09.11.2022/70
Law No. 7420, Containing Important Changes to Tax Laws, Has Been Published
Law No. 7420, titled “Law on Amendments to the Income Tax Law and Some Other Laws and Decrees with the Force of Law,” was published in the Official Gazette No. 32008 on 09.11.2022, and includes regulations in various areas, including tax laws.
The tax-related amendments made by the Law are summarized below:
1. The Exemption Limit for Electricity Generation Based on Renewable Energy Sources in Residential Areas Within the Scope of Unlicensed Activities Has Been Raised to 50kW.
In Article 9, Paragraph 1, Subparagraph 9 of the Income Tax Law No. 193, a tax exemption was granted for electricity generated from renewable energy sources in residential areas, where the installed power does not exceed 25 kW (including 25 kW) in single production facilities established on the roofs or facades of homes that individuals own or rent, and the excess electricity is sold to the last source supply company. The exemption limit has been increased from 25 kW to 50 kW.
This regulation entered into force on 9.11.2022.
2. The Requirement to Make Payments to Providers of Meal Services for Meal Allowance Exemption When No Meals Are Provided at the Workplace Has Been Removed.
Article 23/1-8 of the Income Tax Law No. 193 previously stipulated that when no meals are provided at the workplace, meal payments for employees up to 51.00 TL per day for each working day were exempt from taxes, provided the payment was made to meal service providers. The requirement to make payments to meal service providers has now been removed. Therefore, direct meal payments to employees up to the specified limit will be exempt from income tax.
This regulation will enter into force on 1.12.2022.
3. Wage Payments for Employees Working in Construction, Repair, Assembly, and Technical Services Abroad Have Been Included in the Exemption Scope.
A new paragraph (19) has been added to Article 23 of the Income Tax Law, which regulates exemptions for wages.
According to this amendment, wages paid to employees working abroad in construction, repair, assembly, and technical services, as long as they are paid from the employer’s foreign income, are now exempt from income tax.
This regulation will enter into force on 1.12.2022.
4. Monthly Payments of Up to 1,000 TL for Electricity, Natural Gas, and Other Heating Expenses Paid to Employees Have Been Exempted Until 30.06.2023.
Temporary Article 1 of Law No. 7420 stipulates that payments made by employers to employees for electricity, natural gas, and other heating expenses will be exempt from income tax until 30.06.2023 (inclusive), provided that the payments do not exceed 1,000 Turkish Liras.
Additionally, these payments will not be included in the calculation of social security premiums for the employees.
This regulation entered into force on 9.11.2022.
5. The Individual Investment Exemption Application Period and the Maximum Annual Amount Eligible for the Exemption Have Been Updated.
According to Temporary Article 82 of the Income Tax Law No. 193, individual investors (taxpayers who are full taxpayers) can deduct 75% of the value of shares they acquire in fully taxable joint-stock companies from their taxable income if they hold these shares for at least two full years. The application period for this exemption was extended from 31.12.2022 to 3.12.2027 with Law No. 7420. Additionally, the annual maximum amount that can be exempted has been increased from 1,000,000 TL to 2,500,000 TL.
This regulation entered into force on the date of publication for income or earnings earned as of 1.1.2023.
6. A Provision on Capital Reduction Has Been Added to the Corporate Tax Law.
With Law No. 7420, a new Article 32/B titled “Taxation of Capital Reduction” was added to the Corporate Tax Law No. 5520, providing regulation on the tax consequences of capital reduction by companies.
Currently, there is no tax obligation on capital reductions made from paid-in and cash capital. However, reductions from past profits or additions to capital are subject to withholding tax on dividends. Capital reductions from revaluation increases and funds resulting from exemptions are subject to both withholding tax and corporate tax.
The new article regulates how reductions in capital are handled, including how capital reductions made from various sources are taxed.
This regulation entered into force on 9.11.2022.
7. The Exemption Period for Currency Protected Deposits Has Been Extended Until 31.12.2023.
With an amendment to Article 14 of the Corporate Tax Law No. 5520, the exemption for foreign currencies and gold account balances converted to Turkish Lira deposits and participation accounts has been extended until 31.12.2023.
Additionally, the President is authorized to apply this exemption for foreign currencies in company balance sheets as of the end of each temporary tax or annual accounting period, either separately or collectively, until 31.12.2023.
This regulation entered into force on 9.11.2022, effective from 26.05.2022.
You can access the relevant Law here.
Best regards,
BİLGENER
