02.08.2024/34
Law No. 7524 Amendments to the Corporate Tax Law
Law No. 7524 on Amendments to Tax Laws, Certain Laws and Decree Law No. 375 was published in the Official Gazette dated 02.08.2024 and numbered 32620.
The regulations regarding the Corporate Tax Law introduced by the said Law are summarized below:
1. Exemption from Corporate Tax on the Earnings of Investment Funds and Partnerships is conditional upon the distribution of at least 50% of their earnings from immovable properties as dividends.
According to Article 5/1-d of the Corporate Tax Law, the earnings of investment funds and trusts established in Turkey are exempt from corporate tax.
With the regulation introduced by Law No. 7524, benefiting from this exemption has been made conditional upon at least 50% of the income derived from real estates owned by funds and partnerships (excluding pension investment funds) being distributed as dividends by the end of the second month following the month in which the corporate tax return for the fiscal year is due. If this income is not distributed up to the specified rate, the exemption cannot be fully utilized.
For the application of the exemption, it is necessary and sufficient to distribute only the earnings from immovable properties, but not the other earnings.
On the other hand, Article 5/1-a of the Law regulates the exemption for participation income. Accordingly, corporate tax exemption is not applied to the earnings derived from funds and partnerships other than venture capital. With the regulation introduced, corporate taxpayers who receive dividends from funds and partnerships that have lost the right to benefit from the exemption by not fulfilling the distribution condition mentioned above will also be able to benefit from the exemption for participation gains.
Effective 02.08.2024 to be applied to the earnings obtained as of 1.1.2025
2. Local Minimum Corporate Income Tax Enacted to Apply to Earnings for the 2025 Accounting Period.
Article 32/C was added to the Corporate Tax Law by Law No. 7524.
This article regulates that corporate tax cannot be less than 10% of the profit before deducting deductions and exemptions.
Accordingly, 10% of the amount calculated by adding legally unacceptable expenses to the commercial balance sheet profit at the end of the accounting period will be calculated as minimum corporate tax.
However, the following deductions and exemptions will be allowed to be deducted while calculating the minimum corporate tax. These deductions and exemptions are listed below:
- Exemption for participation gains,
- Emission premium,
- Risturn exception,
- Exemption applied to gains from sale leaseback transactions with financial leasing companies and asset leasing companies,
- Exempt earnings within the scope of the Law on the Amendment of the Turkish International Ship Registry Law and the Decree Law No. 491 dated 16/12/1999 and numbered 4490,
- Law No. 3218 on Free Zones exempted from tax,
- Venture capital fund deduction,
- Protected workplace discount,
- R&D and design discounts,
- Exemption of earnings provided in Technology Development Zones
Minimum 10% corporate tax calculated after the application of the exemptions and deductions mentioned above;
- A two-point discount applied to institutions whose shares are offered to the public by at least 20% to be traded for the first time on the Borsa Istanbul Equity Market,
- The five-point discount amount applied exclusively to the export earnings of exporting corporations,
- With the tax not collected due to the one point discount applied exclusively to the earnings from the production activities of the institutions holding the industrial registry certificate and actually engaged in production activities
- Limited to the investment contribution amounts within the scope of the incentive certificates received from the Ministry of Industry and Technology before the effective date of the article, the corporate tax not paid by the taxpayers due to the reduced corporate tax application based on the provision of Article 32/A of the Corporate Tax Law on their own declarations can be deducted.
Thus, it is aimed to preserve the advantages provided to publicly listed companies, manufacturers, exporters and companies with investment incentive certificates.
Minimum corporate tax is also applied for temporary tax periods.
Minimum corporate tax will not be applied to companies starting their activities for the first time for three accounting periods starting from the accounting period in which they start their activities.
Effective: 02.08.2024 to be applied to the earnings obtained in 2025 and the following taxation periods, and to the earnings obtained in the special accounting period starting in the calendar year 2025 and the following taxation periods of the institutions subject to the special accounting period.
3. The tax to be collected from the institutions operating in the projects carried out within the framework of Build Operate Transfer and Public Private Partnership was increased to 30%.
With the amendment made to Article 32 of the Corporate Tax Law by Law No. 7424, the corporate tax rate has been increased to 30% for companies operating as parties to contracts for projects carried out under the build-operate-transfer model pursuant to Law No. 3996 on the Implementation of Certain Investments and Services through the Build-Operate-Transfer Model, and for projects conducted under the public-private partnership model in accordance with the provisions of Law No. 6428 on the Construction, Renovation, and Procurement of Services through the Public-Private Partnership Model by the Ministry of Health, and Amending Certain Laws and Decrees.
Effective: 02.08.2024 to be applied to the earnings obtained in 2025 and the following taxation periods, and to the earnings obtained in the special accounting period starting in the calendar year 2025 and the following taxation periods of the institutions subject to the special accounting period.
4. Payments to be made by Electronic Commerce Intermediary Service Providers who are Corporate Taxpayers were included in the scope of withholding tax. In addition, the President was authorized to determine the sectors and fields of activity to be subject to withholding tax.
Law No. 6563 on the Regulation of Electronic Commerce
- Intermediary service provider: Natural and legal persons who provide the electronic commerce environment for the economic and commercial activities of others,
- Electronic commerce intermediary service provider: It is defined as an intermediary service provider that allows the electronic commerce service providers to make a contract or place an order for the supply of goods or services in the electronic commerce marketplace.
Law No. 7524 amended Articles 15 and 30 of the Corporate Tax Law, introducing an obligation for service providers to withhold withholding tax on their payments.
In addition, a provision was added to the article to allow withholding tax on payments made for the purchase of goods and services related to the sectors or fields of activity determined by the President.
Effective: 01.01.2025
5. Global Minimum Corporate Tax Enacted.
Law No. 7524 introduces a minimum corporate tax rate for multinational enterprises whose annual consolidated worldwide revenue exceeds EUR 750 million equivalent of Turkish Lira, taking into account the OECD Model Rules.
Accordingly, such companies that calculate taxes below this rate will be subject to an additional supplementary tax.
If this tax is not collected in the country where the ultimate parent company is located, it will be collected by the third countries where the group operates.
Information on the details of the regulation will be provided in our future circulars.
Effective: 02.08.2024 to be applied to the earnings obtained in 2024 and the following taxation periods, and to the earnings obtained in the special accounting period starting in the calendar year 2024 and the following taxation periods of the institutions subject to the special accounting period.
You can access the relevant Law here.
Sincerely,
BİLGENER
