FCHAIN Turkey Office informs:A New Omnibus Law and Tax Regulations in Turkey

The purpose of the law is to encourage investment in Turkish lira, protect taxpayer rights, increase voluntary tax compliance, transfer some practices to electronic platforms utilizing advancing technology, ensure tax security, make some tax deductions, and ensure compliance with the decisions of the Constitutional Court by making some tax regulatory adjustments.

Some of the main regulations made within this scope include:

Extension of the deadline for certain tax provisions, encouragement of bringing foreign currency into the country, expansion of the authority given to the President regarding income and corporate tax withholding rates etc.

Below are some important points:

CORPORATE TAX LAW REGULATIONS

Exemption for Foreign Subsidiary Gains Article 5 (b) of the Corporate Tax Law provides an exemption for subsidiary gains, and this regulation has been preserved in its current form. Additionally, a new regulation has been made to facilitate the conditions for exemption aiming to encourage the transfer of foreign earnings to Turkey.

Accordingly, 50% of the subsidiary gains obtained by corporations that participate in the capital of foreign corporations with the characteristics of anonymous and limited companies, provided that: the shareholding rate is at least 50%, the gains are transferred to Turkey by the date on which the corporate income tax return for the year in which the income is earned must be submitted, are exempt from corporate tax without any other requirements.

As a result of this regulation, corporations owning 50% of the capital of companies domiciled abroad will be able to benefit from the exemption if the conditions of the new regulation are met, regardless of whether the gains from foreign subsidiaries carry a tax burden of over 15%.

AMENDMENTS MADE IN THE VALUE ADDED TAX LAW

Conditionality of Deduction of VAT Declared as Responsible by the Taxpayer to be “Paid”

Until now, the Tax Administration has made regulations with Circulars stating that VAT declared as responsible could be deducted by the VAT taxpayer only if it was paid. However, the Council of State has decided to suspend the execution of the regulation in question, and the Revenue Administration Presidency has announced that refund requests can be made regardless of whether the VAT levied as responsible has been paid or not.

However, placing a provision stating that the right of refund granted by the Law can be removed by administrative regulations is contrary to the fundamental principles of the Constitution, and there is a previous decision of the Constitutional Court on this matter. Therefore, it is highly likely that this issue will be brought before the judiciary again.