Minimum Corporate Tax in Turkey

Client Alert: Introduction of Minimum Corporate Tax in Turkey Effective from 2025

Dear Valued Client,

We would like to bring to your attention significant legislative changes concerning corporate taxation in Turkey that may impact your operations.

Legislative Update

On September 28, 2024, the Turkish government published the "Communiqué on Amendments to the Corporate Tax General Communiqué (Serial No: 1) (Serial No: 23)" in the Official Gazette No. 32676. This Communiqué introduces various updates to the Corporate Tax General Communiqué in line with the amendments made by Laws No. 7338, 7341, 7440, 7456, 7491, and 7524.

Key changes include:

Implementation of a domestic minimum corporate tax
Adjustments to free zone exemptions
Tax reductions applied to manufacturing and export earnings
Deductibility of financial expenses in company mergers
Linking corporate tax exemptions for funds and partnerships to real estate gains and profit distributions
Utilization of investment contribution amounts under investment incentive certificates by offsetting them against tax liabilities

Introduction of Domestic Minimum Corporate Tax

Law No. 7524, published on August 2, 2024, introduced a new Article 32/C titled "Domestic Minimum Corporate Tax" to the Corporate Tax Law. According to this provision:

The corporate tax calculated under Articles 32 and 32/A cannot be less than 10% of the corporate earnings before deductions and exemptions.
This minimum tax applies to earnings obtained in the 2025 fiscal year and subsequent years.
For companies with special accounting periods, it applies to periods starting within the 2025 calendar year.
The minimum corporate tax also applies to provisional tax periods.
Companies commencing operations for the first time are exempt from this provision for the first three accounting periods following their establishment.

Affected Taxpayers

All entities subject to the Corporate Tax Law are affected, including non-resident corporations required to declare income earned in Turkey.
Non-resident corporations that opt to file tax returns for income subject to withholding tax under Article 30 will also be subject to the minimum corporate tax.

Application and Calculation

Taxpayers must calculate corporate tax in their provisional and annual returns considering Articles 32 and 32/A.
Non-deductible expenses should be added back to the commercial balance sheet profit or loss.
If the adjusted amount is positive, exemptions and deductions not covered by the minimum tax are subtracted.
A 10% rate is then applied to the remaining amount to calculate the minimum corporate tax.
From this calculated tax, any tax not collected due to reduced rates under Articles 32 and 32/A is deducted.
If the resulting amount exceeds the tax calculated based on the taxpayer's declaration, the excess constitutes an additional tax liability.
Withholding taxes and provisional taxes paid can be offset against the calculated minimum corporate tax.
This calculation is also required in tax returns filed due to liquidation, merger, transfer, and full division transactions.

Implications for Your Business

The introduction of the minimum corporate tax aims to:

Reduce the utilization of exemptions and deductions
Lessen the impact of carryforward tax losses
Ensure a consistent level of tax revenue based on corporate profits

We recommend reviewing your current tax strategies to assess the potential impact of these changes on your operations. Careful planning may be necessary to optimize your tax position and ensure compliance with the new regulations.

How We Can Assist

Our team at Ozm-Consultancy is prepared to help you navigate these developments. We offer comprehensive services including:

Tax impact assessments specific to your organization
Guidance on compliance requirements under the new regime
Strategic advice on tax planning and optimization

Please feel free to reach out to us with any questions or to schedule a consultation.

Sincerely,

Evren ÖZMEN

OZM-Consultancy

Introduction of Minimum Corporate Tax in Turkey Effective from 2025

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