16.05.2022/32

23.11.2024

Regarding the Corporate Tax General Communiqué Serial No. 20 on the 1 Point Reduction of the Corporate Tax Rate for Corporations Engaged in Export/Manufacturing Activities

Summary: With the paragraphs added to Article 32 of the Corporate Tax Law with the Law No. 7351, it has been stipulated that the corporate tax rate will be applied with a 1 point discount to the earnings obtained exclusively from exports of exporting corporations, and to the earnings obtained exclusively from production activities of corporations that have an industrial registry certificate and are actually engaged in production activities. The Corporate Tax General Communiqué Serial No. 20 on the subject entered into force after being published in the Official Gazette dated 14/05/2022 and numbered 31835.

Summarized information on the important issues in the Communiqué is provided below.

It will be sufficient for exporting companies to be engaged in export activities in order for the corporate tax rate to be reduced by 1 percentage point, limited to their earnings from exports.
In order for the corporate tax rate to be applied with a 1 percentage point discount limited to the earnings obtained from the production activities of the institutions engaged in production activities, these institutions must have an industrial registry certificate and actually engage in production activities.
Exporting corporations will be able to apply the corporate tax rate applicable in the relevant period with a 1 percentage point discount, exclusively for their earnings from both goods and services exports.
In this context, export of services includes services provided for a customer abroad and utilized abroad. In addition, earnings derived from roaming services provided in Turkey for customers abroad within the framework of international roaming agreements, provided that they are reciprocal, will also be accepted among the earnings to which the rate will be applied with a 1 percentage point discount.
In addition, sales made from Turkey to free zones and duty-free stores for sale in these stores will also be considered as exports and 1 point discount will be applied to the earnings derived from this activity.
In case of earning from other activities in addition to export activities, the tax base arising from exports and to which 1 point deduction will be applied will be determined by proportioning the earnings from exports to the commercial balance sheet profit (Tax Base = Export Earnings / Commercial Balance Sheet Profit).
If the taxpayers holding the industrial registry certificate have earnings from other activities in addition to their production activities, the base obtained from the production activity and to which 1 point discount will be applied will be determined by proportioning the earnings from production to the commercial balance sheet profit (Base = Manufacturing Earnings / Commercial Balance Sheet Profit).
The corporate tax rate will be reduced by 1 percentage point for the earnings obtained as a result of the production activities carried out exclusively in software, informatics and similar issues within the scope of this certificate.
On the other hand, the amount of earnings to which 1 point discount will be applied cannot exceed both the earnings from export/manufacturing and the net corporate income for the relevant period.
Therefore, if the taxpayers’ earnings from export/manufacturing activities are more than the commercial balance sheet profit, 1 point discount can be applied to the entire earnings from export/manufacturing activities, provided that it does not exceed the pure corporate income.
In the determination of the earnings from production of taxpayers engaged in production activities in more than one subject, the earnings from production activities and losses arising from production, if any, will be evaluated as a whole.
In accordance with the eighth paragraph of Article 32 of this Law, the corporate tax rate of the taxpayers holding the industrial registry certificate and actually engaged in production activities will be applied with a 1 point discount in accordance with the eighth paragraph of Article 32 of this Law as “earnings from production activities”, without making any distinction according to whether the products produced are sold domestically or abroad. An additional 1 point discount will not be applied to the portion of this income corresponding to exports, which will lead to a second discount.
In the event that the earnings from export or production activities are also subject to deduction or exemption, an additional 1-point deduction will not be applied for these earnings.
In the calculation of the base to which 1 point discount will be applied, the production or export earnings that are subject to discount/exemption and excluded from tax will also be excluded from the commercial balance sheet profit. Tax Base=(Earnings from Export/Manufacturing Activity)/(Commercial Balance Sheet Profit-Deduction or Exemption Amount)
In the event that the taxpayers holding the Investment Incentive Certificate and holding the industrial registry certificate, which will benefit from discounted corporate tax within the scope of Article 32/A of the Law, have earned from production activities or export activities in the same period, a 1-point discount will be applied to the tax base, and then the tax deduction rate within the scope of Article 32/A of the Law will be applied to this discounted rate.
When determining the income, if the activities accepted within the scope of the discount and the activities not covered by this scope are carried out together, it is essential to determine the revenue, expense and cost elements related to the income to which 1 point discount will be applied separately. In cases where it is not possible to determine the expense and cost elements by monitoring them in separate accounts, joint overhead expenses can be distributed by determining an appropriate distribution key between the activities within the scope of the discount and the activities not covered by the discount.
Depreciation related to installations, machinery and transportation vehicles used jointly in the activities within the scope of the deduction and the activities not considered within this scope should be distributed according to the number of days they are used in each business. Depreciation related to fixed assets that cannot be determined for how long they are used in which business will be subject to distribution together with common general expenses.
While the foreign exchange difference, interest and similar income corresponding to the receivables arising within the scope of export/manufacturing activities are evaluated within the scope of corporate income to which 1 point discount will be applied, the foreign exchange difference, interest and similar income arising after the collection of receivables within the scope of these activities will not benefit from the said discount.