Turkey to introduce a new Tax Draft Law
Draft Law Amending Various Laws and Regulations
Table of contents
- 1-Inflation accounting will not be applied to banks and financial institutions for two years
- 2-Huge tax advantage for some services provided abroad
- 3-Exemption of 50% of foreign-earned dividends from income tax is governed by Article
- 4-Reverse Value Added Tax Regulation
- 5-Application of company tax with a 5% reduction for exports carried out via an intermediary export contract.
- 6-Extension of the corporate tax exemption period applied to exchange rate-protected deposit accounts
Recent Development
The proposal for amending specific laws and decrees with the force of law, including regulations about the field of economy, has been submitted to the Presidency of the Grand National Assembly of Turkey.
The tax regulations proposed by the proposal are summarized below;
1-Inflation accounting will not be applied to banks and financial institutions for two years
It is stipulated that the inflation adjustment made by banks and financial institutions must not impact the tax base.
The main reason for this regulation is the tax loss that the public will suffer if banks apply inflation accounting.
2-Huge tax advantage for some services provided abroad
Under Article 89/1–13 of the Income Tax Law, individuals can claim a deduction on their declaration if they earn income from specific services, which include;
Architecture,
Engineering,
Design, software, medical reporting,
Accounting record keeping,
Call centers, product testing, certification abroad, and education and health services provided to foreigners.
The deduction is equal to 80% of the earnings, and certain conditions must be met. The amendment in Article 10 of this Bill and Article 89 of the Income Tax Law named “Other Discounts” introduces a transfer requirement and raises the discount rate to 80% from 50%
- To get a discount on the earnings from these services, send the full amount to Turkey by the deadline for submitting the tax return for the calendar year.
3-Exemption of 50% of foreign-earned dividends from income tax is governed by Article
Under the provisions outlined in Article 8 of this Bill and Article 22 of the Income Tax Law, namely “Securities Capital Revenues,” individuals must own a minimum of 50% of the paid-up capital for joint-stock and limited liability companies whose legal and business headquarters are located outside of Turkey.
Furthermore, 50% of the dividends earned are exempt from income tax, provided such dividends are repatriated to Turkey before the annual income tax return deadline relevant to the year in which they were earned.
4-Reverse Value Added Tax Regulation
The deadline for submitting Value Added Tax Declarations and paying taxes accrued on these declarations is by the end of the 28th day of the month following the relevant taxation period.
Declaration 19th day of the month: With the proposed amendment to the 32nd article of this bill and the 41st article of the Value Added Tax Law entitled “Time for submitting declarations”, the deadline for submitting value-added tax returns by individuals responsible for tax deductions is advanced and set as the 19th day of the month following the tax period.
Payment 21st day of the month: the payment date for value-added tax amounts declared by those who are responsible for tax deduction is brought forward and established as the 21st day of the month following the taxation period.
5-Application of company tax with a 5% reduction for exports carried out via an intermediary export contract.
As per current regulations, the company tax rate is 25%.
It is applied at 20% on profits earned by exporting companies exclusively from exports.
With the proposed amendment to Article 60 of this law and Article 32 of the Corporate Tax Law, “Corporate Tax and Provisional Tax Rate”, companies that manufacture or supply goods can receive a 5% discount on earnings from export activities carried out through foreign trade capital companies or sectoral foreign trade companies, as long as there is an intermediary export contract.
6-Extension of the corporate tax exemption period applied to exchange rate-protected deposit accounts
The corporate tax exemption applied to exchange rate-protected deposit and participation accounts expires on 31/12/2023.
With the amendment foreseen to be made in Article 61 of this bill and provisional Article 14 of the Corporate Tax Law, the duration of the corporate tax exemption applied to exchange rate-protected deposits and participation accounts is extended until 30/6/2024.