General Information on the Profit Exemption Applied in Social Content Creation and Application Development for Mobile Devices

Income derived from the activities of social content creators who share content such as text, images, audio, and video through social networking providers on the internet, and income obtained from the sharing and sales of applications developed for mobile devices such as smartphones or tablets are exempt from income tax according to Article 20/B of the Duplicate Article 193 of the Income Tax Law.

To benefit from this exemption, it is necessary to open an account in banks established in Turkey and collect all the revenues related to these activities exclusively through this account.

Banks are obliged to withhold income tax at a rate of 15% on the revenue amount transferred to the accounts opened under this scope, as of the transfer date, and declare and pay the tax in accordance with the principles specified in Articles 98 and 119 of the Law. No withholding is made on this amount within the scope of Article 94.

The existence of income or earnings arising from activities other than those covered by the first paragraph does not prevent taxpayers from benefiting from the exemption.

Those whose total income from activities within the scope of the first paragraph exceeds the amount specified in the fourth income bracket of the tariff written in Article 103 of the Law and those who do not collect all their revenues related to the activity according to the conditions specified in the second paragraph cannot benefit from this exemption. It is stated that those in this situation are not obliged to make withholding tax payments regarding the tax debts accrued and to be accrued until the date of division from the divided company, and the companies that inherit the assets of the divided company will be jointly and severally liable only for the fair value of the assets they acquire.

What are the Tax Advantages of Transferring Real Estate through Partial Division until January 1, 2024?

As mentioned in the previous section, real estate within this scope is transferred to existing or newly established companies at their registered values, and the tax burden on the property is transferred to the existing or newly established company.

However, if the acquiring company sells the property in the future, the difference between the sale value and the registered value will be included in the company’s taxable income.

Therefore, the removal of real estate from businesses through partial division is used as a tax deferral tool. Additionally, through this method, companies can be restructured, and multiple services or production activities conducted within the same company can be separated and operated under different companies.

In addition, in partial divisions carried out in accordance with the Corporate Tax Law:

• VAT exemption under Article 17/4-c of the VAT Law,
• Stamp Duty exemption for documents issued due to mergers, transfers, and divisions (according to item 17 of Table II titled “Commercial and civil papers” attached to the Stamp Duty Law),
• Exemption from land registry fees according to Article 123 of the Fees Law, are also available.

Furthermore, uncollectible VAT amounts incurred by the divided company that relate to the transferred assets and cannot be deducted can be treated as deductible expenses for the taxpayers who inherit the assets of the starting or transferred/divided companies, without causing a double deduction.

Benefit from the Exemption until January 1, 2024

With the regulation made by Law No. 7456, as of January 1, 2024, real estate cannot be subject to tax-free partial division within the scope of the Corporate Tax Law regulations.

Considering the publication date of the Law (July 15, 2023) and the effective date of the regulation (January 1, 2024), it can be seen that there is a short period of five and a half months to benefit from the current practice.

Therefore, companies that transfer their real estate through partial division to existing or newly established companies until January 1, 2024 will gain a significant tax advantage.