New Regulations on Minimum Corporate Tax in Turkey
In recent months, with a heavy focus on inflation adjustments and the preparation of financial statements, we have entered a period of significant effort. Now, the long-anticipated Minimum Corporate Tax has come into effect through the 23rd amendment to the 1st Corporate Tax Communiqué, published in the Official Gazette on September 28, 2024, with issue number 32676.
Let’s dive into the details of this new tax and how it impacts businesses.
What is Minimum Corporate Tax in Turkey?
Minimum Corporate Tax was introduced in Article 32/C of the Corporate Tax Law as part of the Law numbered 7524, dated July 28, 2024. This tax ensures that businesses pay a minimum tax based on their income, regardless of certain exemptions and deductions.
Key Provisions:
The tax will be no less than 10% of the corporate income before applying any exemptions or deductions.
Several exemptions and deductions are allowed when calculating the taxable income, such as certain real estate earnings and R&D deductions.
Newly established companies are exempt from Minimum Corporate Tax for their first three fiscal years.
How is Minimum Corporate Tax Calculated?
The calculation of Minimum Corporate Tax involves determining the corporate income before any exemptions or deductions and applying a 10% rate. Below are the key deductions that are applicable and non-applicable under this regime:
Deductions Allowed:
Participation income exemptions (e.g., dividends from subsidiary companies)
Capital gains from certain real estate transactions
R&D and design expense deductions
Deductions Not Allowed:
Frequently Asked Questions (FAQs)
When Will Minimum Corporate Tax Be Applied?
The tax will apply to earnings from 2025 onwards for regular companies, and for special accounting periods, it will apply from the 2025 calendar year.
Who Is Subject to Minimum Corporate Tax?
All entities subject to corporate tax in Turkey will be liable. This includes both resident and non-resident companies with income from Turkey, provided they submit a tax return.
Are There Any Exemptions from Minimum Corporate Tax?
Yes. Companies exempt from corporate tax or newly established businesses for their first three fiscal years will not be subject to this tax.
Example of Minimum Corporate Tax Calculation
Below are a few examples illustrating how the tax is calculated:
Example 1: Profit Scenario
| Description | Corporate Tax | Minimum Corporate Tax |
| Commercial Balance Sheet Profit | 1,500,000 TRY | 1,500,000 TRY |
| Non-Deductible Expenses | 300,000 TRY | 300,000 TRY |
| Exemptions & Deductions | 0 TRY | 0 TRY |
| Taxable Income | 1,800,000 TRY | 1,800,000 TRY |
| Calculated Tax | 450,000 TRY | 180,000 TRY |
| Tax to be Paid | 450,000 TRY | 180,000 TRY |
Example 2: Loss Scenario
| Description | Corporate Tax | Minimum Corporate Tax |
| Commercial Balance Sheet Profit | 1,500,000 TRY | 1,500,000 TRY |
| Non-Deductible Expenses | 2,300,000 TRY | 2,300,000 TRY |
| Exemptions & Deductions | 0 TRY | 0 TRY |
| Taxable Income | 800,000 TRY | 800,000 TRY |
| Calculated Tax | 200,000 TRY | 80,000 TRY |
| Tax to be Paid | 200,000 TRY | 80,000 TRY |
Summary of Minimum Corporate Tax Policy
In summary, the Minimum Corporate Tax ensures that businesses contribute a minimum amount of tax based on their commercial profits. The main objectives of this policy are to:
Reduce the impact of exemptions and deductions.
Minimize the effect of past-year losses.
Secure a stable revenue stream for the government through corporate earnings.
By understanding the new tax regime, businesses can better prepare for the financial implications and ensure compliance with the latest tax regulations.
For more information: info@ozmconsultancy.com
