The Importance of the Amount of Realized and Unrealized Investment Expenditures in the Calculation of the Reduced Corporate Tax to be Benefited During the Investment Period
With the provision of subparagraph (c) added to the second paragraph of Article 32/A of the Corporate Tax Law with the Law No. 6322, it has become possible to partially utilize the investment contribution amount by applying discounted corporate tax to the taxpayers’ earnings obtained from other activities during the investment period of the investments within the scope of the investment incentive certificate as of 1/1/2013.
Taxpayers, from the date they actually start their investments within the scope of investment incentive certificates issued within the scope of the Decree on State Aids in Investments No. 2012/3305 (Decree), as a deduction from the investment contribution amount to be calculated;
a) Not exceeding the ratio of the total investment contribution amount determined by the Council of Ministers Decree and
b) Not exceeding the amount of investment expenditure realized
In addition, discounted corporate tax can be applied to their earnings from other activities during the investment period.
The rate to be applied in the determination of the first of the two above-mentioned restrictions is set as 80% in Article 15/5 of the Decree No. 2012/3305.
On the other hand, according to the provisional Article 8 of the aforementioned Decree, within the scope of investment incentive certificates issued for the manufacturing industry (US-97 Code: 15-37) For investment expenditures to be realized between 1/1/2017 and 31/12/2022 The investment contribution rates to be applied in the tax incentive support are calculated by adding 15 points to the investment contribution rate valid in each region, corporate tax or income tax deduction is 100% in all regions and the investment The ratio of the contribution amount to be applied to the investor’s earnings from other activities during the investment period shall be one hundred percent. is applied.
Accordingly, if an investment with an incentive certificate is for the manufacturing industry (US-97 Code: 15-37) Made between 1/1/2017 and 31/12/2022 for capital expenditures,
1- 15 points will be added to the investment contribution rate.
2- The discounted corporate tax rate for the amount of investment expenditure realized will be applied at a rate of one hundred percent (Therefore, the corporate tax rate will be zero percent until the investment contribution amount for this part is reached).
3- One hundred percent of the investment contribution amount corresponding to the amount of expenditure made will be taken into account when applying discounted corporate tax to the investor’s earnings from other activities during the investment period.
Provisional Article 8 for Investments Started Before 2017
It should be noted that the advantages provided by Provisional Article 8 are specific to the investment expenditures realized between 1/1/2017 and 31/12/2022. In other words, while the aforementioned advantageous elements can be applied for the investment expenditures made between these dates, the provisions of Provisional Article 8 cannot be applied for the expenditures made in the period outside these dates.
Example: (A) A.Ş. started an investment of 10.000.000,00-TL in 2016 within the scope of the incentive certificate and made a total investment expenditure of 2.000.000,00-TL in this year.
Between 2017-2021, the remaining 8.000.000,00,-TL investment expenditure was made and the investment was commissioned in 2022.
A.Ş. did not earn any profit from other activities except for 2021. Accordingly, the investment contribution amounts that can be utilized in 2021 and the discounted corporate tax bases that will enable to reach these amounts will be calculated as follows (investment contribution rate: 40%, tax deduction rate: 80%, the portion of the investment contribution amount that can be used during the investment period is 80%):
| Years | Expenditure | Investment Contribution Rate | Investment Contribution Amount | Investment Contribution Amount Available During the Investment Period ** | Discounted Corporate Tax Rate | Discounted Corporate Tax Base |
|---|---|---|---|---|---|---|
| 2016 | 2,000,000.00 | 40% | 2,000,000*40%=800,000 | 2,000,000*40%*80%=640,000 | 25-(25*80%)=5 | 640,000/0.20=3,200,000 |
| 2017-2021 | 8,000,000.00 | 55%* | 8,000,000*55%=4,400,000 | 8,000,000*55%*100%=4,400,000 | 25-(25*100%)=0 | 4,400,000/0.25=17,600,000 |
| Total | 10,000,000.00 | 5,200,000.00 | 5,040,000.00 | 20,800,000.00 |
*15 points have been added.
**The calculated amount is compared with the total investment expenditure and the smaller amount is taken into account.
Since the enterprise is in the investment period as of the end of 2021, the calculation of the investment contribution amount that can be utilized during the investment period will also vary according to the dates of investment.
In this context, the additional 15-point investment contribution rate is calculated for the expenditures made between 2017-2022. In line with this calculation, an investment contribution amount of 4.400.000-TL is reached for the expenditures made between 2017-2021. For 2016 expenditures, the calculation was made without applying the additional 15 points and the investment contribution amount of 800.000,00-TL was reached.
For investment expenditures made in 2016, a portion (80%) of the investment contribution amount determined by the Council of Ministers can be used during the investment period. Accordingly, the investment contribution amount of 640.000,00-TL can be used for the investment expenditures made in 2016.
Since this rate will be applied as 100% for the investment expenditures made between 2017-2021, the investment contribution amount of 4.400.000,00-TL can be used for the expenditures corresponding to this period.
The separate calculation of these amounts is also related to the determination of the portion to which the corporate tax deduction rate will be applied 100%. According to the provisional Article 8, only the investment contribution amount corresponding to the investment expenditures made between 1.1.2017 and 31.12.2022 will be subject to 100% corporate tax deduction (0% corporate tax rate for the 2021 accounting period). Between these dates unrealized 100% corporate tax deduction will not be applied for investment expenditures. A corporate tax deduction of 80% will be applied for the investment in question (5% corporate tax rate for the 2021 accounting period).
Since there is no restrictive regulation regarding the determination of the tax base to be applied 0% and 5% corporate tax rate, it is possible to apply 0% corporate tax to the tax base up to (4.400.000/0.25)=17.600.000,00-TL. For the exceeding part, a tax rate of 5% can be applied up to (640.000/0,20)=3.200.000,00-TL. After that, the normal corporate tax rate will be applied.
Accordingly, if the taxpayer has a tax base of (3.200.000 + 17.600.000)=20.800.000,00-TL in the 2021 accounting period, the entire portion of the investment contribution amount that can be used during the investment period will be used. The remaining part of the investment contribution amount will be used by applying discounted corporate tax to the income from the investment.
01.01.2017-31.12.2022 Status of Started and Ongoing Investments
The same is true for investments that have been started but not yet completed between 2017 and 2022. The advantageous elements provided by the provisional Article 8 will be applied for the completed part of the ongoing investments, but will not be applicable for the parts that have not yet been completed.
Example: The part of the total investment of 35.814.904,00 within the scope of the incentive certificate started by (B) A.Ş. in 2019, which was completed by the end of 2021, is 22.918.676,43 TL. (B) A.Ş.’s tax base for the period is 122,487,194.54 TL. (B) A.Ş. could not benefit from reduced corporate tax due to insufficient earnings until the 2021 accounting period. Accordingly, the corporate tax calculation for the 2021 accounting period will be as follows (investment contribution rate: 40%, tax deduction rate: 80%, the portion of the investment contribution amount that can be used during the investment period is 80%):
| Realized/Unrealized Expenditures | Expenditure | Investment Contribution Rate | Investment Contribution Amount Available During the Investment Period ** | Discounted Corporate Tax Rate | Discounted Corporate Tax Base |
|---|---|---|---|---|---|
| Unrealized | 12,896,227.57 | 40% | 12,896,227.57*40%*80%=4,126,792.82 | 25-(25*80%)=5 | 4,126,792.82/0.20=20,633,964.11 |
| Realized | 22,918,676.43 | 55%* | 22,918,676.43*55%*100%=12,605,272.04 | 25-(25*100%)=0 | 12,605,272.04/0.25=50,421,088.50 |
| Total | 35,814,904.00 | 16,732,064.86 | 71,055,052.26 |
*15 points added
**The calculated amount is compared with the total investment expenditure and the smaller amount is taken into account.
In order to determine the investment contribution amount that can be utilized during the investment period, it is necessary to classify the realized and unrealized investment expenditures between 01.01.2017 and 31.12.2022. According to this classification, the amount to which an additional 15% investment contribution rate will be applied and the base to which 100% corporate tax deduction will be applied can be determined.
The amount of investment expenditure realized by (B) A.Ş. until the end of 2021 is 22.918.676,43-TL. Since this part was realized between 2017-2022, 15 points will be added to the investment contribution rate. At the same time, the corporate tax discount rate will be applied 100% for this part and 100% of the investment contribution amount will be taken into account when applying discounted corporate tax to earnings from other activities. Accordingly, the investment contribution amount that can be utilized for the investment expenditures realized is (22.918.676,4355 100%)=12.605.272,04.
However, the provisions of provisional Article 8 will not be applicable for the part that has not yet been realized. For this part, discounted corporate tax can be utilized during the investment period in proportion to the ratio of the investment contribution amount determined in the Decree. Accordingly, the amount of contribution to investment that can be utilized for the unrealized portion is calculated as (12.896.227,5740%80%)=4.126.792,82-TL.
According to this calculation, the total investment contribution amount that can be utilized during the investment period is (12.605.272,04+4.126.792,82)=16.732.064,86-TL. Since this amount is less than the total investment expenditure (22.918.676,43-TL), discounted corporate tax can be applied until this amount is reached.
As explained above, the bases that will enable the use of the investment contribution amounts calculated separately will also be determined separately. (12.605.272,04/0.25)=50.421.088,50-TL at 0%, (4.126.792,82/0,20)=20.633.964,11-TL at 5% and the remaining (122.487.194,54-71.055.052,26)=51.432.142,28-TL at 25% corporate tax rate.
(B) A.Ş.’s corporate tax base and the amount of corporate tax payable are summarized below:
| Rates (A) | Tax Base (B) | Tax (C=A*B) |
|---|---|---|
| 0% | 50,421,088.15 | 0.00 |
| 5% | 20,633,964.11 | 1,031,698.21 |
| 25% | 51,432,142.28 | 12,858,035.57 |
| Total | 122,487,194.54 | 13,889,733.78 |
