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2024-30 / Taxademy Newsletter (May 2024)

Find out the latest developments on tax and related regulations and be updated on recent changes along with their effects on your business through our monthly tax bulletins.

Ministry of Trade’s Draft Circular on inflation accounting for firms about the capital and reserves, postponed tax return season for corporate taxpayers, news about the postponement of inflation accounting for the first provisional tax period for 2024, increased withholding tax rates on time deposit accounts and other instruments are the main headlines. Foreign direct investors should check and submit their investments in May to the Ministry.

Major Tax Issues

Withholding tax on time deposits and other instruments are increased.

• It started to implement in May 1st. It will be applicable till the end of July 2024.
  • Withholding tax on F/X time deposits set as 25% in last July. It used to be 18-20% depending on the maturity.
• TRY time deposits have been taxed with lower rates until this decision. Time deposits withholding tax is shown below depending on the maturity and F/X.
• TRY Foreign Exchange Protected Deposit Account Converted from FX gains are taxed %0. Time deposit accounts tax is also %0 for the ones which has adjustable interest rates to the inflation.
• WHT rates are increased on some funds, bonds, and different instruments.

TRY / FX Time Deposit Accounts Tax (Withholding Tax) Rates

Corporate tax returns due on May 6th.

• There are 1.158.382 corporate tax payers in Türkiye according to the Statistics announced by the Revenue Administration as of March 2024.
• Important specific matters are summarized below for FY23 corporate tax returns:
  • %50 tax deduction rate is increased to %80 for those who served specific services to the clients abroad if all the earnings are brought to Türkiye. This rate increase will be used for corporate tax payers in 2023.
  • %05 “lump sum expenditure allowance” will not be used starting from 2024 for exporters. So, it will be the last year to use this application in tax returns.
  • %5 export sourced corporate tax deduction can be used by intermediated firms as well. Corporate tax rate is %25 for firms while it is %20 for exporters.
  • Participation exemption system for foreign sourced dividends is eased this year. New amendment gives %50 exemption rather than full exemption with lighter conditions. Dividends should be remitted to Türkiye by the date corporate income tax is due to benefit this new %50 exemption.
  • Tax returns will be different this year. There are 2 balance sheets attached to corporate tax return because of the inflation adjustments for FY23. You can find more info regarding with this application.

You should double check the corporate tax rates as it become more complex.

• Corporate tax rates depend on the FY year, type of the companies (financial or non-financial), the main activities (industrial/exporting) and whether it is publicly listed or not and type/region of the investment incentive certificates if there is any in Türkiye.
• There might be some gray areas in practice that you should ask for advice.
• There is no tax in techno parks, free zones and İstanbul Finance Center with some conditions.

The notional interest rate on the 2023 cash capital discount is revised as 53.11%.

• New capital injection will enjoy this “notional deduction” depending on the capital’s origin.
• Foreign capital will be deducted at a rate of 75%. Domestic capital will be deducted at a rate of 50%. It is super incentive for FDI to Türkiye.

Inflation Accounting will not be made in first provisional Tax Period in Türkiye.

• The Ministry of Finance has the power to postpone it for the provisional tax seasons. Inflation adjustments will be in the second and third quarter if not changed and annual basis for FY24.

The Draft Circular on inflation adjustment was announced by the Ministry of Trade.

• Draft Circular is explaining the financial tables to be considered in different cases such as profit distribution, capital increase and capital reserves to be converted to the capital.
• Banks are not in the scope of this Draft.

The revaluation rate to be used for 1Q2024 corporate tax period has been determined as 7.55%.

New VAT Communique create some controversial news in media.

• The Government had increased some tax rates in July 2023 last year.
  • Additional tax increases were in effect started last year.
  • VAT rates had been increased by 2 points across the board.
  • Banking and insurance transaction tax has been increased to 15% for consumer loans.
  • Gambling tax has been increased by 100%. Duties have been increased by 50%.
  • Mobile phone registration duty has been increased to TRY 20k.
  • Motorized vehicle tax has been increased for gasoline, diesel, solvents, and its derivatives.
• Ministry of Finance has updated the Communique regarding with the “food and beverages” and “catering services” with examples. There are still some grey areas about the rate.

Banking & Finance

CMB launches new online system for submissions

• Capital Markets Board of Türkiye (CMB) announced the new electronic system for submissions which is known as “e-Başvuru Sistemi.” This new platform facilitates the submission to the Board electronically, streamlining the process and enhancing accessibility.

The Central Bank has kept the interest rates stable.

• The award rate for weekly repurchase agreements is 50%.

Turkish Digital Lira Report is announced by TCMB.

R&D and Incentives

2 new project-based incentives are being announced by the President.

• Defense industry plant has been incentivized in Ankara and Kırıkkale.
• Aluminum production plant has been incentivized in Tekirdağ.

Fund allocation requirement for R&D incentives is still ongoing.

• It will be calculated on the tax exemption of R&D and Technopark firms.
• Firms should make the reservation in their accounting accordingly.
• This requirement will be 3% this year. The funds should be calculated in April and should be allocated till the year end.

Commercial Regulations

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

• 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.

Miscellaneous

Airbnb Law application is extended till June for landlords to be in line with the rules.

• You can access our article regarding the Airbnb Law by clicking on the

The implementation guide on financial reporting in high-inflation economies has been updated and published on the KGK website.

KGK has updated its independent audit criteria.

• With the Decision dated April 6, 2024, turnover and asset sizes were doubled while the number of employees, which is one of the general audit conditions, remained the same.

Sustainability is an important subject for firms in Türkiye.

• KGK announced additional guidelines for some business sectors.

Constitutional Court published important decision on additional tax.

• The additional tax was for implemented for the 2022 Corporate Tax return period. The additional tax was levied whether the company has recorded profits or not in this period.
• The Court did not discuss the different tax exemptions such as share premiums.
• As expected, it is not cancelled by the Court. You can find details about the tax.

Consumer Price Index for April 2024 as announced by TURKSTAT;

• Consumer price index (CPI) realized as 69.80% annually and 3.18% monthly.

Best regards,

Taxademy