Tax Related Regulations in the New Omnibus Bill Proposal
On July 5, 2023, a legislative proposal was submitted to the Presidency of the Grand National Assembly of Turkey regarding the economic losses caused by the earthquakes that occurred on February 6, 2023, and the imposition of additional taxes for their recovery. The proposal includes regulations introducing new tax liabilities.
The regulations to be introduced by the proposed law are summarized below based on the proposal text and justifications:
1. Change in Corporate Tax Rate
The proposal sets the corporate tax rate at 25%. However, a 30% tax rate is proposed for corporate earnings of banks, companies covered by the Financial Leasing, Factoring, Finance, and Savings Finance Companies Law No. 6361, electronic payment and money institutions, authorized foreign exchange institutions, asset management companies, capital market institutions, insurance and reinsurance companies, and pension companies.
2. Removal of VAT and Corporate Tax Exemptions on Property Sales
According to Article 17/4-r of the VAT Law, the VAT exemption on property sales by corporations, where the property has been held for two years, is to be removed. However, for properties acquired before the enactment of the proposed law, the exemption will continue.
Additionally, the corporate tax exemption on property sales, which applies at a 50% rate for properties held for two full years, will be abolished. For properties acquired before the effective date of the law, the exemption will continue but at a 25% rate.
3. Additional Motor Vehicle Tax (MTV)
According to Article 1 of the proposal, motor vehicles registered at the time of the law’s publication, as well as those that are registered between the publication date and 31/12/2023, will be subject to an additional motor vehicle tax equivalent to the motor vehicle tax for 2023.
For vehicles registered after the law’s publication, the additional motor vehicle tax will be calculated based on the second half of the year, according to Article 9/6 of the Motor Vehicles Tax Law No. 197.
Exemptions from this additional motor vehicle tax apply to vehicles registered in areas declared as force majeure by the Ministry of Finance due to the earthquakes in Kahramanmaraş on 6/2/2023, vehicles belonging to owners of buildings damaged or severely damaged by the earthquake, vehicles that were rendered unusable, and vehicles of taxpayers who lost a spouse or a first-degree relative due to the earthquake.
The additional motor vehicle tax for vehicles registered before the publication date of the law will be paid in two equal installments: the first installment will be due by the end of the month following the law’s publication, and the second by the end of November 2023. For vehicles registered between the law’s publication and 31/12/2023, the additional tax will be paid along with the motor vehicle tax in full.
4. 1-Point Corporate Tax Reduction
In order to encourage exports, the corporate tax rate on profits exclusively earned from exports, which currently benefits from a 1-point reduction, will be reduced by 5 points. However, no increase is proposed for the reduction on manufacturing profits.
5. Regulation on Special Consumption Tax (ÖTV) Increases
According to Article 6 of the proposal, a new paragraph is added to Article 12 of the ÖTV Law. It stipulates that the fixed tax amounts in List (I) of the ÖTV Law, or those determined by the President, will be revised in January and July based on the change in the domestic producer price index published by the Turkish Statistical Institute for the past six months, effective from the announcement date.
This adjustment aims to prevent the decrease in treasury revenues due to the ÖTV not keeping up with high price increases and price movements during periods of inflation.
Additionally, the proposal changes the authority granted to the President regarding ÖTV for goods in Lists (I) and (III) to allow for rapid and flexible decision-making in line with social, economic, and fiscal needs, especially during price fluctuations.
6. Removal of Exemption on Gains from Investment Funds Except for Venture Capital
The proposal suggests removing the exemption on gains from investment funds other than venture capital investment funds and venture capital investment companies’ shares, except for those related to venture capital funds. The exemption on gains from investment funds introduced by Law No. 7351 for the 2022 fiscal year is to be abolished.
However, this regulation will apply only to investment fund shares acquired after the law’s enactment.
7. Exclusion of Real Estate from Partial Division
Under Article 19, paragraph 3(b) of the Corporate Tax Law No. 5520, real estate, shareholding interests, and production and service businesses can be subject to a partial division process under certain conditions. The regulation aims to exclude real estate from the partial division process.
Sincerely,
BİLGENER
