Additional Tax Imposed on Corporations and the Debt Restructuring and Amendment Law

The Latest Update on Additional Tax Imposed on Corporations and the Debt Restructuring and Amendment Law

The first section of the “Debt Restructuring and Amendment Law Proposal,” consisting of 12 articles, is being discussed in the Turkish Grand National Assembly. Significant changes have been made and approved, including the imposition of additional tax on corporations’ exemptions and discounts, the collection of 1,000 TL from the tax declarations due to the increase in taxable income and the extension of the application and first installment payment deadlines by one month.

In this article, we will provide a brief explanation of the additional tax imposed on corporations.

Additional Tax Imposed on Corporations’ Exemptions and Discounts

According to an amendment made during the parliamentary session on 8.3.2023, corporate taxpayers will be subject to additional tax at a rate of 10% on the exemptions and discounts applied to corporate income under Law No. 5520 and other laws, as well as on the reduced taxable income subject to discounted corporate tax under Article 32/A of the same law, without being related to the period’s income.

Additionally, a 5% tax will be applied on exempt income from participation gains specified in the first paragraph (a) of Article 5 of Law No. 5520 and exempt income that is confirmed to have a tax burden of at least 15% from foreign sources.

The first installment of this tax will be paid within the payment period of corporate tax (April), and the second installment will be paid in the fourth month following this period (August). This tax cannot be considered as an expense or discount and cannot be offset against any other tax.

Exemptions and Discounts Not Subject to Additional Tax

The following exemptions and discounts are not subject to additional tax:

  • Rebate exemptions in cooperatives (Article 5/1-i of Law No. 5520)
  • Exemption for income from the sale-rental-buyback of movable and immovable property (Article 5/1-j of Law No. 5520)
  • Exemption for gains from the sale of assets and rights to leasing companies (Article 5/1-k of Law No. 5520)
  • Exemption for gains obtained from Currency Hedged Deposit accounts (Temporary Article 14 of Law No. 5520)
  • Sponsorship expenses (Article 10/1-b of Law No. 5520)
  • Donations made to public and special budgeted administrationsprovincial administrations, municipalities, villages, foundations granted tax exemption by the President, public benefit associations and institutions engaged in scientific research and development activities in exchange for a receipt (Article 10/1-c of Law No. 5520)
  • Donations made for the construction and operation of schools, health facilities, student dormitories, children’s homes, nursing homes and care and rehabilitation centers, as well as donations made to places supported by the Ministry of Culture and Tourism, public and special budgeted administrations, provincial administrations, municipalities and villages, foundations granted tax exemption by the President, public benefit associations and institutions engaged in scientific research and development activities (Article 10/1-ç of Law No. 5520)
  • Donations made in exchange for a receipt to the aid campaigns initiated by the President (Article 10/1-e of Law No. 5520)
  • Donations or aid provided with a receipt to the Turkish Red Crescent Society and the Turkish Green Crescent Society except for economic enterprises (Article 10/1-f of Law No. 5520)
  • The portion of venture capital funds allocated in accordance with Article 325/A of the Tax Procedure Law that does not exceed 10% of the declared income (Article 10/1-g of Law No. 5520)
  • The discount for protected workplaces established under the Law on the Rights of the Disabled (Article 10/1-h of Law No. 5520)
  • Investment discount exemption (Temporary Article 61 of the Income Tax Law)
  • Donations and aids that can be deducted from corporate income according to relevant laws.

Corporations located in earthquake zones are exempt from additional tax as of 6/2/2023 if they have corporate tax liability in the provinces of Adana, Adıyaman, Diyarbakır, Elazığ, Gaziantep, Hatay, Kahramanmaraş, Kilis, Malatya, Osmaniye, Şanlıurfa, and the district of Gürün in Sivas.

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