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2023/64 - May 2023 Financial/Tax Bulletin

Find out the latest developments on tax regulation and be updated on regulatory changes along with their effects on your business through our tax bulletins. The important financial news of last 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 the May 2023 bulletin.

Let’s briefly 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 February 2023 is announced by the Central Bank

• The current account recorded a deficit of USD 8.783 million. Gold and energy excluded current account indicated net surplus of USD 834 million.
• Click to view the announcement.

Turkish Statistical Institute announced inflation figures for April 2023.

• Consumer price index increased by 43.68% annually and 2.39% monthly.
• Domestic producer price index increased by 52.11% on annual basis, by 0.81% on monthly basis.
• Click to view the announcement.

The Ministry of Treasury and Finance announced the foreign trade statistics for March 2023.

• According to the general trade system exports 4.4% and imports increased by 3.4% in February 2023.
• According to the provisional data, produced with the cooperation of the Turkish Statistical Institute and the Ministry of Trade, in March 2023; exports were 23 billion 595 million dollars with a 4.4% increase and imports were 31 billion 936 million dollars with a 3.4% increase compared with March 2022.
• Click to view the press release.

The Ministry of Finance and Treasury announced the domestic borrowing strategy and debt statistics May – July 2023.

• Central Government Debt Statistics were published as well by currency, interest and instrument type.
• Click to view the domestic borrowing strategy.

Major Tax Issues

The one-time additional tax is still a controversial topic; as such we suggest that filing a tax return with reservation.

• Each company should evaluate their own situation and decide whether they should initiate a taxpayer’s suit.
• For more information, you can read our publication

The communique on the additional tax has been published.

• For more information, you can read our publication

The tax treatment of gains realized from exchange rate adjusted certificates of deposits has been altered.

• Entities which convert their foreign currency holdings into exchange rate adjusted certificates of deposits at a minimum expiration of three months will be exempted from corporate tax for the gains realized from this transaction.
• This exemption applies not only to the accrued interest, profit, and other gains, but also to the difference in value at the end of the period.

The revaluation rate to be used for 1Q2023 corporate tax period has been determined as 8.77%.

Don’t forget to declare your foreign capital through the E-TUYS system.

• The direct foreign investor activity form must be filled in annually no later than the end of May.
• Capital increases and decreases must be recorded in the stockholders list field within one month of the transaction.
• Payments regarding capital increases and stock transfers must be recorded within the direct foreign investor equity form within one month of the payment.
• Stock transfers among current or new stockholders must be recorded in the stockholders list field within one month of the transfer.

You can apply to the tax amnesty and restructuring of tax program by the end of May.

• For more information, you can read our publication

Banking & Finance

The foreign currency position reporting requirement as mandated by the Central Bank has been eased in accordance with the received feedback.

The Banks Association of Turkey has published a report on the sustainability of the banking sector.

The Treasury of Turkey has issued its first ESG bonds.

• The bonds are denominated in USD and mature in 2030 with 9.125% coupon payments.
• USD 2.5B of bonds has been issued.

The Central Bank has kept the interest rates stable.

• The award rate for weekly repurchase agreements is 8.5%.

The code on precautions against financing of terrorism and illegal activities has been amended.

R&D and Incentives

Project-based incentives are being announced.

• The general communique on corporate tax regarding the application of the incentive for the TOGG project has been published.
• An active carbon production plant has been incentivized in Sakarya.
• A cellulose production plant has been incentivized in Adana.

The remote-working ratio for Technology Development Zones and R&D/Design Center employees has been set.

• For IT personnel, this ratio is set as 100%.
• For other personnel, this ratio is set as 75%.
• These values are valid through 2023.

Incentivization efforts are being more focused on green & digital transformation projects.

Commercial Regulations

The general communique on tax exemptions under the IPA III Financial Framework Partnership Agreement has been published in the official gazette.

• This topic bears significance for the TR-EU Instrument for Pre-accession Assistance agreement.

According to the statements made by the Grand Assembly:

• The EUR 9.2B fund provided for EU compliance processes has been utilized to support about 900 large-scale projects.
• A fund pool of EUR 14.2B has been prepared for candidates under the IPA III scope.
• Sectors regarding digitalization and green transformation are being prioritized.

International Trade

The regulations on duty-free shops have been amended.

• All applicants are required to have a report prepared by a Sworn-In CPA.

The date of effect of the agreement on incentivization of investments between Turkey and Belarus has been determined.

• The agreement, signed in Minsk in 2018, is deemed to be effective after 30 December 2022.

Climate & Environment

The Law on Organized Industry Zones has been amended.

• The concept of Green Organized Industry Zones has been defined.
• A principle of transparency has been adopted for integrity.
• Regulations on renewable and non-renewable energy sources have been changed.
• The application of liabilities resulting from customs taxes has been altered.

Best regards,

Partners, Taxia