Investment Obligation of Entrepreneurs Operating in Technology Development Zones

Additional Article 3 of Law No. 4691 is amended as follows

“As of 1/1/2022, three 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 the provisional Article 2 are TL 2.000.000 and above. The amount to be transferred under this paragraph is limited to TL 100,000,000 on an annual basis. This amount must be transferred as capital to venture capital investment funds established to invest in entrepreneurs residing in Turkey or to venture capital investment trusts or other entrepreneurs operating in incubation centers within the scope of this Law until the end of the year in which the temporary account is established. 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, 3% 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 amount of exempt earnings within the scope of the provisional article 2 of the Law No. 4691 must be 2.000.000 TL and above. In the declaration of the relevant year, if the amount subject to exemption is below 2.000.000 TL or if the activity subject to exemption results in loss, the investment obligation will not occur.

2- The amount of investment obligation is 3% 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 TL 100.000.000 on an annual basis.

3- This 3% is transferred to a temporary account in the liabilities and the investment must be made until the end of the year in which the temporary account is formed.

4- The investment must be made through the purchase of venture capital investment fund shares established to invest in entrepreneurs resident 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 earnings 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 2023 in different situations is calculated as follows.

2023 Accounting Period 1st Status 2nd Status 3rd Status
Income outside the technology development zone (A) 2,000,000 2,000,000 –3,000,000
(Loss)
Income within the technology development zone (B) 2,500,000 1,500,000 2,500,000
Commercial balance sheet profit (C=A+B) 4,500,000 3,500,000 -500,000
(Loss)
Technology development zone income exemption (D=B) 2,500,000 1,500,000 2,500,000
Corporate tax base (E=C-D) 2,000,000 2,000,000
Loss carried forward to the next year 3,000,000
Investment Obligation Amount (F=D*%3) 75,000 75,000

 

Accordingly, in Case 1 and Case 3, the investment obligation will arise as the exempt earnings amount within the scope of the provisional Article 2 of the Law No. 4691 is TRY 2.000.000 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 2.000.000.

Accounting Records

(A) Ltd. operating in the Technology Development Zone has declared a profit exemption amounting to TL 2.500.000 within the scope of the provisional article 2 of the Law No. 4691 in its annual corporate tax return for 2023. Accordingly, the journal entries related to the 3% (75.000=2.500.000*3%) investment obligation of the enterprise will be as follows.

Sincerely,

BİLGENER

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