TAXIA Kişisel Rıza Formu

2024-13 / Financial/Tax Bulletin (March 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 Circular on inflation accounting for firms without tax effects for FY23, upcoming tax returns season for income tax and corporate tax, Türkiye’s new tax treaty with Azerbaijan and Gabon, new TRY payment necessities for some contracts, new Turkcorn program for Turkish unicorn candidates, Türkiye’s Pre-Accession Report submitted to the EU and OECD tax developments are the main headlines.

Major Tax Issues

Tax declaration deadlines are approaching.

• Income tax returns for 2023 should be filed in March.
• Real person taxpayers who are subject to income tax should file their returns electronically by the 1st of April.
• You can visit Tax Brochures prepared by Turkish Tax Authority in English.
• Corporate tax returns for 2023 should be filed by the end of April (Tuesday, April 30th).
• There are 2 important tax exemptions in this year with a new amendment. One is for firms the other one is for real person taxpayers.

• Participation exemption system for foreign sourced dividends is eased with this new Law. The conditions for participation exemption are heavy and some firms cannot meet those criteria. One of the criteria to enjoy full exemption for dividends received by a Turkish company from a foreign participation, is to be subject to tax at least at the rate of 15% at the level of distributing foreign company.
• New amendment gives %50 exemption rather than full exemption with lighter conditions.
  • Holding of at least 50% of the share capital of the foreign company (for full exemption holding criterion is %10 and minimum holding period is 1 year),
  • Dividends must be remitted to Türkiye by the date corporate income tax is due.
  • Firms that could not benefit from the full tax exemption because of minimum taxation requirement of the foreign subsidiary will be able to use this partial (50%) exemption on dividends to be received from foreign companies.
  • The same application goes for real people as well providing 50% tax exemption on foreign sourced dividends transferred to a Turkish individual. It might be considered as an alternative to a “tax amnesty” which has been used several times in Türkiye to allow transfer of those foreign sourced income. In this case, it is planned to encourage individual taxpayers in Türkiye to declare foreign sourced dividend income regularly, without waiting for a tax amnesty law. Please note that, according to the analysis just 1,500 people declared this income in 2022.
  • This new tax incentive will be applied for FY23 as well, so better to talk with your tax advisors if you have such transactions in 2023.
  • Taxia organizes a webinar on “income tax” in March 12th.

Angel investors can use tax exemption in their tax returns.

• Real persons who are tax resident in Türkiye may exempt 75% of the value of their participation shares held in full taxpayer corporations from their annual tax returns.
  • Shares must be acquired after the date of this ruling.
  • Shares must be held for at least 2 years.
• This exemption is applied as 100% if the corporation is involved in a research, development, or innovation program as incentivized by the Ministry of Industry and Technology.

Tax-free Foundations (NGO) are to submit “Exemption Reports” in March

• There are more than 300 Foundations in Türkiye to enjoy tax exemption. They must submit a special exemption report certifying certain conditions by a sworn-in CPA
• Firms can deduct the payments to those NGO’s in their corporate tax returns as well.

OECD published the G20 Finance Ministers’ Meeting Notes

• According to the Report the G20 led global efforts to crack down on bank secrecy in 2009, EUR 126 billion in additional tax revenues have been assessed or collected among the members of the Global Forum on Transparency and Exchange of Information for Tax Purposes (Global Forum)
• Automatic Exchange of Information
  • So far, 108 jurisdictions have exchanged information under the AEOI Standard. Information on over 123 million financial accounts was exchanged automatically in 2022, covering total assets of almost EUR 12 trillion.
  • More than 130 jurisdictions have reported engaging in EOIR in 2022. Over 26,600 requests for information were sent last year to support ongoing tax investigations.
• Pillar I and II are on the way
  • The Pillar Two global minimum tax, which represents the most significant globally coordinated effort to address profit shifting ever agreed, is already being (or will be implemented) by over 35 jurisdictions taking effect in 2024.
  • It will substantially reduce low-taxed profit globally by about 80% (from an estimated 36% of all profit globally to about 7%).
  • Moreover, the Inclusive Framework is now working towards finalizing the text of the Multilateral Convention to Implement Amount A of Pillar One (MLC) by the end of March with a view to holding a signing ceremony by the end of June 2024.
  • Amount A is set to allocate taxing rights on around USD 200 billion profit per year and raise USD 17-32 billion by reallocating taxing rights from investment hubs to market jurisdictions.

OECD Tax Days covering international tax issues.

• It will be held in March 12th and 13th. It is valuable for tax practitioners.
• On 12-13 March, a dedicated series of online sessions covering the OECD’s work on tax and development will be open to the public, allowing a glimpse into the various international tax-related workstreams.

Double Tax Treaty with Azerbaijan will be renewed.  

• The first Treaty was signed between the countries in 1994. The new agreement is signed in Ankara in February 2024.

Double Tax Treaty with Gabon is signed in Antalya in March 3rd, 2024.

The interest rate on the 2023 cash capital discount is revised as 53.11% (It was set 52.73% before).

• New capital injection will enjoy this “notional deduction” depending on the capital’s origin.
• The notional interest deduction was limited to 5 years with an amendment in 2022. There was no time limitation before this change.
• Foreign capital will be deducted at a rate of 75%. Domestic capital will be deducted at a rate of 50%.

The Circular on inflation adjustment was published.

• Communique number 555 of Tax Procedural Law was published before for the inflation accounting starting to be applied for FY23 and FY24.
• The Circular number 165 was published by the Tax Authority.
• In summary, there is no threshold so far in terms of the size of the balance sheet or number of employees.
  • B/S for FY23 will be adjusted and it will have no corporate tax effects.
  • FY24 and coming years will be adjusted in every quarter till the inflation decreases and, there will be tax effects either increasing the profit or loss for companies.
  • Inventory / tangible asset rich firms will pay tax and capital intense firms will create losses deductible in general.
  • There is no VAT affect as long as the inventory/assets kept.
  • As debts and credits will not be adjusted but the capital adjusted, then “finance expense limitation” will be eased for indebted firms.
  • More importantly, it seems to be applied for provisional tax periods as well.

Social Security

The Communique regarding with minimum wage is published.

• Minimum wage support law is passed in the Parliament. Law number 7495 is published.
• The minimum salary support for 2024 is updated to TRY 700. The minimum wage is set as TRY 17,002.12 net, TRY 20,002.50 gross last month.
• The daily wage is set as TRY 666.75 gross.

Banking & Finance

The Central Bank decided to keep interest rates 45%.

• The Monetary Policy Committee (the Committee) has decided to keep the policy rate (the one-week repo auction rate) constant at 45 percent.
• Participating Committee Members; Yaşar Fatih Karahan (Governor), Osman Cevdet Akçay, Elif Haykır Hobikoğlu, Hatice Karahan, Fatma Özkul.

TRY payment necessity is eased for some transactions with a Circular.

• Contract and payment in other currencies are strict in Türkiye starting from 2018 with a Presidential Decree. In time, there are some exemptions and ease but this legislation is still very crucial. You can read more about the Decree and Circular in our newsletter.
• As you can read more detail below, other than vehicle sales, firms are able to deal and sign contract in other currencies. But even in this case, payment must be made in TRY. There are some exemptions. Those exemptions are clarified with a new Circular.

• In April 2022 a new Circular was announced and payment with Turkish Lira is necessary event the contract is in foreign exchange:
  • With a revision in the Communique number 32-34 Turkish Lira should be used in payments. Ministry of Finance shed lights on some questions below:
  • Payment obligations regarding negotiable instruments indexed to a foreign currency (e.g. checks) issued within the scope of contracts concluded before April 19, 2022 might be fulfilled in a foreign currency.
  • Payment obligations regarding invoices issued before April 19, 2022 may be fulfilled in a foreign currency.
  • Purchase and sale transactions regarding precious metals and precious stones carried out in a foreign currency and payment obligations within the scope of settlement of such transactions in the Precious Metals and Precious Stones Market of Borsa İstanbul A.Ş., may be fulfilled in a foreign currency.
• In February, 2024 a new Circular is published and some exemptions are announced in terms of the payment in TRY.
• Those are the invoices before April 19th, 2022, payment in free zones and payment between the specific export mediation firms.

R&D and Incentives

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 requirement will be 3% this year.
• You can read an article written by Taxia’s Partner Şaban Küçük regarding with the “collective investment vehicles” in Türkiye.

Turkcorn Program is live and support unicorn candidates in Türkiye.

• Progam aims to count new Turcorns to the Turkish startup ecosystem with the Turcorn 100 Program, in which the Program support technology startups that have successfully passed the early stage and have high growth potential, in order to scale faster and open to global markets.
• We define startups operating in Türkiye with a valuation of 1 Billion Dollars as Turcorn.

Commercial Regulations

Turkish Competition Authority issued a newsletter about the recent developments.

• According to the Newsletter “in this winter term, while we welcome 2024, we take a look back to 2023 and we would proudly like to share the overall picture we depicted: In 2023, 58 investigations were concluded in total. For 46 of them, in which violations were detected or the undertakings settled with the TCA, a total of 2.3 billion TL fine was imposed.
• However, in some markets, guiding how to open the market to competition becomes more important than simply imposing fines or stopping violations. In this regard, 6 of the investigations, including those on Obilet, Krea and Sahibinden, were terminated by accepting the commitments made by the undertakings. We are currently working on 45 investigations, 35 of which have been initiated in 2023.”

Turkish Audit Authority published a new announcement regarding with the standards

• Subject of the announcement is Publication of “Conforming and Consequential Amendments to the IAASB’s Other Standards as a Result of the New and Revised Quality Management Standards” and “Revisions to the Code Relating to the Definition of Engagement Team and Group Audits”
• Click to view the details.

Energy Market Regulatory Authority (EMRA) Activity Report 2022 is published.

• Report includes, legislative activities, licenses and permits, tariffs, and price formation, consumer protection activities and audit of the EMRA in 2022.

Miscellaneous

Türkiye’s “Pre-Accession Report” is published for 2024-2026.

• Türkiye, as an acceding candidate country of European Union (EU), has been preparing the Economic Reform Program (ERP) and has been submitting it to the European Commission since 2001, responding to the request of the Economic and Financial Affairs Council (ECOFIN Council) dated 26-27 November 2000.
• In line with the framework requested by European Commission, Economic Reform Program (2024-2026) has been prepared under the coordination of Presidency of the Republic of Türkiye, Presidency of Strategy and Budget with the contributions of relevant ministries and institutions and approved by the President.
• In consultation with all relevant institutions, ERP (2024-2026) has been prepared based on Long-Term Development Strategy (2024-2053) and 12th Development Plan (2024-2028), Medium Term Program (MTP, 2024-2026) and 2024 Presidential Annual Program.

Eighth Amendment on Judicial System include revisions on Turkish GDPR.

• The amendments are accepted in the Parliament as Law number 7499 and will be submitted to President’s approval. This law has not been published in Official Gazette yet.
• The changes envisaged by the new Law are related to (i) processing conditions of data, (ii) conditions for transfer of personal data abroad and (iii) administrative sanctions and remedies against administrative sanctions described by the Law.
• You can find more information regarding with Turkish law and applications in Türkiye. Personal Data Protection Authority publishes important decisions and announcements in its website.

Railway Operation Authorization Regulation has been published in official gazette in February.

• The purpose of this Regulation is to regulate the railway transportation activities carried out on the national railway infrastructure network, by railway infrastructure and railway train operators and those engaged in agency, station, or station operator activities;
  • Determination of service principles, professional prestige, and financial and professional qualification conditions,
  • To regulate the procedures and principles regarding the determination, authorization and supervision of the rights, powers, obligations, and responsibilities of those operating.
• One of the required conditions for management is financial sufficiency. Operators must have been independently audited and have sufficient capital to meet a certain capital and must certify this. This company should at least have TRY 50million paid capital.

Consumer Price Index for February 2024 as announced by TURKSTAT;

• Consumer price index (CPI) increased by 67.07% annually and 4.53% monthly.

Best regards,

Taxademy