2023-112 / December 2023 Financial/Tax Bulletin
Find out the latest developments on tax regulations and be updated on regulatory changes along with their effects on your business through our tax bulletins. The important financial news of this month is briefly explained below.
We are glad to share these summaries with our clients and network. As a result of productive and comprehensive research, we present you monthly bulletin.
Let’s start with the headings and then examine the details. We will share information about Turkish economy in general, and the latest figures in labor, inflation, growth, main tax developments, social security obligations, banking and financial issues, R&D and incentives, and other issues below.
Main Economic Indicators
The balance of payments statistics for September 2023 is announced by the Central Bank
- The current account recorded net surplus of USD 1.876 million. Gold and energy excluded current account indicated net surplus of USD 7.118 million.
- Goods deficit recorded USD 3.657 million.
- Click to view the announcement.
Turkish Statistical Institute announced inflation figures for November 2023.
- Consumer price index increased by 61.98% annually and 3.28% monthly.
- Domestic producer price index increased by 42.25% annually and 2.81% on monthly basis.
- Click to view the announcement.
Ministry of Finance and Treasury announced the domestic borrowing strategy and debt statistics for December 2023 – February 2024.
- Central Government Debt Statistics were published as well by currency, interest and instrument type.
- Click to view the domestic borrowing strategy.
Major Tax Issues
Medium Term Program (2024-2026) is on the Presidency’s website in English.
The Grand Assembly discussions on the 2024 budget are still ongoing.
Check the status of your VAT refund requests by the end of the year.
The revaluation rate for 2023 has been set as 58.46%.
The interest charge for late tax payments has been increased to 3.5% monthly.
- The previous rate was 2.5%.
- This rate is set by the President, and has historically varied between 1.6% and 15%.
Deferment interest rate has been increased to 36% annually.
- The previous rate was 24%.
- The new rate is effective from November 14th, 2023.
A new communique draft on VAT is open for comments.
- The draft includes updates on digital codes, digital funds, and similar applications.
- Exemptions on seaports and airports are discussed.
- Revisions are made after public consultation.
New DTT agreements have been published in the Official Gazette.
- The agreements are with the following countries.
- Sierra Leone
- Sri Lanka
- Senegal
- Nigeria
- Cambodia
- Kongo
Special consumption tax for electric vehicles has been set. Threshold for lower tax is increased.
- For engines with a power rating less than 160 kW
- 10% if the base price is less than TRY 1,450,000
- 40% if else
- For engines with a power rating more than 160 kW
- 50% if the base price is less than TRY 1,450,000
- 60% if else
The omnibus consisting of 80 articles is passed by the Commission and now in General Assembly.
- The following articles are present within:
- 5-point corporate tax discounts for exporters
- 80% tax discounts for overseas work for some service exports
- 50% tax discounts on foreign dividends
- Extensions on the exchange rate adjusted certificates of deposits program
- Extensions on the exemptions applied to exchange rate adjusted certificates of deposits
- Financial restructuring for companies in debt
- Exclusion of banks and financial institutions from inflationary adjustments
- 5‰ lump sum expense application is removed in line with the OECD
- No special consumption tax exemptions for exports to freezones
- Notarized contract requirements for motorized vehicle dealers
- Increase of vessel registration fees and introduction of annual fees
- New tier system for determining withholding rates for income and corporate tax
- Preparation of sequestration filings electronically
- Additional price difference and deadline extensions for construction work
- Changing of VAT declaration periods for reverse charge
- Extension of financial restructuring agreements
- Expansion of duties to be refunded in case of a cancelled government order.
The draft of the communique on inflationary adjustments is ready.
- No postponements have been announced.
- Firms should prepare two balance sheets this year.
- There is no tax effect in 2023.
- Strong capital intense firms will not pay tax because of inflation starting from 2024.
- The following articles are present within:
- Principles of the application
- Adjustment only of the balance sheet
- Differences between the 2023 and 2024 applications
- Those who may not apply the adjustments
- Method to be utilized by those who use special financial periods
- List of assets to be adjusted
- List of assets not to be adjusted
- Designation of fictive financing expenses
- Status of revaluation premiums added to capital before 2024
- Equity accounts to be present in the balance sheet after the adjustments
- Accrued amortization, in-progress investments, goods priced by the government, status of advance payments, assets subject to financial leasing, backup funds, merging premiums
- Book entries to be accounted
- Adjustments for halts, liquidations, mergers, acquisitions, etc.
- Special cases for adjustments after 2024
- Status of specialized commerce activities
- Timing of adjustment records
- Preparation of the balance sheet
- Resale of the assets
- Adjustment values for liability accounts
- Penalties for not applying adjustments
Social Security
The social security agreement between Türkiye and Iran is determined to be effective from May 1st, 2023.
Foreign workers must report to the Social Security Administration as stated on their work permits.
Banking & Finance
The Central Bank has hiked the interest rates.
- The weekly repurchase agreement award rate is increased to 40%.
- Discount rate for bills less than 3 months to value date is 40.75%.
- Advance rate is 41.75%.
Rediscount rates for exports and foreign currency earning services has been capped at 25.93%.
Revisions have been made in the following programs provided by the Central Bank.
- Advance loans with investment commitments
- Conversions to Turkish Lira deposit and participation accounts
- Conversions of physically held gold
- Deposit and participation system for citizens living abroad
The Turkish Banks Association will start reporting on the payment systems within the Turkish banking system.
The Central Bank has revised the reporting requirements for FX positions.
R&D and Incentives
The 2% fund allocation requirement for R&D and Design Centers, along with Technocity firms, is still ongoing.
University students will be provided with free internet access, laptops, and mobile phones.
- The internet access is provided for 1 year with a 10 GB cap per month.
- The electronics requested must be listed at less than TRY 9,500.00 (including tax) and must not be pre-owned.
- The provided electronics are not allowed to be transferred by the student to someone else within 2 years.
A Sworn-in CPA report requirement has been placed for incentives provided to solar and wind energy production plants.
The communique on strategic prioritization and technical evaluation of investment projects has been published.
The Family and Youth Fund has been formed.
The agreement of investment incentives between Turkey and China is determined to be effective from November 11th, 2020.
Commercial Regulations
The law on short-term rental has been published in the Official Gazette.
The regulations on distance agreements have been published.
Electronic notification regulations have been updated.
Minimum equity requirements for companies have been increased.
- For companies to be incorporated after January 1st, 2024:
- Corporations require a minimum capital of TRY 250k.
- LLCs require a minimum capital of TRY 50k.
- Pre-existing companies are not required to comply with the new limits.
- According to the Ministry’s announcement, it is suggested that the companies increase their capital to the minimum amounts to strengthen the equity positions.
No deduction is to be provided for VAT on imports in some cases.
The Exports Communique has been updated.
The customs agreement between Turkey and Angola has been approved.
Climate and Environment
The draft on the regulations regarding carbon markets is open for comments.
- Emission rights for greenhouse gases are to be distributed and traded by the proposed carbon markets.
The proposed law on the conversion of areas under natural disaster risk has been enacted.
The Capital Markets Board is discussing strategies and structural reforms to improve sustainable investing.
Regulations on energy incentives for wastewater filtration plants has been published.
Miscellaneous
A guide regarding the application of inflationary adjustments on financial reports has been published.
Sustainability Reporting Standards open for public consultation till December 18th, 2023.
Regulations on regular naval expeditions has been published.
Regulations on the inspection of private health providers has been published.
Best regards,
Partners, Taxia
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