Law No. 7524 on the Amendment of Tax Laws

With the Law No. 7524 on the Amendment of Tax Laws and Certain Laws and Decree Law No. 375 published in the Official Gazette dated 2.8.2024 and numbered 32620, amendments have been made to the Laws regarding tax practices.

 The amendments made by the Law in question are summarised as follows:

Main Amendments to the Corporate Tax Law

- A global minimum corporate income tax has been introduced for multinational companies.

The earnings of the subsidiaries of multinational enterprise groups whose annual consolidated revenue in the consolidated financial statements of their ultimate parent entity exceeds the limit of 750 million EUR equivalent Turkish lira in at least two of the four accounting periods preceding the accounting period in which the revenue is reported, are subject to local and global minimum complementary corporate tax. (Effective Date: On the date of publication (02.08.2024) to be applied to the earnings obtained in 2024 and the following taxation periods, and to the earnings obtained in the special accounting period starting in the calendar year 2024 and the following taxation periods of the institutions subject to the special accounting period).

The minimum corporate tax rate is 15%, and the taxpayers are the Turkish resident ultimate parent, intermediate parent or partially owned parent of the enterprises which are affiliated to multinational enterprise groups and resident in other countries.

The global minimum tax is declared and paid until the last day of the fifteenth month following the close of the accounting period. Local minimum tax is declared and paid from the first to the last day of the twelfth month following the close of the accounting period.

- Domestic minimum corporate tax regulation has been introduced.

Within the scope of the domestic minimum corporate tax regulation, a minimum tax of 10% is levied on corporate earnings before deducting discounts and exemptions. (Effective Date: 01.01.2025)

Domestic minimum corporate tax will not be calculated for three accounting periods for corporations starting operations for the first time.

- Rearrangement of the corporate tax rate for the Build Operate and Transfer Model and Public Private Partnership Projects

It is envisaged that the corporate tax rate will be applied as 30% to the earnings obtained within the scope of the Build Operate and Transfer Model and Public Private Cooperation Projects (Effective Date: 01.01.2025).

- An additional condition has been added to the exemption provisions for investment funds and partnerships.

The current tax exemption for the earnings of investment funds and trusts is subject to the condition that 50% of the real estate earnings are distributed as profit distribution. (Effective Date: 01.01.2025)

- The tax exemption for the free zone earnings has been narrowed.

Accordingly, the exemption provided to the enterprises operating in free zones has been limited to export revenues and the exemption applied to the earnings derived from domestic sales has been abolished (Effective Date: 01.01.2025).

Amendments to the Income Tax Law

- Tax relief for stock options in companies designated as techno-entrepreneurship companies by the Ministry of Industry and Technology.

The portion of the fair value of the share certificates, which are given to the service personnel free of charge or at a discount by the employers having the qualification of techno-entrepreneurship company and accepted as wages, which does not exceed the amount of one year's gross wage in that year, is exempt from income tax (Effective Date: 02.08.2024).

Acquired shares: If it is disposed of within three full years from the date of acquisition, the entire exempted tax is collected from the employer; if it is disposed of within four to six years, 75% of the exempted tax, and if it is disposed of within seven to twelve years, 25% of the exempted tax are collected from the employer together with the default interest, without applying a tax loss penalty.

- The determination of daily revenue and the determination of the income tax base.

It is stipulated that those who are taxpayers due to their commercial or professional activities can be surveyed in order to determine the daily revenue and income tax base. Such inspections shall not be less than three in a month and twelve in a calendar year.

Taxpayers with an inconsistency of more than 20% between the revenue to be determined in the surveys and the gross sales amount in the income statement of those who keep books on the balance sheet basis will be invited to explain (Effective Date: 01.01.2025).

Amendments to the Value Added Tax Law

- The VAT that cannot be eliminated through deduction for five calendar years

In the event that the VAT amounts to be deducted in the VAT declarations of the taxpayers cannot be eliminated by way of deduction for a period of five calendar years, they can be removed from the records at the end of this period and taken into account as expenses in the determination of income or corporate tax (Effective Date: 01.01.2030).

- The transfer of the transferred VAT amount in merger, transfer and demerger transactions

In merger, transfer and demerger transactions, an arrangement has been made to allow the transfer of the transferred VAT amount to the new company through tax inspection without being subject to the five-calendar year criterion or statute of limitations (Effective Date: 02.08.2024).

- Arrangements have been made to clarify the definition of sea transport vehicles in VAT exemption application

The following provision has been added to subparagraph b of paragraph 1 of Article 13, which includes the exemption provisions regarding the services provided at Ports and Airports (Effective Date: 01.09.2024): “In the application of this subparagraph, vehicles used in activities such as recreation, entertainment, sports and amateur fishing, private boats and yachts are not accepted as sea transport vehicles”.

- VAT exemption for the aids to be provided by foreign states due to earthquake

Goods and services to be purchased for immovable properties to be donated to places considered as disaster areas due to earthquake are exempt from VAT (Effective Date: 02.08.2024).

Amendments to the Tax Procedure Law

- In order to contribute to the fight against informality, the amounts of irregularity and special irregularity penalties have been increased.

• Increased penalties for issuing forged documents (Effective Date: 02.08.2024)

• Increase in the 1st degree irregularity fine and 2nd degree irregularity fine for capital companies (Effective Date: 02.08.2024).

• Special irregularity penalty to be applied in the case of not giving invoices and issuing paper invoices when electronic invoices should be issued (gradually increasing penalties for each irregularity determination) (Effective Date: 02.08.2024).

• Special irregularity penalty to be applied for each document in case it is determined that the payment recorder receipt, delivery note, transport delivery note is not issued, or that it is issued in paper when it should be issued electronically (gradually increasing penalties for each irregularity determination) (Effective Date: 02.08.2024).

• The fine for violation of the Uniform Chart of Accounts has been increased to TRY 65,000 (Effective Date: 02.08.2024)

• The special irregularity penalty to be imposed in case of non-compliance with the obligation of certification in collections and payments has been changed as 10% of the amount subject to the transaction, and the total of the special irregularity penalty to be issued in a calendar year shall not exceed 20.000.000 TRY. In addition, it has been stipulated that if those who make payments in violation of the certification obligation, spontaneously notify the administration within five business days following the payment, a special irregularity penalty will not be imposed on behalf of the payer in accordance with this paragraph (Effective Date: 02.08.2024).

• If the collection transactions are made in the name and / or account of others, a special irregularity penalty will be imposed separately at the rate of 10% of the amount subject to the transaction, and the special irregularity penalty to be imposed in a calendar year will not exceed 20.000.000 TRY. (Effective Date: 02.08.2024).

• If these transactions are made through payment systems that are not registered in the name of the taxpayer, the special irregularity fine to be imposed will be applied 3 times and the special irregularity fine to be imposed in a calendar year cannot exceed 20.000.000 TRY (Effective Date: 02.08.2024).

- Increased penalties were introduced for taxpayers engaged in unregistered activities.

- The original tax amount has been excluded from the scope of reconciliation.

The tax principal has been excluded from the scope of reconciliation, and the old provisions will be applied regarding the taxes and penalties for which the reconciliation day before the effective date has not been given or has been given but not negotiated, and the reconciliation request period has not expired (Effective Date: 02.08.2024).

In addition, the application of a deduction of 25% of the penalty amount, if 75% of the reconciled tax, tax difference and penalty amount is paid within one month, has been abolished (Effective Date: 02.08.2024).

Autor: Serkan Yılmaz