A. Key Amendments to the Income Tax Law and Corporate Tax Law

  • A minimum corporate tax payment obligation has been introduced for corporations. However, this obligation will not apply to earnings in 2024; it will take effect for earnings after January 1, 2025, including interim tax periods.
  • Subsidiaries of multinational enterprise groups with annual consolidated revenues exceeding €750 million in at least two of the four financial years preceding the reporting year will be subject to local and global minimum corporate tax on their profits for the relevant fiscal year.
  • The portion of share certificates provided free of charge or at a discount by tech startups to their employees, which does not exceed the annual gross salary for that year, will be exempt from income tax.
  • Income tax assessments will be conducted for self-employed individuals and commercial income earners based on revenue determination at their workplaces. This regulation will come into effect on January 1, 2025. However, this does not preclude the possibility of revenue determination by specially authorized audit officers under Article 127 of the Tax Procedure Law before this effective date.
  • In addition to the sectors determined by the President, withholding tax on income and corporate tax will also apply to payments made by intermediary service providers and electronic commerce intermediary service providers to service providers and electronic commerce service providers due to their activities within the scope of the Law on the Regulation of Electronic Commerce. This regulation will come into effect on January 1, 2025.
  • The corporate tax exemption granted to funds or partnerships established in Turkey for the gains derived from immovable properties, including those considered as commercial goods, is now conditional on distributing 50% of these gains as dividends to their shareholders by the end of the second month following the month in which the corporate tax return is due. However, institutions receiving dividends from investment funds and partnerships that do not meet this profit distribution requirement and cannot benefit from the exemption will still be able to benefit from the participation exemption. This regulation came into effect upon the publication of the Law and will apply to gains obtained from January 1, 2025.
  • The corporate tax rate for companies involved in projects under the build-operate-transfer model and public-private partnership projects has been increased to 30%. This 30% rate will apply not only to the profits exclusively derived from these activities but to all profit-generating activities of these companies.

B. Key Amendments to the Value Added Tax Law

  • To limit the scope of the Value Added Tax (VAT) exemption for services related to sea and air transport vehicles, vessels used for activities such as tourism, entertainment, sports, and amateur fishing, as well as private boats and yachts, will not be considered as sea transport vehicles. This regulation will come into effect on September 1, 2024.
  • The exemption under Article 167 of the Customs Law, related to deliveries and services made for national defense and internal security needs of national security institutions, has been abolished. With this change, the differential treatment favoring imports in the VAT exemption has been eliminated, and the VAT exemption in the VAT Law remains.
  • The deduction of VAT incurred but not deducted by taxpayers who cease operations due to mergers, transfers, or divisions will be possible based on the outcome of an audit. The necessary audits can be conducted without being subject to the statute of limitations as stipulated in the Tax Procedure Law.
  • VAT amounts carried forward for five or more calendar years will be removed from the VAT deduction accounts and transferred to a special account. The VAT amounts, whose deduction is prohibited, will be allowed as a deductible expense in determining income or corporate tax within three years, based on a tax audit requested by the taxpayer. If no request is made within the specified period, the VAT amount whose deduction is prohibited will not be considered as a deductible expense. This regulation will take effect on January 1, 2030.
  • The rule has been established that VAT refunds will be made based on the outcome of a tax audit. However, the Ministry has been given the authority to determine refund methods without requiring a Certified Public Accountant’s report or any report, depending on the compliance level of taxpayers. This regulation will take effect on September 1, 2024.

C. Key Amendments to the Tax Procedure Law

  • With the changes made to the provisions of Article 153/A-3 and following articles of the Tax Procedure Law (“TPL”), annulled by the Constitutional Court, the upper limit of the guarantee required from taxpayers under this article has been determined, the period for providing the required guarantee has been extended from 30 to 60 days, and taxpayers who fulfill their obligations under Article 153/A-3 as prescribed will have their guarantee returned. Additionally, those listed in the first paragraph will not be held liable for all accrued tax debts as of the date the guarantee is requested.
  • The definition of “market value” in the TPL (Article 262) has been expanded to include precious metals. Furthermore, with the additional regulation (Article 274/A), precious metals such as gold, silver, platinum, and palladium will be valued at their market value.
  • Tax evasion penalties imposed on individuals engaging in commercial, agricultural, or professional activities without establishing tax liability and without notifying the tax office have been increased by 50%. Penalties imposed at one time the tax amount will be applied at 1.5 times, and those imposed at three times the tax amount will be applied at 4.5 times.
  • To contribute to the fight against the informal economy, the amounts of penalties for irregularity and special irregularity have been increased.
  • The main tax will be excluded from the scope of the reconciliation mechanism in the TPL.

D.Other Changes

  • The corporate tax exemption applicable to all income derived from production activities in free zones has been limited to profits earned from exports. Thus, profits from sales made domestically will now be subject to corporate tax.
  • The “no debt” application has been expanded to include “payments made pursuant to court decisions and enforcement office’s payment or enforcement orders.”