Use of Investment Contribution Amounts within and outside the scope of Provisional Article 8 together with Export/Manufacturing Deduction in the Reduced Corporate Tax to be applied to Other Activities
From the date the taxpayers actually start their investments, 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, it is possible to apply reduced corporate tax on the 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. In other words, taxpayers will determine their total investment contribution amount and will be able to use up to 80% of this amount, based on the amount of investment expenditure actually made.
On the other hand, according to the provisional Article 8 of the Decree No. 2012/3305 on State Aids in Investments (Decree), if an investment with an incentive certificate is for the manufacturing industry (US-97 Code: 15-37) for investment expenditures made between 1/1/2017 and 31/12/2022,
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.
Therefore, discounted corporate tax will be applied separately for the investment expenditures made and not made between the aforementioned dates, and the tax deduction rate and the portion of the investment contribution amount to be used will vary.
Example: A company manufacturing chairs in Kayseri/Hacılar OIZ located in the 2nd region made an investment expenditure of 1.888.907,40-TL in 2022 within the scope of an investment incentive certificate of 8.026.674,00-TL. By the end of 2023, the total amount of expenditure reached 6.475.000,00-TL. In 2022, no reduced tax was applied due to insufficient earnings (YKO: 25%, VIO: 60%).
Here, since some of the expenditures were made in 2022, 15 points will be added to the investment contribution amount, 100% tax deduction will be applied to the ROE calculated in this way, and not 80% of this ROE can be used, but all of it (100%).
The remainder of the total investment amount is subject to the limits mentioned above.
Accordingly, the distribution of the ACTs that can be used is as follows:
| Investment Period | Total Investment (A) | YKO (B) | Total ROA (C=A*B) | Investment Period Available to Benefit Investment Contribution Amount (D=C*80%,100%)* |
Total Utilized ACT (E) |
Balık YKT (F=D-E)** |
| 2023 | 6.137.766,60 | 25% | 1.534.441,65 | 1.227.553,32 | 0,00 | 1.534.441,65 |
| 2022 | 1.888.907,40 | 40% | 755.562,96 | 755.562,96 | 0,00 | 755.562,96 |
| TOTAL | 8.026.674,00 | 2.290.004,61 | 1.983.116,28 | 0,00 | 2.290.004,61 |
*100% for 2022 expenditure, 80% for 2023 expenditure
** There was no utilization in 2022.
As can be seen, the investment contribution rate is higher for the expenditure made in 2022. All of the investment contribution rate found in this way can be used. In other words, it is not subject to the 80% restriction.
However, these limits apply to the portion not incurred in this year.
In addition, a 100% tax deduction rate is applied for the use of the ACT calculated for the expenditure incurred in 2022. In other words, a 0% tax rate is applied to the tax base when using this IIT. For this reason, it is more advantageous for taxpayers to primarily use the ACR provided by the year 2022 in the use of investment contribution amounts.
Before determining the discounted corporate tax rate according to 32/A, the tax rate to be applied to manufacturing and export earnings should also be determined. After this rate is determined, 32/A can be applied.
When determining the bases on which the investment contribution amount will be used, the investment contribution amount should be broken down according to the ratio of manufacturing, export and external earnings in the total earnings of the taxpayer. The discounted corporate tax rates that will arise after applying tax deductions to the rates of 20%, 24% and 25% are different. Therefore, the bases to reach the investment contribution amount should be determined according to these rates. After this determination is made, the bases to be applied discounted corporate tax for each investment contribution amount are found. Then, the tax bases to be taxed at the rates of 20%, 24% and 25% can also be determined.
The taxpayer’s earnings status regarding manufacturing, export and other earnings is given below:
| Investment Period | Total Investment (A) | YKO (B) | Total YKT (C=A*B) | Investment Contribution Amount Available During the Investment Period (D=C*%80,%100)* | Total YKT Used (E) | Remaining YKT (F=D-E)** |
| 2023 | 6,137,766.60 | 25% | 1,534,441.65 | 1,227,553.32 | 0.00 | 1,534,441.65 |
| 2022 | 1,888,907.40 | 40% | 755,562.96 | 755,562.96 | 0.00 | 755,562.96 |
| TOTAL | 8,026,674.00 | 2,290,004.61 | 1,983,116.28 | 0.00 | 2,290,004.61 |
Accordingly, firstly, the calculation regarding the use of the 755,562.96-TL YKT for the 2022 expenditure will be as follows:
| Source | Income | Investment Contribution Amount (A)= (Income/9,000,000) | Tax Rate According to Article 32 (B) | Discounted Tax Rate According to 32/A (C)=(B)-(B*100%) | Difference Between General Tax Rate and Discounted Tax Rate (D)=(B-C) | Tax Base Eligible for Discounted Tax Rate (E)=(A/%D) | Calculated Discounted Tax (F)=(E*C) | Remaining Tax Base (G=Income-E) |
| Manufacturing Income | 6,000,000.00 | 503,708.64 | 24 | 0 | 24 | 2,098,786.00 | 0.00 | 3,901,214.00 |
| Export Income | 1,000,000.00 | 83,951.44 | 20 | 0 | 20 | 419,757.20 | 0.00 | 580,242.80 |
| Non-Manufacturing and Non-Export Income | 2,000,000.00 | 167,902.88 | 25 | 0 | 25 | 671,611.52 | 0.00 | 1,328,388.48 |
| Total | 9,000,000.00 | 755,562.96 | 3,190,154.72 | 0.00 | 5,809,845.28 | |||
The ACTs in column (A) are distributed according to the weight of the gain in the total. The correct allocation is important for the determination of the remaining tax base rather than the amount of the ACT to be used.
As it can be seen, 755,562.96-TL of RTL 755,562.96 was used with a base of 3,190,154.72-TL, leaving a base of 5,809,845.28-TL. The remainder of the RIT that can be used during the investment period can be applied to this tax base in the same manner.
The remainder of the ACT is TL 1,227,553.32 in the first table. When using this part, it should be kept in mind that the conditions in the provisional Article 8 are not applicable and 60% tax deduction will be applied.
| … No. Investment Certificate Subject to 60% Tax Discount | ||||||
|---|---|---|---|---|---|---|
| Source | Tax Base (A)* | Tax Rate According to Article 32 (B) | Discounted Tax Rate According to 32/A (C)= (B)-(B*60%) | Difference Between General Tax Rate and Discounted Tax Rate (D)=(B-C) | Calculated Tax (E)=(A*C) | Utilized YKT (F)=(A*D%) |
| Manufacturing Income | 3,901,214.00 | 24 | 9.6 | 14.4 | 374,516.54 | 561,774.82 |
| Export Income | 580,242.80 | 20 | 8 | 12 | 46,419.42 | 69,629.14 |
| Non-Manufacturing and Non-Export Income | 1,328,388.48 | 25 | 10 | 15 | 132,838.85 | 199,258.27 |
| TOTAL | 5,809,845.28 | 553,774.82 | 830,662.22 | |||
*Taken from the remaining base column of the previous table.
Under these conditions, firstly 755.562,96-TL and secondly 830.662,22-TL of 1.983.116,28-TL, which is the total YKT that can be utilized during the investment period, will be used and 396.891,10-TL of YKT will remain. The remaining portion can be used if there is a gain in the next period.
Sincerely,
BİLGENER
