1. Minimum Corporate and Income Tax
What is the Minimum Corporate Tax Regulation?
Explanation: According to the proposed law, the minimum corporate tax is calculated as 10% of the pre-deduction corporate income (excluding certain exemptions and reductions), or 2% of the declared revenue (2% of total assets for banks and financial institutions), whichever is higher.
Details: The minimum tax based on revenue can be offset against the corporate tax payable over the next five accounting periods. New corporate taxpayers are exempt from the minimum tax for the first three taxation periods.
Special Case: For income related to investment incentives obtained before the publication of the law, a 5% rate will apply.
What is the Minimum Income Tax Regulation?
Explanation: If the taxable income declared in annual returns (including those declaring a loss) is less than 10% of gross revenue/net sales, the taxable income will be considered as 10% of gross revenue/net sales, and the tax will be calculated on the resulting income difference.
Details: The minimum tax can be offset against the income tax payable over the next five accounting periods. New income taxpayers are exempt from the minimum tax for the first three taxation periods.
2. Revenue Tracking in Certain Professions and Commercial Activities
How is Revenue Tracked in Certain Professions and Commercial Activities?
Explanation: For professionals (doctors, dentists, etc.) and commercial traders (restaurants, cafes, hairdressers, etc.), daily revenues will be determined through inspections conducted at least 3 times a month and 12 times a year. If there is a discrepancy (e.g., 20%) between the declared revenue and the inspected revenue, the taxpayer will be invited for an explanation.
Details: If the explanation is insufficient and the declaration is not corrected, tax authorities will make an assessment based on the inspected revenues or refer the taxpayer for a tax audit.
3. Withholding in Corporate Tax
Which Payments are Subject to Withholding in Corporate Tax?
Explanation: The proposed law includes certain transactions already subject to partial withholding in VAT (construction works, labor supply services, consultancy services, meal services, etc.) to also be subject to withholding in corporate tax.
Details: Payments made through e-commerce platforms will also be subject to tax withholding.
4. Adjustment of Capital Gains Exemption for Shares and Equity
What Changes are Proposed for the Exemption of Capital Gains on Shares and Equity?
Explanation: The holding period for shares owned by fully liable corporations to qualify for the exemption is extended from 2 years to 5 years.
Details: The exemption will also include gains from equity shares (e.g., limited company shares).
5. Tax on Cryptocurrency Transactions
How Will Tax on Cryptocurrency Transactions be Implemented?
Explanation: The proposed law stipulates that gains from the sale of cryptocurrencies through platforms regulated by the Capital Markets Board (SPK) will be subject to income tax and withholding.
Details: The withholding tax rate is proposed to be 0.03%.
6. Corporate Tax on Public-Private Partnership Gains
How Will Public-Private Partnership Gains be Taxed?
- Explanation: A 30% corporate tax will be applied to gains from public-private partnership projects.
7. Tax Benefits for Stock Options in Startup Companies
What Tax Benefits are Provided for Stock Options in Startup Companies?
Explanation: Employees of startup companies engaged in R&D and design activities defined by the Ministry of Industry will receive tax benefits on stock options, depending on the holding period.
Details: Up to 3 years: general taxation; 3-6 years: 25% tax advantage; 5-12 years: 75% tax advantage; over 12 years: 100% tax advantage.
How Will Precious Metals and Deposits be Valued?
Explanation: The proposed law requires businesses to value precious metals and deposits based on market rates.
Details: This valuation method will be effective from January 1, 2024.
9. Removal of Exemption for Share Sale Gains
What Changes are Proposed for the Exemption of Share Sale Gains?
Explanation: The exemption for gains from the sale of newly acquired shares will be removed. For existing shares, the exemption rate will be reduced from 75% to 25%.
Details: The new rule will apply to shares acquired after the publication date of the law.
10. Removal of Exemption for Real Estate Investment Trusts
What Changes are Proposed for Real Estate Investment Trust Exemptions?
Explanation: The proposed law requires that 50% of gains from real estate held by Real Estate Investment Trusts (GYO) and Real Estate Investment Funds (GYF) be distributed for the exemption to continue.
Details: As a result, minimum corporate tax will be paid on real estate gains.
11. Limiting Free Zone Exemption to Export Revenues
How Will the Free Zone Exemption be Limited?
- Explanation: The exemption will be limited to export revenues.
12. Increase in Departure Fee
What Changes are Proposed for the Departure Fee?
- Explanation: The departure fee for leaving the country will be increased.
13. Deducting VAT Carried Forward for More Than Five Years
How Will VAT Carried Forward for More Than Five Years be Handled?
Explanation: If VAT carried forward cannot be deducted within five calendar years, it can be considered an expense in determining income or corporate tax.
Details: In mergers, transfers, and divisions, carried forward VAT can be transferred to the new company without being subject to the five-year criterion.
14. Limitation of Settlement
How Will Settlement Be Limited?
- Explanation: Settlement will be limited to penalties only.
What Measures Will Increase Tax Compliance and Combat the Informal Economy?
Explanation: The proposed law includes various measures such as increased penalties for unregistered activities, penalties for using someone else's POS device, and mandatory reporting of invoices and real estate rentals.
Details: Penalties for non-compliance with these measures will be increased.
Summary
This comprehensive overview of Turkey's proposed tax law changes includes new regulations on minimum corporate and income tax, revenue tracking for certain professions, tax withholding for corporate payments, and adjustments to capital gains exemptions for shares and equity. These changes aim to enhance tax compliance and combat the informal economy across various sectors.
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