Law No. 7420 with Important Amendments to Tax Laws Published
On November 9, 2022, the Law No. 7420 on Amending the Income Tax Law and Certain Other Laws was published in the Official Gazette No. 32008, which included several amendments in various areas, including tax laws.
The tax-related amendments made by this law are summarized below:
1. The Exemption Limit for Renewable Energy-based Electricity Generation in Residences under Unlicensed Activities has been Increased to 50 kW
Article 9, paragraph 1, item (9) of the Income Tax Law No. 193, titled “Exempt Traders”, previously stated that individuals generating electricity for their needs in their residences, through renewable energy sources (either owned or rented), with a maximum installed capacity of up to 25 kW (inclusive), are exempt from taxes if the excess electricity is sold to the last-resort electricity supply company. This included electricity generated for common electricity needs in multi-apartment buildings.
With the amendment, the exemption limit for such activities has been increased from 25 kW to 50 kW.
This regulation came into effect on November 9, 2022.
2. The Requirement for Payment to Meal Service Providers for Meal Exemption for Employees Has Been Removed
Article 23, paragraph 1-8 of the Income Tax Law No. 193 previously required that meal allowances given to employees, when meals are not provided at the workplace, be exempt from tax only if the payments were made to businesses providing meal services.
With the amendment, this requirement has been removed. As a result, meal payments made directly to employees, up to a certain limit, will be exempt from income tax.
This regulation will come into effect on December 1, 2022.
3. Salary Payments for Personnel Working Abroad in Construction, Repair, Assembly, and Technical Services Have Been Included Under the Exemption
Item (19) has been added to Article 23, paragraph 1 of the Income Tax Law, which addresses income tax exemptions on wages.
This amendment includes salary payments made to employees working abroad in construction, repair, assembly, and technical services under the income tax exemption, provided these payments are covered by the employer’s foreign earnings.
This regulation will come into effect on December 1, 2022.
4. Monthly Payments of Up to 1,000 TRY for Employees’ Electricity, Natural Gas, and Heating Costs Are Exempt Until June 30, 2023
According to the temporary Article 1 of Law No. 7420, employers will not be required to calculate income tax on payments of up to 1,000 Turkish lira made to employees for electricity, natural gas, and heating costs until June 30, 2023 (inclusive).
Additionally, these payments will not be included in employees’ social security earnings.
This regulation came into effect on November 9, 2022.
5. The Application Period for the Individual Participation Investor Discount and the Maximum Annual Discount Limit Have Been Updated
Article 82 of the Income Tax Law has been amended to extend the application period for the individual participation investor discount. The discount is available to full-taxed individual investors who hold shares in full-taxed joint-stock companies for at least two years. The amount of shares eligible for the discount has been raised from 1,000,000 TRY to 2,500,000 TRY annually, and the discount application period has been extended to December 3, 2027.
This regulation is applicable for income or gains obtained from January 1, 2023, onwards.
6. A Provision on the Taxation of Capital Reductions Has Been Added to the Corporate Tax Law
With Law No. 7420, Article 32/B, titled “Taxation on Capital Reduction”, has been added to the Corporate Tax Law No. 5520. This provision regulates the tax implications of corporate capital reductions.
Under this provision, reductions in capital involving added reserves, revaluation funds, or contributions from the company’s past profits will be subject to both corporate tax and dividend tax withholding. However, reductions made with cash or non-cash capital will be treated differently based on the timing of the capital reduction.
This regulation came into effect on November 9, 2022.
7. The Duration of the Exemption for the Currency-Protected Deposits has Been Extended to December 31, 2023
The temporary Article 14 of the Corporate Tax Law No. 5520 has been amended to extend the exemption on foreign currency and gold deposits converted into Turkish lira deposits or participation accounts until December 31, 2023.
Additionally, the President has been granted the authority to apply this exemption to foreign currencies in corporate balances for each temporary tax or annual accounting period, either separately or together, until December 31, 2023.
This regulation came into effect on November 9, 2022, for transactions starting from May 26, 2022.
For the full text of the relevant Law, you can access it here.
Best regards,
BİLGENER
