Amendments to Turkish Tax Laws Applicable as of 2024

The “Draft Law on the Amendment of Certain Laws and Statutory Decrees” (the Draft Law) was submitted for ratification to the Turkish Grand National Assembly on 24.11.2023. In this tax bulletin, we present a summary of tax changes that will enter into force in financial year 2024 after the completion of the ratification process.

PROPOSED CHANGES IN TAX LAWS

1. Expenditure Tax Law No. 6802

Article 29 of Expenditure Taxes Law No. 6802 exempts money received as collateral for loans and insurance transactions within the scope of home financing from Banking and Insurance Transactions Tax (BITT). However, in order to ensure that this exemption does not lead to excessive home purchases or the use of home financing as a consumer loan, Article 6 of the Draft Law specifies that money received in the form of home loans that is used directly or through cooperatives by those who own a registered home as of the date the loan is used does not qualify for the exemption. The idea is to make the relevant BITT exemption available only to those who do not already own a registered home.

2. Personal Income Tax Law No. 193

• Pursuant to the Repeated Article 20/B of Personal Income Tax Law No. 193, digital content producers who share content through social network providers on the Internet are exempt from income tax. In Article 7 of the Draft Law, it is proposed that this exemption also be applied to digital platforms other than social network providers as well as to sharing content such as text, images, audio and video on any digital platform; sharing videos such as training, recipes and product promotion over the internet and similar electronic media; and earning income by sharing content such as data processing and development over these media.
• In paragraph b of Article 22 of the PIT Law, half of the dividend income of full-taxpayer real persons from full-taxpayer corporations is exempted from income tax. In addition to this exemption, in Article 8 of the Draft Law, it is proposed that dividends received from joint stock companies and limited liability companies whose legal and business headquarters are not located in Turkey also qualify for this exemption, provided that such full-taxpayer real persons own at least 50% of the paid-in capital of these companies and that the dividends are transferred to Turkey by the date of filing of the annual income tax return for the calendar year in which the dividend is received. If the legislative proposal is accepted, 50% of the participation income derived by full-taxpayer real persons from foreign subsidiaries in which they own 50% of the paid-in capital will be exempt from income tax, provided that the income is brought to Turkey.
• Under Article 40 of the PIT Law, taxpayers who export or engage in construction, repair, assembly and transportation activities abroad, in addition to the expenses specified in the relevant subparagraph, are entitled to deduct expenses calculated on a lumpsum basis to cover expenses related to this work abroad, provided that they do not exceed .5% of the revenue obtained in foreign currency from these activities. In Article 9 of the Draft Law, it is proposed to abolish this practice, since the lumpsum expense calculation involves unrealized expenses, which erode the tax base.
• Article 89/1-13 of the PIT Law provides an income tax exemption for architectural, engineering, design, software, medical reporting, accounting, call center, product testing, certification, data storage, data processing, data storage and data processing services provided in Turkey exclusively for the benefit of non-residents and those whose workplace and legal and business center is located abroad, as well as 50% of the income derived exclusively by service businesses operating in the fields of data analysis and vocational training, as determined by the Ministry of Finance, and businesses operating in the field of education and health and providing services to non-residents, subject to the permission and oversight of the relevant ministry. In Article 10 of the Draft Law, it is proposed that this exemption be applied “on condition that all of the income is transferred to Turkey by the date of filing of the annual income tax return for the calendar year in which the income is earned” and that the exemption rate be increased to 80%.
• In Article 13 of the Draft Law, it is proposed to extend the provision in Provisional Article 72 of the PIT Law regarding the withholding of personal income tax from wages and payments deemed wages of athletes (e.g. football players) until 31 December 2028.
• In Provisional Article 76 of the PIT law, earnings from the disposal of warehouse receipts issued issued under Agricultural Products Licensed Warehousing Law No. 5300 are exempted from income tax until 31 December 2023. In Article 14 of the Draft Law, it is proposed to extend this to 31 December 2028.

3. Tax Procedure Law No. 213

• In Article 15 of the Draft Law, it is proposed to add an article to Tax Procedure Law No. 213 entitled Repeated Article 413 and to charge a participation fee of at least 25 Kuruş per query or returned record in return for sharing information that may be shared under Article 5 of the Law with public institutions and organizations other than public administrations under general administration and real or legal persons.
• In Provisional Article 30 of the Tax Procedure Law, taxpayers holding an industrial registry certificate or investment incentive certificate were granted the right to apply 50% of the depreciation rates and useful periods declared to new machinery and equipment acquired until 31 December 2023 for use exclusively in the manufacturing industry. Taxpayers operating in the field of Technology Development and R&D can also benefit from this for purchased machinery and equipment to be used exclusively in R&D, innovation and design activities. For new machinery and equipment, Article 16 of the Draft Law proposes to extend this practice until 31 December 2024.
• It is proposed that Provisional Article 33 of the Tax Procedure Law be amended to specify that banks, financial companies, payment and electronic money institutions, authorized foreign exchange institutions, asset management companies, capital market institutions, insurance and reinsurance companies and pension companies cannot take into account profit/loss differences arising from the inflation adjustment made in the 2024 and 2025 accounting periods, including temporary tax periods, in the preparation of financial statements.

4. Stamp Tax Law No. 488

• Additional Article 2/2-a of Stamp Tax Law No. 488 provides a stamp duty exemption for the activities of the main contractors that win a tender for investments included in the current-year investment program published by the Ministry of Development and some public investments that are put out to international tender or activities of companies undertake the construction of those financed with foreign currency, depending on the Tax and Fee Exemption Certificate. In Article 21 of the Draft Law, it is proposed to remove the phrase “the winner of an international tender or”. The rationale for the proposed amendment is that in tenders undertaken by full-taxpayer companies, this provision creates competition between domestic and foreign companies, which is contrary to the objective of reducing the investment cost of the public sector and preventing the outflow of foreign currency from the country. This wording is removed so that the exemption will apply only to investments financed with foreign currency that serve to bring foreign currency into the country.
• In Article 22 of the Draft Law, it is proposed that the phrase “tender decision” in the parenthetical provision of paragraph 2 of the section titled “II. Decisions” of table (1) annexed to the Stamp Tax Law be revised to read “the tender decision and the contract issued with the contracting authority regarding the tender”. The purpose of this change is to eliminate differences in practice in the event that a tender is canceled upon a complaint to institutions and organizations under the Public Procurement Law or an objection to the Public Procurement Authority or a judicial decision by allowing the return of the part of the contract issued regarding the canceled tender that is not benefited from its provision. In addition, it will be certain that the stamp duties of the existing tender decision and contract will not be refunded in the event that the tenderer who is awarded the tender changes without the tender being canceled.

5. Value Added Tax Law No. 3065

• Article 29 of VAT Law No. 3065 determines what taxes can be deducted from calculated value added tax. In Article 30 of the Draft Law, it is proposed to add the phrase “Value added tax paid by those who are held responsible for tax deductions by reverse charge” to this article of the VAT Law and to stipulate payment of declared tax as a condition for VAT deduction.
• Article 41 of the VAT Law stipulates that taxpayers who are held responsible for tax deductions must submit their VAT declarations to the relevant tax office by the evening of the 24th day of the following month. In Article 32 of the Draft Law, it is proposed that “VAT2 declarations” for reversecharged VAT be submitted by the evening of the 19th day of the following month. Additionally, the payment period specified in Article 46 of this law is to be revised by Article 33 of the Draft Law to make payment of reverse-charged VAT due by the evening of the 21st day of following month.
• Provisional Article 29 of the VAT Law provides a VAT exemption for projects realized within the framework of the build-operate-transfer model, projects related to health facilities, determined by the High Planning Council, to be built in return for a lease, projects related to education and training facilities, determined by the Ministry, to be built in return for a lease, projects for which the tender or assignment announcement has been published before the effective date of this article but no bids have been received, and projects for which the tender or assignment announcement will be published by 31 December 2023, as well as deliveries of goods and services made within the scope of a project during the investment period to those who are assigned to tender or undertake the project. Article 34 of the Draft Law proposes to extend this practice until 31 December 2028.
• Provisional Article 32 of the VAT Law provides a VAT exemption for the transfer and delivery of urban rail transportation systems, metros, trams, cable cars, chairlifts and funiculars and their lines, stations, passenger terminals and stops as well as facilities related to such work and transactions and their accessories or integral parts between the Ministry of Transport, Maritime Affairs and Communications, municipalities and their affiliated organizations. In Article 35 of the Draft Law, it is proposed to extend this practice until 31 December 2028.
• In Provisional Article 33 of the VAT law, the transfer and delivery of immovables to the Social Security Institution under Provisional Article 41 of Social Security and General Health Insurance Law No. 5510 and the transfer and delivery of such immovables by the Social Security Institution are exempted from VAT until 31 December 2023. Under Article 36 of the Draft Law, it is proposed to extend this until 31 December 2024.

6. Special Consumption Tax Law No. 4760

• Article 5 of Special Consumption Tax (SCT) Law No. 4760 exempts export deliveries of goods from SCT, provided that delivery is made to a customer abroad and that the goods subject to delivery have left the Customs Territory of the Republic of Turkey. In Article 44 of the Draft Law, it is proposed to prevent conflicts in practice by separately stipulating that the delivery of goods subject to SCT to free trade zones does not qualify for an export exemption.
• Under Provisional Article 6 of the VAT Law, if tax calculated according to the rate determined for goods numbered 8517.12.00.00.00.11 G.T.İ.P. in the list (IV) annexed to the law is less than 160 Turkish Liras for each unit of goods, 160 Turkish Liras should be assessed for each unit instead of tax calculated according to the rate until 31 December 2023. In Article 45 of the Draft Law, it is proposed to extend this period until 31 December 2033 and to apply this amount by increasing the revaluation rate determined under the Tax Procedure Law every year.

7. Corporate Tax Law No. 5520

Pursuant to Article 5/b of Corporate Tax Law No. 5520, the participation income of corporations participating in the capital of joint stock and limited liability companies whose legal and business centers are not located in Turkey is exempt from corporate tax, provided that the following conditions are met:

• The company holding the participating interest must hold at least 10% of the paid-in capital of the foreign subsidiary.
• The participation interest must have been held continuously for at least one year as of the date of the revenue gain.
• The earnings of the foreign subsidiary, including taxes paid on the earnings that are the source of dividend distribution, should bear a total tax burden of at least 15%, similar to income and corporate taxes, in accordance with the tax laws of the country in which the subsidiary operates.
• Subsidiary income is transferred to Turkey by the date of filing of the corporate tax return for the accounting period in which the income is derived.

In addition to this exemption, Article 56 of the Draft Law proposes to apply a 50% corporate tax exemption to the related participation income of corporations participating in the capital of foreign corporations, provided that the company holding the participation share owns at least 50% of the paid in capital of the foreign subsidiary and the earnings are transferred to Turkey by the date of filing of the corporate tax return for the accounting period in which the earnings are obtained, without other conditions being specified.

• Article 10/ğ of the Corporate Tax Law provides a corporate tax exemption for architectural, engineering, design, software, medical reporting, accounting, call center, product testing, certification, data storage and data processing services provided in Turkey exclusively for the benefit of non-residents in Turkey and those whose workplace and legal and business center is located abroad, service businesses operating in the fields of vocational training, as determined by the Ministry of Finance in consultation with the relevant ministries and subject to the permission and oversight of the relevant ministry, and service businesses operating in the fields of education and health and providing services to non-residents in Turkey. 50% of the income derived exclusively from these activities is deducted from the corporate tax base. In Article 57 of the Draft Law, it is proposed that an 80% exemption be applied, provided that all of it is transferred to Turkey by the date of filing of the corporate tax return for the accounting period in which the income is generated, thus introducing nationalization of income as a condition of this exemption.
• Pursuant to Article 32/7 of the Corporate Tax Law, corporate tax is reduced by 5 points for earnings that exporting corporations derive exclusively from exports. In Article 60 of the Draft Law, it is proposed that this discount be applied to the manufacturer’s or supplier’s earnings from export activities carried out by foreign trade capital companies or sectoral foreign trade companies under an intermediary export contract.

TAKEAWAY

As is clear from the above explanations, the Draft Law makes important amendments to tax laws. One of the most important changes is the income and corporate tax exemption of 50% of dividends received from abroad under certain conditions and the increase in the income exemption rate to 80% for services provided to parties abroad, such as architecture, engineering, design, software, medical reporting, bookkeeping and call center services. Changes affecting other tax issues are also important. It is thus useful to analyze the impact of these changes on your company or the person concerned.

You are welcome to contact us regarding the topics in our bulletin and the effects of these tax regulations.