Investment Obligation of Entrepreneurs Operating in Technology Development Zones
Additional Article 3 of the Law No. 4691 is amended as follows
“As of 1/1/2022, two percent of this amount shall be transferred to a temporary account in liabilities by income and corporate taxpayers whose exempted earnings over the annual declaration within the scope of provisional Article 2 amount to 1.000.000 Turkish lira and above. The amount to be transferred under this paragraph is limited to TL 20,000,000 on an annual basis. This amount shall be transferred to the temporary account until the end of the year in which the temporary account is established, provided that the shares of venture capital investment funds established to invest in entrepreneurs residing in Turkey are purchased or capitalized to venture capital investment trusts or other entrepreneurs operating in incubation centers within the scope of this Law. If the said amount is not transferred until the end of the relevant year, twenty percent of the amount of earnings exempted from the annual declaration under this Law cannot be subject to the income and corporate tax exemption utilized in the relevant year. Taxes not collected on time due to this amount shall be levied without applying tax loss penalty. The President of the Republic is authorized to reduce the amounts and rates in this paragraph together or separately up to zero and increase them up to five times. The procedures and principles regarding the implementation of this paragraph shall be determined by regulation.”
Accordingly, pursuant to the article of the Law, 2% of the exempted earnings over the annual income/corporate tax return is subject to investment obligation. Detailed explanations regarding this obligation are provided below.
1- In order for the investment obligation in question to occur, the exempt earnings amount within the scope of the provisional article 2 of the Law No. 4691 must be TRY 1.000.000 and above. In the relevant year declaration, if the amount subject to exemption is below 1.000.000 TL or if the activity subject to exemption results in loss, the investment obligation will not occur.
2- The amount of the investment obligation is 2% of the exempted earnings amount within the scope of the provisional article 2 of the Law No. 4691 over the annual income/corporate declaration. However, the amount obligation to be transferred is limited to 20.000.000 TL on an annual basis.
3- This 2% is transferred to a temporary account in liabilities and must be invested until the end of the year in which the temporary account is established.
4- The investment must be made through the purchase of venture capital investment fund shares established to invest in entrepreneurs residing in Turkey or as capital to entrepreneurs operating in venture capital investment trusts or incubation centers within the scope of Law No. 4691.
5- In the event that the said amount is not transferred until the end of the relevant year, 20% of the amount of income exempted on the annual declaration within the scope of Law No. 4691 cannot be subject to the income/corporate tax exemption utilized in the relevant year. Taxes not collected on time due to this amount are levied without applying tax loss penalty.
6- There is no obstacle for the taxpayers within the scope of this regulation to benefit from the advantages specified in Article 10/1-g of Law No. 5520 and provisional Article 4 of Law No. 4691 and Article 5/1-a of Law No. 5520, if they meet the conditions.
Example: The investment obligation of (A) Ltd. operating in the Technology Development Zone for the year 2022 in different situations is calculated as follows.
| 2022 Accounting Period | 1st Scenario | 2nd Scenario | 3rd Scenario |
| Profit outside the technology development zone (A) | 2,000,000 | 2,000,000 | -2,000,000 (Loss) |
| Profit within the technology development zone (B) | 1,500,000 | 500,000 | 1,500,000 |
| Commercial balance sheet profit (C=A+B) | 3,500,000 | 2,500,000 | -500,000 (Loss) |
| Technology development zone profit exemption (D=B) | 1,500,000 | 500,000 | 1,500,000 |
| Corporate tax base (E=C-D) | 2,000,000 | 2,000,000 | – |
| Loss carried forward to the next year | – | – | 2,000,000 |
| Investment obligation amount (F=D*2%) | 30,000 | – | 30,000 |
Accordingly, in Case 1 and Case 3, an investment obligation will arise as the exempt earnings amount within the scope of the provisional article 2 of the Law No. 4691 is TRY 1.000.000 and above. On the other hand, as in Case 3, the fact that the other activities of the organization resulted in loss will not eliminate this obligation.
In case 2, no investment obligation will arise since the exempt gain amount is below TL 1.000.000.
Accounting Records
(A) Ltd. operating in the Technology Development Zone has declared a profit exemption of 1.500.000 TL within the scope of the provisional article 2 of the Law No. 4691 in its annual corporate tax declaration for the year 2022. Accordingly, the journal entries related to the 2% (30.000=1.500.000*2%) investment obligation of the enterprise will be as follows.
Sincerely,
BİLGENER
