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2024-02 / Financial/Tax Bulletin (January 2024)

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.  

New omnibus having many amendments in Tax Laws, inflation accounting for firms without tax effects for FY23, new tax increases for FY23 annual basis, new interest rates by the CBRT, Türkiye’s new tax treaties and social security agreements, new listing conditions by the Stock Exchange, new thresholds for IPO by the CMB, sustainability reporting requirement with some thresholds announcement by the KGK are main headlines.  

We will follow the iron tracking system by the Tax Office, AirBnb Bylaw applications, new tax amendments frequently mentioned by the Minister in 2023, new law on crypto assets including tax, new amendments expected in corporate tax law about the Pillar II (minimum global tax rules), %3 R&D fund requirements and inflation adjustment procedure close this year.

Main Economic Indicators

The balance of payments statistics for October 2023 is announced by the Central Bank

• The current account recorded net surplus of USD 186 million. Gold and energy excluded current account indicated net surplus of USD 5,067 million.
• Goods deficit recorded USD 4,866 million.
• Click to view the announcement.

Turkish Statistical Institute announced inflation figures for December 2023.

• Consumer price index increased by 64.77% annually and 2.93% monthly.
• Domestic producer price index increased by 44.22% annually and 1.14% on monthly basis.
• Click to view the announcement.

Ministry of Finance and Treasury announced the debt stocks for Türkiye.

• Click to view the announcement.

Ministry of Finance and Treasury announced the domestic borrowing strategy and debt statistics for January – March 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

The omnibus (nr. 7491) has been published in the Official Gazette.

• There are important amendments in different tax laws. We summarize here:

• Inflation adjustment will not be in favor of the banks and financial firms. Profits or losses arising from the inflation adjustment in those firms will not enjoy the inflation accounting for the 2024 and 2025 accounting periods. It will affect the Treasury for TRY70 billion. It will most probably be seen as against to the Constitution if it will be sued.  

• %50 tax deduction is increased to %80 for those who served specific services to the clients abroad if all the earnings are brought to Türkiye.

• VAT submission dates are differentiated for VAT 1 and VAT 2 declarations. VAT 2 is “adverse charge VAT tax declaration” and this will not be deducted unless it is paid.

• %05 “lump sum expenditure allowance” will not be used starting from 2024 for exporters.

• %5 export sourced corporate tax deduction can be used by intermediated firms as well.  

• The President is empowered to differentiate the withholding tax rate on “construction earnings” and increase the tax rate to %40 for interest and similar income.

• Tax exemption on the currency-protected deposit system (KKM) will be extended till 2024 and renewed 3 times by the President. It will be used for 2024 and 2025.

• Participation exemption system for foreign sourced dividends is eased. The conditions for participation exemption now are heavy and some firms cannot meet those criteria. One of the criteria for dividends received must be subject to tax at the level of distributing foreign company at a rate of 15% at a minimum abroad to get %100 exemption.

• New amendment gives %50 exemption rather than full exemption with lighter conditions.

• First, minimum holding of 50% in the share capital of the foreign company (for full exemption holding criterion is %10 and minimum period is 1 year),
• Dividends should be remitted to Türkiye by the date corporate income tax is due.
• Firms previously could not benefit from the full tax exemption because the foreign subsidiary is not subject to 15% taxation will use this partial (50%) exemption on dividends from foreign companies.
• The same application goes for real people as well. It might be considered as “hidden tax amnesty” which Türkiye is very familiar with. In this case, taxpayers in Türkiye might want to declare more foreign sourced dividend income. According to the analysis just 1,500 people declared this income in 2022.

The double-taxation treaty signed with Congo has been approved.

The draft of the VAT communique has been updated but has not been published yet.

• Some definitions have been revised in accordance with received feedback.
• Exclusions for the exemptions made for airports and seaports, such as private vessels, have been highlighted.
• The requests of payment system providers have been mostly overruled.
• The draft is not on GİB’s website, so it may be published soon.

The draft on inflation adjustment communique has been updated and published.

• Institutions that operate within the scope of Banking Regulation and Supervision Authority and Insurance and Private Pension Regulation and Supervision Authority are exempt from inflation adjustments.
• The Draft has been criticized heavily but no major amendment made.

Restructuring terms have been extended.

Taxes on chance-based games have been lowered.

Withholding rates as set by the Temporary Article 67 of Income Tax Law has been extended until the 30th of April, 2024.

• The discounted withholding rates apply to the following:
  • Accrued interest on deposit accounts and participation accounts
  • Earnings on treasury notes, bonds, and sukuks
  • Earnings on investment funds
  • Earnings on asset-backed securities, mortgage-backed securities, asset-collateralized securities, and mortgage-collateralized securities

Courts started to declare first decisions on the “Earthquake Tax” which is negative.

• Click to view the details.

Special Consumption Tax rates have been adjusted.

Social Security

Communique on Iran – Türkiye Social Security Agreement has been published.

Minimum wage has been increased.

• The minimum wage is set as TRY 17,002.12 net, TRY 20,002.50 gross.
• The daily wage is set as TRY 666.75 gross.
• The minimum salary support for 2024 is updated to TRY 700.
• There is no income tax and stamp tax in Türkiye for the minimum wages.

Banking & Finance

Monetary Policy Report has been published by the Central Bank.

The Central Bank has adjusted the interest rates for discounts and advances.

• The discount rate for bills less than 3 months to value date is 43.25%.
• Advance rate is %44.25.

The Central Bank raised the interest rates 2,5%.

• The Monetary Policy Committee (the Committee) has decided to raise the policy rate (the one-week repo auction rate) from 40 percent to 42.5 percent.

IPA III agreement has been approved by the President.

The regulations on securities offerings have been updated.

The Capital Markets Board has extended the inflation adjustment deadline by 6 weeks.

IPO requirements are updated.

• Capital Markets Board (SPK) has tightened the rules in asset and revenue side.
• It is an expected decision after heavy inflation and too many IPO’s in 2023.
• It will be applicable for the new applications starting in 2024.

BRSA (BDDK) renewed the “Bylaw on Credits”.

• Banks should ask “financial table summary” from the clients for the credits exceeding TRY 5 million.

New Listing Conditions for Borsa Istanbul has been announced.

• There are 3 types of market in BIST.
• There is 2% corporate tax advantage for listed companies in Türkiye for 5 years.

R&D and Incentives

Incentives are provided to the youth, women, and persons with professional certificates.

• The incentives are provided without regard to citizenship status as long as the person is within social security.

The 2% fund allocation requirement for R&D incentives is still ongoing.

• It will be calculated on the tax exemption of R&D and Technopark firms.
• This will be 3% next year.

Applications for advance loans with investment commitments have started on the 20th of December.

• The implementation framework for advance loans against investment commitment (ALAIC) is restructured. According to the new implementation framework, considering the Technology/Strategy score of the firms’ investment projects with a minimum total investment amount of TRY 1 billion will be eligible for allocation of ALAIC via intermediary banks.
• The interest rate for loans, which will be extended with a maximum maturity of 10 years, will be set between 30% and 15%, depending on the Technology/Strategy score, the ratio of external financing for the investment, and the financial soundness assessment.
• The new ALAIC program has been allocated an annual limit of TRY 100 billion. The program envisages a total limit allocation of TRY 300 billion over the course of three years. 

The agreement of investment incentives between Turkey and Cote d’Ivoire is determined to be effective from August 30th, 2023.

Research infrastructure aids have been extended until the end of 2028.

Remote work duration for R&D centers and techno parks have been extended until the end of 2024.

• It is %100 for IT people and 75% for others.

Commercial Regulations

Minimum capital requirement figures are increased for the firms in 2024.

• New amount for limited companies is TRY50,000, for joint-stock companies TRY 250,000.
• Non-public joint stock companies with registered share capital will be TRY 500,000.
• These updated amounts will only be applied to joint stock and limited companies incorporated after 1 January 2024. Current companies having share capital is below the new amounts do not have to increase their capital. But, the Ministry of Trade announced on 26 November 2023, stating that it would be beneficial for them to increase share capital to the new amounts.

Construction Iron Tracking System is live in 2024.

The regulations on the principles and rules regarding retail trade has been updated.

The “AirBnB Law” has been published.

• It started in 2024. The Bylaw has also been announced.
• Click to view more about the Law.
• Airbnb stopped to serve the landlords if they are not compliant with the Law.

The restrictions on VAT discounts for customs has been partially rolled back.

The Regulation on Active Cooperation for Detecting Cartels come into force after 14 years of the old version by the “Competition Authority”

The communique on exports has been updated significantly.

The general communique on customs has been updated for 2024.

• The 2024 customs rates have been determined using a revaluation rate of 58.46%

The regulations on the trade of used motorized land vehicles has been updated.

• Used vehicle dealers may not market or sell any motorized land vehicle before the 1st of July, 2024, unless 6 months have lapsed since the acquisition of the vehicle or the vehicle has been used for 6000 km after the acquisition.

Miscellaneous

The law on crypto assets is on its way to the General Assembly.

• According to the Minister of Finance and Treasury, Türkiye should bring the law soon to exit from the gray list.

The premiums for mandatory vehicle insurance have been increased by 10%.

The bankruptcy trustee regulations have been published.

Sustainability Reporting started in Türkiye for FY2024 for big firms and voluntary for others.

• The Public Oversight, Accounting and Auditing Standards Authority (KGK) announced the firms subject to the reporting system on December 27th, 2023. Banks are on the list and the firms exceeding some revenue (TRY 1 billion) and total asset criteria (TRY 500 million).
• Other firms can prepare those reports as well voluntarily even if they are not listed.

Best regards,

Partners, Taxia