# Domestic Minimum Corporate Tax: Rules and Worked Examples

# Domestic Minimum Corporate Tax: Rules and Worked Examples

## Introduction

In order to broaden the tax base and promote fairness, recent legislative efforts have accelerated the gradual removal of certain exemptions, reliefs and deductions. With Law No. 7524—effective January 1, 2025—the Turkish Corporate Tax Law was amended by adding Article 32/C, titled “Domestic Minimum Corporate Tax,” to scale back the tax advantages granted by exemptions and reliefs deemed no longer effective.

Below, we explain the scope and mechanics of the Domestic Minimum Corporate Tax and share our comments in line with the current draft communiqué.

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## A. Principles of Implementation

### 1\. General Framework

Under the Corporate Tax Law (Articles 32 and 32/A), a company’s corporate tax is calculated by applying the statutory rate to its net accounting profit (adjusted for non-deductible expenses). The new rule requires that, **before** applying any exemptions or reliefs, this tax cannot fall below **10 percent** of the company’s pre-exemption profit.

Thus, corporate tax is determined in two steps:

1. **Standard Calculation:** Compute tax under Articles 32 and 32/A, ignoring the minimum-tax rule.
    
2. **Minimum-Tax Calculation:** Determine the “minimum-tax” base (pre-exemption profit) and calculate 10 percent of that amount.
    

The higher of these two results is reported as the corporate tax liability.

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### 2\. Who Must Pay the Minimum Tax?

All corporate taxpayers subject to Turkish corporate tax—including those who report exempt income or claim reliefs—must comply with the minimum-tax rule. **Income‑tax** payers are **not** affected. Foreign-headquartered entities that file a Turkish corporate‑tax return on their Turkish‑source profits also fall within scope.

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### 3\. Exemptions from the Minimum‑Tax Rule

The minimum‑tax rule does **not** apply to:

* Entities exempt from corporate tax.
    
* **Newly established** companies, for their first three fiscal years.
    
    * E.g., a company established in 2025 is exempt for 2025–2027.
        
* Companies taxed on a “revenue basis” under Income Tax Law Art. 113.
    

Mergers, demergers or conversions do **not** qualify as “newly established” for this purpose.

---

### 4\. Detailed Mechanics

* The **minimum‑tax base** is the company’s accounting profit (or loss) plus non‑deductible expenses, **before** exemptions and reliefs.
    
* If this sum is positive, the minimum‑tax liability is 10 percent of that amount.
    
* Carried‑forward losses **remain** deductible for standard corporate tax but **cannot** reduce the minimum‑tax base.
    
* In inflation‑adjustment periods, inflation‑adjusted values are included in the minimum‑tax base.
    
* From the computed minimum tax, the following are **deducted** (to the extent they reduced tax under Articles 32/6‑8 or 32/A):
    
    * 2 percent discount for IPO proceeds (min. 20 percent float).
        
    * 5 percent discount on export profits.
        
    * 1 percent special rate for manufacturing companies holding a valid Industrial Registry Certificate.
        
    * Tax exemptions/reliefs under investment‑incentive certificates issued before August 2, 2024.
        

Tax paid via withholding or provisional returns is **credited** against the final minimum‑tax liability.

Also, if a company undergoes liquidation, merger, demerger or transfer, it must calculate the minimum tax for its final return. Some corporate taxpayers holding Income Tax Law Art. 121 relief may also apply that relief to their minimum tax.

---

### 5\. Exemptions and Reliefs **Deductible** From the Minimum‑Tax Base

(The following may be subtracted when determining the minimum‑tax base.)

| Law Reference | Description |
| --- | --- |
| CTL 5/1‑a | Participation exemption |
| CTL 5/1‑ç | Share premium gains exemption |
| CTL 5/1‑d | Portfolio‑management gains of investment funds (excl. real estate) |
| CTL 5/1‑i | Rebate (“risturn”) gains exemption |
| CTL 5/1‑j | Sale‑and‑leaseback gains exemption |
| CTL 5/1‑k | Asset‑leasing gains exemption |
| CTL 10/1‑g | Venture‑capital relief under VUK 325/A |
| CTL 10/1‑h | Protected‑workshop relief (Disability Law 5378) |
| Law 4490 | Gains from Turkish International Ship Registry |
| Law 3218 | Free‑zone gains exemption |
| Law 4691 | Technology‑park gains exemption |
| Law 5746 | R&D and design relief |
| Various | Other reliefs recorded under “Other deductions” on the return |

---

### 6\. Exemptions and Reliefs **Not Deductible** From the Minimum‑Tax Base

| Law Reference | Description |
| --- | --- |
| CTL 5/1‑b | Foreign participation gains exemption |
| CTL 5/1‑c | Foreign share‑sale gains exemption |
| CTL 5/1‑d (real‑estate) | Real‑estate gains of funds |
| CTL 5/1‑e | Real‑estate, share and fund‑sale gains exemption |
| CTL 5/1‑f | Real‑estate gains exemption for indebtedles |
| CTL 5/1‑g | Foreign‑branch gains exemption |
| CTL 5/1‑h | Foreign‑construction/service gains exemption |
| CTL 5/1‑ı | Education/training gains exemption |
| CTL 5/A | Foreign‑fund management company gains exemption |
| CTL 5/B | IP‑rights sale‑gains exemption |
| CTL Tr 14 | FX‑protected deposits gains exemption |
| Former ITL 19, PTL 61, 69 | Investment‑allowance exemption |
| Law 5300 | Licensed‑warehouse gains exemption |
| Law 6650 | Research‑infrastructure exemption |
| Various | Other special exemptions |
| CTL 10/1‑b to 10/1‑i | Sponsorship, donation, cultural, software‑export reliefs |
| Various | Other special law reliefs |

**Note:** Carried‑forward losses do not reduce the minimum‑tax base and are not deductible from it.

---

## B. Worked Examples

Below are eight illustrative calculations for the 2025 fiscal year. In each case, two figures are compared:

* **Standard Corporate Tax:** 25 percent on taxable profit (adjusted for reliefs).
    
* **Minimum Tax:** 10 percent on the pre‑relief profit.
    

The **higher** amount is the company’s final corporate‑tax liability.

---

### Example 1: Göztepe A.Ş.

* Accounting profit: ₺1,000,000
    
* Non‑deductible expenses: ₺200,000
    
* No exemptions or carried‑forward losses
    

| Calculation | Corporate Tax | Minimum Tax |
| --- | --- | --- |
| Tax base | ₺1,200,000 | ₺1,200,000 |
| Rate | 25 % | 10 % |
| Tax due | ₺300,000 | ₺120,000 |

**Result:** ₺300,000 (standard tax is higher).

---

### Example 2: Bodrum A.Ş.

* Accounting loss: ₺1,000,000
    
* Non‑deductible expenses: ₺1,200,000
    
* No exemptions or losses
    

| Calculation | Corporate Tax | Minimum Tax |
| --- | --- | --- |
| Tax base | ₺200,000 | ₺200,000 |
| Rate | 25 % | 10 % |
| Tax due | ₺50,000 | ₺20,000 |

**Result:** ₺50,000 (standard tax is higher).

---

### Example 3: Samsun A.Ş.

* Accounting profit: ₺4,000,000
    
* Non‑deductible expenses: ₺800,000
    
* Exemptions:
    
    * Participation exemption ₺2,000,000
        
    * Share‑sale exemption ₺800,000
        
    * Tech‑park exemption ₺500,000
        
* Reliefs:
    
    * R&D deduction ₺100,000
        
    * Cash‑capital deduction ₺200,000
        
* Carried‑forward losses ₺400,000
    

| Calculation | Corporate Tax | Minimum Tax |
| --- | --- | --- |
| Tax base: (a + b – exemptions – reliefs – losses) | ₺800,000 | ₺2,200,000 |
| Rate | 25 % | 10 % |
| Tax due | ₺200,000 | ₺220,000 |

**Result:** ₺220,000 (minimum tax is higher).

---

### Example 4: Fenerbahçe A.Ş.

* Accounting profit: ₺12,500,000
    
* Non‑deductible expenses: ₺500,000
    
* 2021 investment‑incentive certificate (₺4,000,000 matrah at 5 %)
    
* Gain on asset transfer: ₺4,000,000 (bank debt transfer)
    
* R&D deduction ₺2,000,000
    
* Investment‑allowance from prior years ₺1,000,000
    

| Calculation | Corporate Tax | Minimum Tax |
| --- | --- | --- |
| Tax base after incentives and reliefs | ₺6,000,000 | ₺11,000,000 |
| Tax due (incentive + standard) | ₺700,000 | – |
| Minimum raw tax (10 %) | – | ₺1,100,000 |
| Less unused incentive tax (₺800,000) | – | ₺300,000 (net) |

**Result:** ₺700,000 (standard tax is higher).

---

### Example 5: Beşiktaş A.Ş. (GYO)

* Accounting profit: ₺15,000,000
    
* Property‑income exemption: ₺5,000,000
    
* Carried‑forward losses: ₺5,000,000
    
* Incentive‑certificate matrah: ₺2,000,000 at 5 %
    

| Calculation | Corporate Tax | Minimum Tax |
| --- | --- | --- |
| Tax base (post‑exemptions/losses) | ₺5,000,000 | ₺15,000,000 |
| Tax due | ₺850,000 | ₺1,100,000 |

**Result:** ₺1,100,000 (minimum tax is higher).

---

### Example 6: Galatasaray A.Ş.

* Accounting profit: ₺10,000,000
    
* Non‑deductible expenses: ₺1,000,000
    
* Exemptions:
    
    * Free‑zone gains ₺1,000,000
        
    * IP‑sale gains ₺4,000,000
        
* Relief: cash‑capital deduction ₺2,000,000
    
* 5 % export‑discount on ₺2,000,000
    

| Calculation | Corporate Tax | Minimum Tax |
| --- | --- | --- |
| Tax base (post‑exemptions/relief) | ₺4,000,000 | ₺10,000,000 |
| Tax due | ₺900,000 | ₺900,000 |

**Result:** ₺900,000 (tie: standard tax applies).

---

### Example 7: Beşiktaş REIT A.Ş.

* Accounting profit: ₺5,000,000 (fully exempt under CTL 5/1‑d)
    
    * Of which ₺3,000,000 is property‑sale & rent income
        

| Calculation | Corporate Tax | Minimum Tax |
| --- | --- | --- |
| Tax base (post‑exemptions) | ₺0 | ₺3,000,000 |
| Tax due | ₺0 | ₺300,000 |

**Result:** ₺300,000 (minimum tax applies).

---

### Example 8: Hatay A.Ş.

* Accounting profit: ₺7,000,000
    
* Exemptions:
    
    * Foreign‑participation gains ₺1,000,000 (15 % tax paid abroad)
        
    * Foreign‑service gains ₺800,000 (50,000 ₺ tax; implies 6.25 % burden)
        
    * IP‑sale gains ₺4,000,000
        
* Only the portion of the service gain that did **not** carry a ≥ 10 % foreign burden (₺300,000) is taxable
    

| Calculation | Corporate Tax | Minimum Tax |
| --- | --- | --- |
| Tax base | ₺1,200,000 | ₺5,500,000 |
| Tax due | ₺300,000 | ₺550,000 |

**Result:** ₺550,000 (minimum tax is higher).

---

## Conclusion

The introduction of the Domestic Minimum Corporate Tax under Law 7524 has added complexity to corporate‑tax calculations. While its aim is to expand the tax base and promote fairness, it creates new cash‑flow and budgeting challenges—particularly for companies currently benefiting from exemptions. We recommend that, instead of temporary fixes, policymakers pursue **simplification** of the tax code and adopt durable, transparent measures under a unified framework.

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