and monitoring of electronic commerce by the Ministry of Treasury and Finance, thus increasing the tax authorities' audit capabilities. Under the revised Article 257/7 of the TPL, new regulations have been introduced to bolster tax security in electronic commerce. These amendments impose information obligations on both individuals and entities engaged in economic and commercial activities through digital platforms, including electronic commerce intermediary service providers, Access providers, Content providers, Hosting providers, social network providers. These regulations expand the tax audit obligations for digital platforms and service providers, requiring them to report their commercial activities to the Ministry of Treasury and Finance.
3. Market Price of Precious Metals: The phrase "and precious metals" has been added to Article 263, allowing the use of stock market prices as the valuation measure for precious metals traded on exchanges.
4. Incremental Rate Application in Special Irregularity Penalty: Within the scope of the provision added to Article 344 of TPL with Article 9 of Law No. 7524, it is regulated that the tax loss penalty to be imposed due to unregistered activities shall be applied with a 50% increase.
5. Increase in Irregularity Penalties: Penalties for various irregularities have been increased significantly under Article 352/1 of TPL.

   TAXPAYER GROUPS	For first degree irregularities (TRY)		For second degree irregularities (TRY)
   	Old Penalty Amount	New Penalty Amount	Old Penalty Amount	New Penalty Amount
   Capital companies	TRY 1,100	TRY 20,000	TRY 580	TRY 10,000
   First class traders and self-employed persons other than capital companies	TRY 660	TRY 10,000	TRY 330	TRY 5,000
   Second class traders	TRY 330	TRY 5,000	TRY 150	TRY 3,500
   Those who are subject to income tax by declaration method and who are not subject to the above	TRY 150	TRY3,500	TRY 87	TRY 2,250
   Those whose earnings are determined in simple procedure	TRY 87	TRY 2,250	TRY 40	TRY 1,500
   Tradesmen exempted from income tax	TRY 40	TRY 1,500	TRY 23	TRY 1,000

6. Increase in Special Irregularity Penalties: Within the scope of the fight against informality, special irregularity fines imposed according to Article 353 of TPL have been increased.

   SPECIAL IRREGULARITY ACTS	Old Penalty Amount	New Penalty Amount
   Failure to give or receive invoice, expense voucher, producer receipt, self-employment receipt	TRY 3,400	1. Determination – TRY 10,000
   		2. Determination – TRY 20,000
   		3. Determination - TRY 30,000
   		4. Determination – TRY 40,000
   		5. Determination – TRY 50,000
   		For 6th and Subsequent Determinations – TRY 100,000
   Total amount of penalty to be imposed for each type of document in a calendar year	TRY 1,700,000	TRY 10,000,000
   Failure to issue, use or keep retail sales receipt, payment recorder device receipt, entry and passenger transport ticket, delivery note, transport delivery note, passenger list, daily customer list and documents required to be issued by the Ministry of Finance	TRY 3,400	1. Determination – TRY 10,000
   		2. Determination – TRY 20,000
   		3. Determination – TRY 30,000
   		4. Determination – TRY 40,000
   		5. Determination – TRY 50,000
   		For 6th and Subsequent Determinations – TRY 100,000
   Maximum penalty amount for each determination for each type of document	TRY 170,000	TRY 1,000,000
   Maximum penalty amount to be imposed in a calendar year for each type of document	TRY 1,700,000	TRY 10,000,000
   Failure to keep the books required by the Ministry of Treasury and Finance to be kept and recorded on a daily basis, failure to record on a daily basis, failure to submit to the authorities and failure to comply with the obligation to keep and hang signs	TRY 1,700	TRY 1,700
   Failure to comply with the accounting standards, uniform chart of accounts, procedures and principles regarding financial statements and rules and standards regarding the production of computer programmes for accounting	TRY 40,000	TRY 65,000
   For each transaction for those who make transactions without using the tax number, which is obliged to be used in transactions to be made by public institutions and organizations and real and legal persons	TRY 2,000	TRY 2,000
   Printing house operators who do not fulfil their notification duties regarding document printing in whole or in part	TRY 6,600	TRY 6,600
   Maximum fine amount to be imposed in a calendar year	TRY 1,300,000	TRY 1,300,000
   Pursuant to Law No. 4358, the organizations which are obliged to use tax identification numbers and which do not fulfil the notifications regarding their transactions in the specified standards and time	TRY 8,700	TRY 8,700
   Pursuant to subparagraph (d) of Article 127 of the Tax Procedure Law, on behalf of the owner of the vehicle that does not stop despite the warning of the specially marked officer of the Ministry of Finance	TRY 6,600	TRY 15,000
   Lower Boundary	TRY 230,000	TRY 230,000
   Upper Limit	TRY 2,300,000	TRY 2,300,000

7. Amendment to Stamp Tax Unpaid Papers Processing: The minimum special irregularity fine for notaries processing papers for which stamp tax has not been paid has increased from TRY 14 to TRY 40.
8. Special Penalty for Non-Compliance in Electronic Commerce: The addition to Article 355 introduces a special irregularity penalty to enhance tax security in digital media usage, including the internet, for economic and commercial activities such as advertising, sales, leasing, and electronic commerce. This penalty aims to ensure accurate reporting by imposing fines on individuals or entities that fail to meet their information obligations, either by not notifying, or by providing incomplete or misleading information regarding these obligations.
9. Increased Penalty for Unauthorized Use of POS Devices: special irregularity penalty is imposed on those who use and make others use POS devices belonging to others, those who have money transfers related to the delivery of goods or performance of services to bank accounts belonging to others and those who make others use their accounts.
10. Changes in the Settlement Procedure: Taxpayers may now request reconciliation to reach an agreement on taxes and related penalties determined ex officio or administratively.
11. Overtime Working Fee for Revenue Administration Personnel: Personnel performing certain duties outside normal working hours are now eligible for overtime pay, with specific limits on payment.

4. Amendments to Value Added Tax Law No. 3065 ("VAT Law")

1. Partial Exemption for Services Provided at Ports and Airports: The amendment to Article 13 of the Value Added Tax (VAT) Law clarifies which vehicles are excluded from VAT exemptions for services at ports and airports. Specifically, vehicles used for activities such as sightseeing, entertainment, sports, amateur fishing, as well as private boats and yachts, are not considered sea transport vehicles. Consequently, VAT exemptions do not apply to services for these types of vehicles at ports and airports. Additionally, the amendment to Article 32 of the VAT Law changes the status of services provided at ports and airports for sea and air transport vehicles. These services are no longer fully exempt from VAT; instead, they are subject to partial exemption. This allows taxpayers to treat VAT incurred on such services as an expense or cost in their tax calculations. These changes aim to clarify VAT responsibilities and improve the accuracy of tax liability and deduction processes for certain vehicles and services.
2. Removal of Import-Domestic Delivery Discrepancy: Exemptions for importing goods used by national security institutions have been revised, and the competitive disparity between imports and domestic purchases has been eliminated.
3. VAT Inspection Without Statute of Limitations: An amendment to Article 17/4-c of the Value Added Tax (VAT) Law has been implemented, stipulating that the deductibility of VAT amounts for taxpayers who cease operations, split, or dissolve will now depend on the results of tax inspections, regardless of the statute of limitations defined in the Tax Procedure Law. This regulation became effective on August 2, 2024, the date the Law was published.
4. 5-Year VAT Deduction Period: If VAT amounts cannot be deducted within five years, they may be removed from records and treated as an expense.
5. Tax Inspection Report Requirement for VAT Refunds: the main procedure in VAT refunds is linked to the tax inspection report in order to ensure that VAT refunds are made correctly and to prevent unfair VAT refunds.
6. VAT Exemption for Earthquake-Related Aid: On February 6, 2023, VAT exemptions were established for certain construction projects within disaster zones affected by recent earthquakes. As of January 1, 2024, VAT will be exempt on deliveries and services related to constructing immovable properties such as residences, workplaces, schools, dormitories, hospitals, places of worship, cultural centers, and libraries. This exemption also applies to donations of these properties by foreign state institutions to public administrations with general budgets. The VAT exemption will be in effect until December 31, 2025.

5. Amendments to Law No. 3218 on Free Zones ("FZL")

Limitation of Exemption to Export Revenues: The exemption from corporate tax for earnings derived from production activities in free zones is now limited to export revenues, with domestic sales becoming taxable.

6. Amendments to Law No. 4760 on Special Consumption Tax ("SCT Law")

Removal of Minimum Tax Amount Limitation on Tobacco Products: The President of the Republic is now authorized to levy a lump sum tax up to the minimum lump sum tax amount on certain tobacco products.

7. Amendment to Law No. 5335 on the Revision of Certain Laws and Decree Laws

New Regulation for “Kizilay” Association and Its Employees: A special regulation has been introduced for the Turkish Kizilay Society and its personnel in relation to international aid responsibilities.

8. Amendments to Law No. 5510 on Social Insurance and General Health Insurance

1. Increase in Short-Term Insurance Premium Rates: The rate has been increased from 2% to 2.25% of the insured's premium-based earnings.
2. Increase in Minimum Retirement Pension: The minimum retirement pension has been raised from TRY 10,000 to TRY 12,500.
3. Removal of 5-Point Incentive: The second paragraph of provisional Article 95 of the Social Security and General Health Insurance Law No. 5510, which previously stated that the Treasury would cover the 5-point portion of the SGDP employer's share for retirees under the EYT program who return to work in the private sector, has been abolished. This change will take effect on August 1, 2024.

9. Amendments to Law No. 5520 on Corporate Tax Law ("CVL")

1. Tax Exemption for Distribution of Real Estate Gains: Funds and partnerships investing in immovable properties must distribute 50% of gains as dividends to shareholders.
2. Corporate Tax Deduction for E-Commerce Payments: Starting January 1, 2025, payments made by intermediary service providers and electronic commerce intermediary service providers to facilitate contracts or orders for goods or services in electronic commerce marketplaces will be eligible for tax deductions. This applies to payments made to service providers and electronic commerce service providers operating under Law No. 6563, who have a workplace or permanent representative in Turkey.
3. Corporate Tax on Build-Operate-Transfer Earnings: Corporation tax at 30% will be levied on earnings from projects within the public-private partnership model.
4. Domestic Minimum Corporate Tax Application: The amendment to Article 32/C of the Corporate Tax Law requires that corporate tax under Article 32 be at least 10% of a corporation's income before discounts and exemptions. Certain items, like participation gains, emission premium earnings, and various tax exemptions, are excluded from this calculation. Taxes not collected due to reduced rates or certain investment contributions will be deducted from the minimum tax. This regulation applies to temporary tax periods and does not affect new companies for their first three accounting periods. It takes effect from January 1, 2025, for regular and special accounting periods.

10. Local and Global Minimum Complementary Corporate Income Tax

Law No. 7524 introduces a new taxation system to ensure that large multinational enterprises with annual consolidated worldwide revenues exceeding EUR 750 million are subject to a minimum corporate tax rate of 15%. This system aligns with OECD Model Rules and Guidelines, aiming to standardize global tax practices and address discrepancies across different countries.

With the introduction of Additional Article 1 to the LPPD via Article 37 of Law No. 7524, enterprises within a multinational group with worldwide consolidated revenues exceeding the specified threshold will be subject to the new tax regulations. The definitions for consolidated revenue and consolidated financial statements are based on "Acceptable Financial Accounting Standards." Additionally, the article outlines how to determine the consolidated revenue threshold if the accounting period deviates from the standard 12 months. Article 38 of Law No. 7524, along with Additional Article 2 to the Corporate Tax Law, clarifies key terms used in the "Local and Global Minimum Complementary Corporate Tax" framework.

• Exemptions and Exceptions: Article 39 of Law No. 7524 outlines exemptions from the local and global minimum complementary corporate income tax. It specifies that certain entities are exempt from this tax, as detailed in the first paragraph. The second paragraph extends this exemption to other enterprises and their workplaces listed, even if they are not covered by the first paragraph. Additionally, the fifth paragraph exempts earnings derived from international maritime transport activities. The sixth paragraph defines what constitutes international maritime transport activities, while the seventh paragraph provides further details on other earnings related to this activity that are also exempt. Finally, the eighth paragraph stipulates that expenses or losses related to exempt earnings cannot be deducted from other taxable income.
• Calculation of Adjusted Covered Taxes: Article 40 of Law No. 7524 defines tax burden as the ratio of adjusted covered taxes to total earnings. Adjusted covered taxes include current period tax expenses, deferred tax adjustments, and changes in covered taxes shown in financial statements. If a country's corporate tax rate is below 15%, deferred tax assets must be recalculated at this minimum rate. Enterprises in countries without corporate tax can apply losses multiplied by the minimum rate in future periods. The article also covers tax burden calculations for enterprise groups and the allocation of taxes among affiliated entities.
• Tax Burden Calculation: Specific rules apply to determine the enterprise-based gain or loss for tax purposes. Article 41 of Law No. 7524 outlines the calculation of enterprise-based gains or losses for determining tax burden proportions. It requires adjustments to the financial accounting net gains or losses of enterprises. The article includes a tax security mechanism for local and global minimum complementary corporate tax. It limits interest expenses on intra-group financing to the amount recognized as income by the lending enterprise if the borrowing enterprise's tax burden is below the minimum rate and the lending enterprise's is above it. It specifies conditions under which income from receivables waivers will not be considered for calculating enterprise-based gains or losses and provides guidelines on how to handle qualified and non-qualified tax credits in tax burden calculations. Further provisions address adjustments for arm's length transactions between affiliates and the allocation of gains or losses between head offices and their affiliates. The article also provides guidelines for calculating the tax burden essential for determining the global minimum complementary corporate tax rate.
• Global Minimum Complementary Corporate Tax Rate: Additional Article 6 of Law No. 7524 establishes a minimum corporate tax rate of 15% and outlines the global minimum supplementary corporate tax rate, calculated as the difference between this rate and the tax burden rate in Additional Article 5. It includes provisions for calculating the tax base, determining tax for relevant countries and subsidiaries, and adjusting for past accounting periods. The "De Minimis" rule allows for a zero global minimum supplementary corporate tax for subsidiaries below certain revenue thresholds. It also includes guidelines for safe harbors and allows for zero tax for five accounting periods under specific conditions.
• Taxpayer Determination: Article 43 of Law No. 7524 and Additional Article 7 of the KVK determine the taxpayer for the global minimum complementary corporate tax based on income inclusion and under-taxed payments principles. Under income inclusion, the tax is the responsibility of the ultimate or intermediate parent entity in Turkey, or a partially owned parent in Turkey if the foreign parent entities do not apply the global minimum tax. The tax is calculated based on the inclusion rate, which excludes third-party interests and earnings from transparent entities, with reductions for taxes paid by intermediate or partly owned entities in other countries. Under the inadequately taxed payments principle, Turkish subsidiaries of multinational groups, not resident in Turkey and not subject to income inclusion, must pay tax based on under-taxed payments. This tax is the difference between the global minimum tax and the income inclusion tax. The under-taxed payments percentage is calculated by comparing Turkish subsidiaries' employees and assets to those in qualifying countries, excluding investment and transparent entities, and excluding countries where tax has not been accrued in the relevant period.
• Taxpayer Obligations: Taxpayers must declare and pay the global minimum tax, with the taxation period generally matching the accounting period.
• Local Minimum Complementary Corporate Tax: With the Additional Article 9 added to the LPPD with Article 45 of Law No. 7524, the taxpayer of the local minimum complementary corporate tax is determined as "subsidiaries and joint ventures of multinational enterprise groups that are resident in Turkey". The local minimum complementary corporate tax is generally based on the accounting period, but for those with special accounting periods, that period is used. The tax amount is calculated using the global minimum supplementary corporate income tax rate, excluding certain distributions or profit-sharing amounts. This tax must be declared and paid within twelve months after the accounting period ends. If a taxpayer in Turkey from the same multinational group pays the tax, other group members are relieved of their tax declaration and payment responsibilities. However, if the tax is unpaid, other group members are jointly liable for the amount. The Ministry of Treasury and Finance can regulate various aspects of the tax, including declaration and payment processes, documentation requirements, and collection procedures. It can also determine the place of levy as needed.
• Mergers, Demergers, and Share Transfers: Article 47 of Law No. 7524 outlines tax rules for multinational groups involved in mergers, splits, or restructurings. If merging groups or entities with total revenues over €750 million (or its Turkish Lira equivalent) in any of the four prior accounting periods combine, the resulting group must meet Article 1's requirements for the reporting period. Similarly, groups exceeding this revenue threshold post-division must comply with Article 1's provisions. The article covers classification for entities transitioning between groups, tax deferral for asset transfers during restructuring, and specifies how to handle global minimum complementary corporate tax in joint ventures and complex group structures
• Special Taxation Cases: Special rules apply to transparent enterprises and dividend-based taxation systems.
• Authorization: The Ministry of Treasury and Finance is authorized to determine the implementation procedures.

11. Amendment to Law No. 5597 Law on the Changes to the Law on Exit Fee for Travelling Abroad and Various Laws

Increase in Departure Fee Amount: The fee has been increased from TRY 50 to TRY 500 and will be adjusted annually based on the revaluation rate.

12. Amendments to Law No. 25777 the Law on Administrative Procedure

1. Redefinition of Legal Remedies: The remedies of appeal and cassation regulated by Articles 45 and 46 of the Code of Administrative Procedure have been reshaped in line with the decisions of the Constitutional Court. Prior to the amendment, the remedies of appeal and cassation were closed for tax cases, full judicial cases and cancellation cases filed against administrative actions that do not exceed a certain monetary limit. However, with the amendment of Law No. 7524;
   • Decisions rendered by administrative and tax courts on tax cases, full remedy cases and cancellation cases filed against administrative acts are final in cases where the subject matter does not exceed thirty-one thousand Turkish Liras, and no appeal may be filed against these decisions. However, an appeal may be filed against the decisions of the regional administrative court within seven days from the day following the date of notification.
   • In its decisions dated 13.10.2023 and 26.07.2023, the Constitutional Court cancelled these rules, stating that these rules do not clarify the date on which the monetary limits will be based. This situation had revealed that the rules did not meet the requirement of legality. With the new regulation, subparagraph (b) of Article 46 of the Law No. 2577, which was cancelled by the Constitutional Court, has been rearranged, and tax cases, full judicial cases and lawsuits filed about administrative actions with a subject matter exceeding nine hundred and twenty thousand Turkish Liras are covered. In addition, the cases exceeding two hundred and seventy thousand Turkish Liras but not exceeding nine hundred and twenty thousand Turkish Liras are defined as the cases in which a new decision is made upon the decision to lift the decision in the legal remedy of appeal.
2. Increase in Monetary Limits: The limits set forth in Additional Article 1 of the Law No. 2577 regarding the increase of the monetary limits shall be increased each year by the revaluation rate determined in accordance with the provisions of the repeated Article 298 of the Tax Procedure Law for the previous year. In addition, the monetary limits to be taken as basis in the cases where a hearing is mandatory and in the applications for appeal or appeal will be accepted as the limits on the date of the final decision. The increases in the monetary limits after the date of the final decision will not be applied in the cases that are re-examined upon the reversal decision of the regional administrative court or the Council of State.

13. Amendments to Law No. 2690 on the Exemptions of the Turkish Atomic Energy Authority and Making Certain Regulations

1. Revenues of the Turkish Energy, Nuclear, and Mining Research Organization: Revenues and budget management for the organization have been revised.
2. Wages and Incentives: New regulations have been introduced for wages and incentives, with the President authorized to determine upper limits.

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