“Law No. 7338 Amending Tax Procedure and Other Laws”
Summary: Law No. 7338 on Amendments to the Tax Procedural Law and Certain Laws was published in the Official Gazette dated 26.10.2021 and numbered 31639. The important issues regarding the said omnibus law are summarized below and the full text of the law is available here.
Income tax exemption has been introduced for earnings determined in simple procedure.
According to Article 46 of the Income Tax Law, these earnings of taxpayers whose commercial income is determined in simple method are exempted from income tax with the Repeated Article 20/A added to the Income Tax Law. In addition, no income tax return will be filed for these exempted earnings and these earnings will not be included in the declaration if a declaration is filed for other income. The said exemption entered into force on the date of its publication to be applied to the earnings obtained as of 01.01.2021.
Social content producers and developers of apps for mobile devices will only be taxed through withholding tax.
With the Repeated Article 20/B added to the Income Tax Law with Article 2 of the Law, earnings (such as advertising revenues, sponsorship and sales revenues, donations, gifts, tips, paid subscription revenues) of social content producers who share content such as text, images, audio, video, etc. through social network providers on the internet, and earnings of those who develop applications for mobile devices such as smartphones or tablets through electronic application sharing and sales platforms are exempt from income tax.In order to benefit from this exemption, an account must be opened in banks established in Turkey and all revenues related to these activities must be collected exclusively through this account. Banks will withhold 15% income tax on the amount of revenue transferred to these accounts as of the date of transfer.
Those whose earnings within this scope exceed the amount in the 4th bracket of the income tax tariff (TL 650,000 in 2021) and those who do not collect all their income through an account in banks established in Turkey cannot benefit from this exemption. The said exemption entered into force on the date of its publication to be applied to the earnings obtained as of 01.01.2022.
The fourth period provisional tax return has been abolished.
With the amendment made in the Repeated Article 120 of the Income Tax Law; three, six and nine-month periods within the current taxation period are accepted as advance tax periods on a quarterly basis and the last three-month period of the accounting period is excluded from the scope of advance tax period.
This regulation entered into force on the date of publication to be applied starting from the declarations to be submitted for the year 2022.
The conditions for tax-compliant taxpayers to benefit from tax deductions have been eased.
According to the Repeated Article 121 of the Income Tax Law, one of the conditions for taxpayers who wish to benefit from the tax deduction is that there is no tax assessment made in the year of the declaration for which the deduction is to be calculated and in the last two years prior to this year in terms of the tax types subject to the declaration.
Pursuant to the amendment made to Article 121 of the Income Tax Law, the condition of benefiting from the deduction, which is the condition of not having been assessed in the year of the declaration for which the deduction is to be calculated and in the previous two years, has been linked to the finalization of the assessments made. However, the conditions to benefit from the discount will not be deemed to be violated if the finalized assessment within the aforementioned period is less than 1% of the upper limit of the discount amount mentioned above and redetermined every year.
This regulation entered into force on the date of its publication to be applied to annual income and corporate tax returns to be submitted as of 01.01.2022.
In the deduction application regarding the cash capital increase, more deductions have been introduced for capital coming from abroad.
Paragraph (ı) of the first paragraph of Article 10 titled “Other Deductions” of the Corporate Tax Law stipulates the provisions regarding the deduction application for cash capital increases. Accordingly, 50% of the amount calculated by taking into account the interest rate announced by the Central Bank of the Republic of Turkey for the year in which the discount is utilized can be deducted from corporate income. However, institutions operating in the finance, banking and insurance sectors and state economic enterprises cannot benefit from this deduction.
According to the amendment made in Article 59 of this Law and in subparagraph (ı) of the first paragraph of Article 10 of the Corporate Tax Law, the 50% rate will be applied as 75% for capital shares from abroad. The said regulation has entered into force as of the publication date of the law and will be valid for capital increases realized as of this date.
The possibility of using 10% of the investment contribution amount related to the discounted corporate tax application by canceling other tax debts, excluding SCT and VAT, has been introduced.
Under the discounted corporate income tax scheme set out in Article 32/A of the Corporate Tax Law, taxpayers can use the investment contribution amounts they are entitled to due to the investments they have made within the scope of the investment incentive certificate by applying a discounted corporate tax rate to their income from both the investment and other activities during the investment period.
With Article 60 of the Law, 10% of the amount determined by applying the investment contribution rate to the investment expenditure on the basis of the investment incentive certificate, can be utilized by canceling other accrued tax debts, excluding SCT and VAT. For this purpose, a request must be made until the end of the 2nd month following the month in which the corporate tax return should be submitted.
The amount that can be requested for cancellation cannot be more than half of the amount found after deducting the investment contribution amount used through discounted corporate tax from the earned investment contribution amount. It is accepted that the investment contribution amount corresponding to one times this amount used by the cancellation of other tax debts is waived. Corporate tax at a reduced rate cannot be applied to the tax base due to the waived investment contribution amounts. The total amount that can be waived from other tax debts cannot be more than 10% of the amount calculated by applying the investment contribution rate to the investment expenditures actually made within the scope of the relevant investment incentive certificate.
The said regulation entered into force as of the date of publication of the law to be applied to investment expenditures to be made as of 01.01.2022.
In the event that the report regarding the situations requiring a Certified Public Accountant Certification Report is not submitted on time, an additional period of 60 days has been introduced.
In order to benefit from the exemptions, exceptions, loss deductions and similar provisions in the tax laws, in some cases, it is obligatory to issue a certification report by certified public accountants.
With the amendment made in Article 227 of the Tax Procedure Law with Article 22 of the Law, it has been stipulated that in exemption, exemption, loss deduction and similar matters, the exemption, exemption, loss deduction and similar matters, which are subject to the condition of submitting a certification report issued by certified public accountants, in case the certification report is not submitted within the time period, an additional period of 60 days shall be given to the taxpayer with the condition of being notified to the taxpayer and if it is submitted within this period, the certification report shall be deemed to have been submitted on time, and if the certification report is not submitted within this period, the right subject to the certification shall not be benefited. This regulation has entered into force as of the publication date of the Law.
An amendment has been made to Article 234 of the Tax Procedure Law regarding the situations where the expense voucher must be issued and the documents that replace the expense voucher.
With Article 23 of the Law, Article 234 of the Tax Procedure Law was amended and the scope of use of the expense voucher was expanded by replacing the expression “tax-exempt tradesmen” with the expression “… to those who are not obliged to issue the documents under this Law…”, whereas previously it could only be issued for the works performed by tax-exempt tradesmen or for the commodities purchased from them.
It is stipulated that the issuance period of the expense voucher is within a maximum of 7 days from the date of delivery of the goods or the service.
In addition, in the cases stipulated in the article, the documents issued by banks, payment institutions and PTT (receipt, receipt, etc.) and the documents issued by public institutions and organizations that are not obliged to issue documents in the application of this Law within the scope of other relevant legislation they are subject to are accepted instead of expense vouchers and in these cases, taxpayers do not need to issue expense vouchers separately.
This regulation will enter into force as of the beginning of the month following the publication date of the Law (01.11.2021).
With the regulation made in Article 262 of the Tax Procedure Law, the compulsory and non-compulsory elements to be included in the cost price are detailed.
With Article 27 of the Law, Article 262 of the Tax Procedure Law has been amended and the compulsory and non-compulsory elements to be included in the cost price have been comprehensively listed and added to the law.
Accordingly, the following expenses shall also be included in the cost price.
a) Customs duties, customs commissions, loading, unloading, transportation and assembly expenses directly related to the acquisition or increase in the value of the economic asset,
b) Directly related to the acquisition or increase in the value of the economic asset; duties and fees, notary, title deed, court, valuation, consultancy, commission and announcement expenses,
c) Interest expenses related to the loans used in the financing of the economic asset and the related exchange differences; in the case of commodities, until the date the commodity enters the stocks, in other economic assets, until the end of the accounting period in which the economic asset is taken into inventory, and the expenses related to the loans in question (Taxpayers are free to import other parts of interest expenses and exchange differences into the cost price or to show them among general expenses),
ç) storage and insurance expenses until the date the economic asset is taken into stock or inventory,
d) Expenses arising from the purchase and demolition of an existing building in real estate and the leveling of the land.
Grants received until the end of the accounting period in which they are taken into inventory, provided that they are directly related to the real estate, shall be deducted from the cost price.
Taxpayers are free to import special consumption tax, non-deductible value added tax, non-deductible value added tax, banking and insurance transactions tax and resource utilization support fund, which are related to the acquisition or increase in value of the economic asset (excluding commodities), into the cost price or to show them among general expenses.
This regulation has entered into force as of the date of publication of the law.
With the amendment made to Article 238 of the Tax Procedure Law, revaluation is allowed in periods when the conditions for inflation adjustment are not met.
With Article 31 of the Law, the title of Repeated Article 298 of the Tax Procedure Law has been amended as “Inflation adjustment, revaluation rate and revaluation” and subparagraph (Ç) regarding revaluation has been added to the article.
Accordingly, income or corporate taxpayers who are fully liable and keep their books on the balance sheet (except for those who make inflation adjustments and those who are allowed to keep their records in a currency other than Turkish currency) as of the end of the accounting periods in which the conditions for making inflation adjustments are not met, The depreciable economic assets included in their balance sheets (except for those subject to sale-leaseback transactions or lease certificate issuance as long as they maintain these qualifications) and the depreciation allocated over them and shown in the liabilities of their balance sheets can be revalued in line with certain conditions.
Foreign exchange differences and loan interest (including depreciation) added to the cost of economic assets (except for those related to the accounting period in which the economic assets are capitalized) are not included in the scope of revaluation
In the revaluation, the values of the economic assets and their depreciation in the legal book records as of the end of the accounting period in which the revaluation will be made will be taken into account.
The post-revaluation values of the economic assets and related depreciation shall be found by multiplying the revaluation rate of the year in which the revaluation will be made. The revaluation rate to be taken as basis in the revaluation to be made as of the provisional tax periods, starting from November of the previous year; 3, 6 and 9th months are determined by taking the average price increase rate occurring in the Domestic Producer Price Index of the Turkish Statistical Institute according to the previous 3, 6 and 9-month periods as basis.
The increase in the value of economic assets as a result of revaluation shall be shown in a special fund account in the liabilities of the balance sheet in such a way that the increase in value corresponding to each of the economic assets subject to revaluation shall be shown in detail.
Those who subject their economic assets to revaluation within this scope will continue to depreciate these assets over the values found after revaluation.
The part of the value increase amount shown in a special fund account in the liabilities, which is transferred to another account or withdrawn from the enterprise in any way other than being added to the capital, will be subject to income or corporate tax in this period without being associated with the earnings of the period in which this transaction is made. Value increases added to the capital will be accepted as assets added to the enterprise by the shareholders. These transactions will not be considered as profit distribution.
In the event that the economic assets subject to revaluation are disposed of (such as sale, transfer, withdrawal from business, liquidation), the value increases shown in a special fund account in the liabilities corresponding to them will be treated exactly like depreciation.
Due to the fact that revaluation is not performed in any year or the revaluation rate is applied low, revaluation of prior periods will not be performed in subsequent years.
No revaluation is made in the accounting period in which the economic assets entered into the assets in the accounting period in which they entered into the assets.
In the event that the conditions for inflation adjustment occur before the disposal of the revalued economic assets, inflation adjustment will be made. Accordingly, the revaluation value increase fund within the scope of this article shall be deducted from the shareholders’ equity in the restatement of shareholders’ equity items. Capital increases arising from the addition of the revaluation value increase fund to the capital will not be considered as capital increase and will not be subject to inflation adjustment.
Revaluation cannot be made in the periods when the conditions for inflation adjustment are met. Starting from the first accounting period in which the conditions related to inflation adjustment do not occur, revaluation practice may continue in accordance with the provisions of this paragraph. In this case, the values in the last balance sheet subjected to inflation adjustment shall be taken into consideration as the basis for revaluation of economic assets. In the determination of this value, if depreciation has not been made for economic assets in any year, it shall be assumed that these depreciations have been fully allocated.
In the event that the conditions for inflation adjustment occur again after the revaluation period, the economic assets subject to revaluation and the depreciation related to them are subject to inflation adjustment by taking into account their adjusted final values.
If revaluation is not made in any year, revaluation may be made for subsequent accounting periods within the scope of this paragraph.
This regulation entered into force on 01.01.2022.
However, with the Provisional Article 32 added to the Tax Procedure Law with Article 52 of the Law, taxpayers that can make revaluation can revalue their immovable properties and other economic assets subject to depreciation (except for immovable properties and economic assets subject to sale-leaseback transactions or lease certificate issuance as long as they maintain these qualifications) registered in their balance sheets as of the end of the accounting period preceding the accounting period in which they will revalue for the first time. Within the scope of this article, a 2% tax is required to be calculated on the amount of value increase shown in a special fund account in the liabilities related to the revaluation transaction made within the scope of this article.
With the amendment made to Article 320 of the Tax Procedure Law regarding depreciation application, the possibility to allocate depreciation on a daily basis and to extend the useful life periods has been introduced.
With the amendment made in Article 320 of the Tax Procedure Law, taxpayers may allocate depreciation on a daily basis for the economic assets to be newly recorded in the assets of the enterprise, starting from the date they are ready for use and for each accounting period for the period that the asset remains in the assets. In order to calculate the period in days, the useful life periods determined and announced by the Ministry of Treasury and Finance will be multiplied by three hundred and sixty-five.
However, taxpayers are allowed to freely determine the depreciation period, provided that the depreciation period is not shorter than the useful lives determined and announced by the Ministry of Treasury and Finance for economic assets, provided that it is the same rate for each year. However, the period determined shall not exceed twice the period determined by the Ministry of Treasury and Finance and fifty years. This preference is used as of the end of the temporary tax period in which the economic asset is taken into inventory. The depreciation period and rate determined in this way cannot be changed in subsequent periods.
With the amendment made to Article 323 of the Tax Procedure Law regarding the application of Doubtful Receivables, the amount for small receivables that are not worthy of litigation and enforcement proceedings has been determined.
With the regulation made in Article 323 of the Tax Procedure Law, the phrase “small receivables that are not worthy of litigation and enforcement proceedings” among the conditions required for a receivable to be considered as doubtful receivable has been changed as “receivables not exceeding 3.000,00 Turkish Liras”.
Accordingly, receivables not exceeding 3.000,00 Turkish Liras that have not been paid by the debtor despite the protest made or requested more than once in writing may be considered as doubtful receivables.
This regulation has entered into force as of the date of publication of the law.
With the amendment made to Article 328 of the Tax Procedure Law regarding the application of the Renewal Fund, the beginning of the 3-year waiting period in the fund account has been clarified.
The provisions regarding the renewal fund application in paragraphs 4 and 5 of Article 328 of the Tax Procedure Law titled “Sale of depreciable goods” have been amended.
It has been clarified that the 3 years in the regulation regarding the renewal fund application, which can be kept in a temporary account in liabilities for a maximum period of three years, will be until the end of the third calendar year following the date of the sale.
In the old version of the article of the Law, in order to apply the renewal fund, the renewal of the sold economic asset must be compulsory or the decision must be made and attempted by the managers of the enterprise in this regard. With the regulation made, it has been stipulated that the renewal fund application can be utilized not only for the renewal of the sold economic asset, but also for the acquisition of a similar asset.
It is also stated that the profit kept in a temporary account in the liabilities will be offset against the depreciation of one or more assets acquired, including those acquired through financial leasing, in accordance with the provisions of this Law, and it is emphasized that there is no limit to the number of newly acquired assets. On the other hand, it has been clarified that if the profit kept in the temporary account is more than the depreciable amount of the new assets acquired instead of the asset sold, this excess will be added to the profit and loss account at the end of the third calendar year following the year of sale.
Depreciation application has been extended until 31.12.2023 by taking into account half of the useful life period for the purchase of new machinery and equipment.
Pursuant to the provisional Article 30 added to the Tax Procedure Law by Article 16 of the Law No. 7103, the depreciation rates and periods to be applied for new machinery and equipment to be used exclusively in the manufacturing industry or in R&D, innovation and design activities by taxpayers holding an industrial registry certificate and for machinery and equipment acquired within the scope of investment incentive certificate until the same date can be calculated by the Ministry of Finance by taking into account half of the useful life periods.10.2021 until 31.12.2023.
Other regulations introduced by Law No. 7338 are as follows
- With the amendment made in subparagraph (2) of the first paragraph of Article 371 of the Tax Procedure Law, it is now possible to submit a regretful declaration for tax types other than the subject of the tax inspection after the tax inspection has been initiated or the tax assessment has been referred.
- With the amendment made in Article 339 of the Tax Procedure Law titled Repetition, it has been stipulated that the amount of the increase regarding the penalty applied by increasing as a result of repetition cannot be more than the finalized penalty (in case of more than one finalized penalty, the highest of them in terms of amount). The time calculation regarding repetition will start from the date of finalization of the first penalty.
- With the amendments made to Additional Article 1 and Additional Article 11 of the Tax Procedure Law, irregularity and special irregularity penalties exceeding TRY 5,000 are included in the scope of reconciliation and pre-assessment reconciliation. For irregularity and special irregularity penalties not exceeding 5.000,00 TL, the discount rate of 50% in Article 376 of the Law will be applied as 75%.
- “Purchase Price” has been added to the valuation measures listed in Article 261 of the Tax Procedure Law. Purchase price is the purchase price of an economic asset. Other expenses related to the acquisition of an economic asset are not included in the purchase price.
- The application of the mutual agreement procedure within the scope of Double Taxation Avoidance Agreements has also been added to the Tax Procedure Law.
- With Article 226/A added to the Tax Procedure Law, obtaining a certificate for the books kept in electronic environment and approving the other books kept in electronic environment within the procedures, principles and periods determined by the Ministry of Treasury and Finance will be accepted as the approval application of the Tax Procedure Law. In the event that the certificate and approval are not obtained or made within the specified procedures, principles and periods, the books will be deemed not to have been certified.
- It has been added to the relevant article that the penalties to be imposed for the acts of non-compliance with the recording order in the electronic recording and book applications, which are implemented within the scope of the authorization in the Repeated Article 242 of the Tax Procedure Law, are of the same nature and a first degree irregularity penalty is imposed in response to these acts.
- Within the scope of Article 31/B of the Capital Markets Law, stamp tax exemption has been introduced for the receipts and papers issued in relation to the collaterals subject to the issuance of capital market instruments, including those to which the collateral manager is a party.
- The exemption from stamp duty, fees and KKDF applied to asset management companies for the calendar year of their establishment and for five years thereafter has been made permanent, and the BITT exemption granted to these companies has been abolished.
- The effective date of the Accommodation Tax has been postponed from 01.01.2022 to 01.01.2023.
- Agricultural support payments made by Public Institutions and Organizations are exempt from income tax.
Sincerely,
BİLGENER
