2024-63 / Tax Newsletter in Türkiye (October 2024)
Please find out our summary with respect to the latest developments on tax regulations, aiming to provide you an update on the recent changes along with their possible effects on your business.
The New Omnibus Tax Law that introduces the “minimum corporate tax” in line with Globe rules for MNE’s and local Türkiye based firms is the main topic in this month. The Ministry of Finance published important Communiques regarding the recent amendments in tax legislation in Türkiye. Stock options will have tax exemptions for the employees with some certain conditions. Export firms will enjoy 5 points less corporate tax for export activities.
Although we are still working on the latest Omnibus Law, the Minister of Finance gave signals of a new Tax Amendment Package expected to be coming to the Parliament soon. The Government sends another Bill to the Parliament including tax increases and some amendments in “inflation accounting”
Globe rules and Pillar II process are progressing very quickly. Türkiye signed an STTR agreement. In addition, 4 new double taxation agreements, including Hong Kong, are on the agenda.
Good news for the foreign direct investors in Türkiye. Firms in the İstanbul Finance Center are allowed to bookkeeping in F/X and there is a new program called “Türkiye Tech Visa” to promote and attract the start-ups and talents coming and working in Türkiye techno parks.
Major Tax Issues
New Tax Law is coming to the Parliament.
- Scope in the inflation accounting is getting narrow. The government owned enterprises are out of scope. Broke firms and companies in liquidation process are not subject to the inflation accounting. Investment amounts in balance sheets will be adjusted with a different method to give a tax effect extension for those firms.
- Some transactions will be subject to “special fund” which is applied as quasi tax for a long time. The revenue of this fund is spent for “improvement defense industry in Türkiye”
- Credit cards, transactions of vehicle and immovables and tax returns are subject to this levy.
- All motorbikes will be subject to the vehicle tax and some luxury items and entertainment items will be subject to “special consumption tax” as well.
Small firms are not subject to inflation accounting in Türkiye for provisional tax periods in 2024.
- The Ministry of Finance published an amendment stating that small firms having less than 50 million TL gross sales are not supposed to prepare financial tables with inflation accounting for the second and third provisional tax quarters.
The Ministry of Finance published the Corporate Tax Communique regarding the recent amendments made in the last 4 years in tax legislation.
- Different tax legislations and amendments were made in recent years, starting in 2021. The Revenue Administration has prepared the Communique including 7 tax omnibus laws.
- Explanations on important regulations such as different tax rates in corporate tax, reduced rate applications, free zone tax exempted earnings, taxation of investment funds and partnerships, minimum corporate tax application, partial division and real estate sales earnings exemption, discount application for some services provided abroad from Türkiye, and 50% exempt dividend income obtained from foreign affiliates meeting the conditions can be found in this Communiqué.
- Important changes are summarized below in this Corporate Tax Communique:
- The implementation of the minimum corporate and income tax will begin in 2025. New firms are not subject to this tax, which are younger than 3 years old.
- In free zones, corporate tax exemption will be only applicable for export income.
- 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)
- Additionally, Türkiye implements a qualified domestic minimum top-up tax (QDMTT).
- There will be another Draft Communique for the Pillar II application.
- Türkiye signed the STTR with the other 8 countries.
- The tax-free period for REIT/REIF came to an end; the requirement to distribute 50% of the profit is a must, and withholding tax is to be collected in this way.
The taxpayers list who declared the most tax for the 2023 taxation period has been announced by each one of the Tax Districts in Türkiye.
Turkey has signed a new agreement on minimum global corporate tax (STTR).
- The process is progressing very quickly. In addition, 4 new double taxation agreements, including Hong Kong, are on the agenda.
- You can find details about Turkish application of Pillar II by clicking the link.
Firms in the Istanbul Finance Center are powered to bookkeeping in F/X instead of TRY.
- The Istanbul Finance Center law provides numerous tax incentives for the firms within the Center.
- General Communiqué numbered 569 (VUK), published in the Official Gazette on 2024, September 26th, explains in detail the issues such as participants keeping books in foreign currency, the main conditions and limits sought, the exchange rates to be taken into consideration, submission of books and tax declarations, application period, conversion to another foreign currency, and TRY.
- The objectives of the new law are as follows:
- To define financial service exports and to incentivize such activities by exempting 75% of the gains earned in such a fashion from the basis used in corporate tax assessment, along with a corporate tax discount rate of 100% for the gains earned in such a fashion between 2022 and 2031.
- To allow for the participants to use accounting principles denominated in foreign currencies.
- To ease excise and stamp taxes for the relevant activities and institutions.
New Tax Communiques are published regarding tax penalties, rental payments, and other payments by banks, e-invoices, e-ledgers, and e-applications.
- Rental payments are to be paid via banks regardless of the amount of rental type.
The scope of the easy tax regulation that came as “Youtuber taxation” has expanded.
- The 15% final tax exemption also covers individual courses and trainings. There are many examples and details in the circular. Taxpayers should inform the tax office and open a specific bank account for this income in Türkiye.
New Tax Communique is published for income taxation of “stock options” in Türkiye.
- Communique explains the new “stock options tax exemption” for technology companies.
- Stock options are defined in Turkish Tax Law for the first time with a possible tax exemption but with unexpectedly though conditions.
- Tax exemption will be limited to the annual salary, and the shares will not be sold for a certain period otherwise, this will be taxed.
Banking & Finance
The Capital Markets Board (CMB) published the “Board Decision on the Sales Methods and Distribution Principles to be Applied in the Initial Public Offering of Shares.”
CMB regulates the VC Communique and eases some procedures and thresholds.
CMB continues to list crypto asset companies.
- According to the announcement on CMB’s web site, service providers are applied to CMB. The list of service providers and the ones applied for liquidation are published.
Some changes have been made to the Capital Movements Circular by the Central Bank.
The Monetary Policy Committee has decided to keep the policy rate (the one-week repo auction rate) constant at 50 percent.
- You can find the details by clicking the link.
The BRSA (BDDK) has prepared Draft Communiqués regarding the display of inflation accounting-based items in financial tables.
R&D and Incentives
Crucial updates have been made to the Organized Industrial Zones (OIZ) Implementation Regulation.
- There are 362 OIZs in our country, and important incentives are provided in this regard. In addition, we know that there are 42 specialized OIZs based on agriculture.
Türkiye Tech Visa Program is announced.
- Türkiye Tech Visa is an exclusive invitation program for talents with critical expertise in technology and startups with innovative business models and technology-based studies. Within the scope of Türkiye Tech Visa, it is provided for talents and startups with many privileges and opportunities that accelerate their participation of Turkish technology ecosystem and make their lives easier in Türkiye.
- You can find details in its website. The Ministry of Labor regulates the working visa legislation and eases some procedures and thresholds.
Climate & Environment
Türkiye announced “Draft Legislation on Green Taxonomy”
- This will help banks, shareholders, and all parties what the right activities and measuring & monitoring the metrics. Firms will start reporting in 2027. The legislation gives enough time to get ready.
- The Draft introduces the definition of the “sustainable economic activity” into legislation, allowing the classification of environmentally sustainable economic activities of companies from different sectors and within the scope of uniform set of rules, thereby facilitating the creation of a climate of trust for all investors motivated by environmental concerns, reducing greenwashing, and encouraging sustainable investments.
- You can find all legislation, framework, Türkiye’s agenda in the following link.
CMB announced the Draft Guidelines on Green Bonds and Sustainable Instruments.
- The Draft Green Guidelines cover green, sustainable, and social capital markets instruments, such as green, sustainable, and social debt instruments, lease certificates, asset- and mortgage-covered securities, asset- and mortgage-backed securities, project-backed securities, and real estate certificates.
- Guidelines evaluate blue capital markets instruments as green capital markets instruments.
- Issuers must obtain external reviews from independent institutions specialized in environmental, sustainability and social issues to certify that their capital markets instrument issuances comply with the Draft Guidelines.
Public Oversight Accounting and Auditing Standards Authority (POAASA) announced Draft Legislation of Sustainability Audit.
- The Draft Regulation stipulates the scope of the sustainability audit, sustainability audit report, audit firms that can conduct sustainability audit, restrictions, and sanctions to be imposed on these audit firms.
- Sustainability Reporting had started in Türkiye for FY2024 for big firms and voluntary for others. You can find details in January Tax Bulletin.
- 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.
Commercial Regulations
The Free Trade Agreement between Türkiye and Ukraine is on by the Presidential Decree.
POAASA announced Draft Legislation of Audit Rotation.
- Firms must choose another audit firm after 7 audit terms / years. The draft explains different scenarios for companies, audit firms and, auditors.
- It is in line with international practices to solve the “conflict issues.”
Miscellaneous
The SGK Circular regarding applications such as meal cards, checks or coupons has been cancelled.
- It is very important for all the employees and employers. You should double check with your accountants and payroll outsourcing firms if you have services from them.
UTTS system will cover all the vehicles in Türkiye to track the oil / gas consumption.
- It will cover the vehicles owned by the firms first. The deadline for this is the year end FY24. The system will be applicable for the new cars in the second half of FY25.
The social security premium rate for short-term insurance branches was increased from 2% to 2.25%.
The Medium-Term Program (MTP) has started to implement.
- The MTP (2025-2027), in accordance with the objectives of the Twelfth Development Plan (2024-2028), aims for sustainable growth by strengthening macroeconomic and financial stability, maintaining fiscal discipline, achieving price stability by reducing inflation to single digits in the medium term, improving R&D and innovation capacity, ensuring technological transformation with a focus on transition to a green and digital economy, strengthening human capital, further activating the labor market, improving the business and investment environment, and reducing informality in the economy.
- The objectives and priorities of the MTP (2025-2027) shall be determinant in the preparation of public institutions’ budgets, legal and administrative regulations, decision-making, and implementation processes throughout the program period. Concrete measures to be implemented in the first year of the program in policy and priority reform areas shall be detailed in the Presidential Annual Program for 2025.
- You can find the details of the Program by clicking the link.
Best regards,
Taxia Partners
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