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2024-49 / Taxademy Newsletter (August 2024)

Please find out our summary with respect to the latest developments on tax and related regulations aiming to provide you an update on the recent changes along with their possible effects on your business.  

There is a new Omnibus Tax Law that introduces the “minimum corporate tax” in line with Globe rules for MNE’s and local Türkiye based firms. On the other hand, currency protected deposits will be subject to a decreasing rate of withholding tax starting in August.

The largest incentive package is announced for high – tech industries and the new Turkish FDI Strategy was released with its action plans.

Major Tax Issues

It is confirmed by the Ministry of Finance that the inflation adjustment will be prepared for the second provisional tax period, despite some criticism from local accounting and business professionals.

A large-scale Omnibus Tax Law is approved in the Parliament;

• Important changes are summarized below:
  • Minimum corporate and income tax implementation is on its way.
  • Some VAT exemptions are being removed and the scope of others is being narrowed.
  • In free zones, corporate tax exemption will be only applicable for exports income.
  • Stock options are defined in the Tax Law with a possible tax exemption but with unexpectedly though conditions.
  • Pillar II will be applied in Türkiye. A new Chapter has been added to the current Corporate Tax Code in Türkiye.
    • Türkiye chooses the income inclusion rule (IIR) and the undertaxed profits rule (UTPR). Also, a qualified domestic minimum top-up tax (QDMTT) is used.
  • The tax-free period for REIT/REIF is coming to an end, the requirement to distribute 50% of the profit is a must and withholding tax to be collected in this way.
  • 5-year time limit on the utilization of carry forward VAT will start in 2030.
  • Transfer of carry forward VAT in mergers and spin-offs will be tax audited.

• It was presented to the public somehow before pre-approval of the President and heavily discussed in media. It is obvious that some of the proposed changes were not accepted in this round, due to current political climate. Even those are not in this Omnibus, they might be coming to the Parliament in a later round. Those are seen below to foresee the changes in the future:
  • In one of the proposed changes, it was suggested to question the source of expenditures and request an additional tax on those whose source cannot be explained through the income declared by the taxpayer. This was heavily discussed in public, but it is not enacted as because of high social and political costs of this shift.
  • It was proposed to end the current practice of selling subsidiary shares with a 75% tax exemption in the corporate tax law. According to this proposal, exemption would be no more applicable for the newly acquired subsidiary shares, the exemption rate for existing subsidiary shares will be decreased to 25% instead of 75%. As the corporate tax exemption and demerger exemption for immovables did end last year, we will closely follow up the current tax exemption for subsidiary shares in future.
  • A gradual exemption was being envisaged in the field of income tax for share options. It is seen that the 2-year tax exemption period for capital gains envisaged on the disposal of shares would have been increased to 5 years and partnership shares were going to be also included. This is a huge tax incentive for Turkish start-ups and will not be a good idea to end it in this turbulent time.
  • It was understood that withholding taxation would have been applied to rental income, and the declaration of these income not exceeding a certain limit will become optional. In general, taxable income is quite low comparing to number of taxpayers. With the proposed regime the cost of tax collection would be low as it will be final tax.
  • An upper limit was going to be imposed on the income tax exemption applied to R&D personnel in techno parks and R&D firms. In current practice, no matter how much salary s/he receives, it is exempt from income tax with some exemption rates up to %100.
  • The removal of the VAT exemption and guarantee method applied within the scope of the inward processing regime was being discussed.
  • While transaction tax was foreseen for crypto assets, a low-rate withholding tax on tips in service businesses, and income tax withholding for motor couriers, it appears that the period-based withholding tax for stock market earnings has been waived. These proposed changes need to be followed in the new tax law proposals expected in the Parliament during last quarter of 2024.

Another Tax Omnibus Law passed in the Parliament, number 7521.

• There are different items in the Law. Some of them are related with public spending and tax.
• It is aimed in this law;
  • To encourage hybrid electric vehicles that meet the stipulated conditions by changing the Special Consumption Tax rates, and
  • To exempt investment contracts signed between the Minister of Industry and Technology and investors, which contain provisions regarding investment incentives, from stamp duty, like those applied based on investment incentive documents.

Currency protected deposits are subject to a decreasing rate of withholding tax depending on their maturity.

• Tax rate will be 5 and 7,5 % and it starts in the beginning of August.
• With the same Presidential Decree, the reduced withholding tax application applied to income obtained from deposit and participation accounts and some securities was extended until 31 October 2024.

Banking & Finance

The Monetary Policy Committee has decided to keep the policy rate (the one-week repo auction rate) constant at 50 percent.

CMB announced transition period and service providers list after the enactment of Crypto Asset Law.

• According to the announcement on CMB’s web site, service providers applied to CMB.
• The list of service providers and the ones applied for liquidation will be published. The current list can be followed by clicking the

In the CBRT Capital Movements Circular, the scope of capital coming from abroad within the scope of “convertible debt” was expanded.

R&D and Incentives

Türkiye’s Foreign Direct Investment (FDI) Strategy (2024-2028) is updated.

• You can find the details here.

The largest incentive package is announced for high – tech industries.

• It will be 30 billion USD worth and there are different sectors to benefit from the regime.

The Green and Digital Transformation Support Implementation Communiqué has been published.

Commercial Regulations

The Free Trade Agreement between Türkiye and Ukraine is enacted.  

The Consumer Protection Bill is in the Parliament.

A chart of accounts in accordance with financial reporting standards has been published.

Miscellaneous

KGK has regulated the application principles of independent audit criteria.

The limit for personal items brought by individuals from abroad has been reduced to 30 Euros.

The Sports Federation Regulation has been published.

• The regulation includes the boards of management and audit, rules to be followed and working principles. Sports federations are obliged to establish an accounting service, train the personnel working in this service and keep accounting records up to date.
• Audit boards prepare a separate audit report for each completed fiscal year. The audit also covers the economic enterprises of the sports federation. The activities of the economic enterprises are evaluated under a separate heading in the prepared report.

Best regards,

Taxademy