Comprehensive Tax Regulation Package Is on the Way

New Developments

As part of the 2024-2026 Medium-Term Economic Program, the Draft Law on Amendments to Tax Laws and Certain Laws (“Draft Law“) was submitted to the Grand National Assembly of Türkiye on 16 July 2024. The Draft Law aims to introduce significant amendments to the tax legislation.

The amendments in the Draft Law include various regulations such as a domestic minimum corporate income tax, global minimum corporate income tax including domestic top-up tax, tax facilitation for employee stock option plans, expansion of the scope of withholding on income tax and corporate income tax and inclusion of certain payments into the scope of the withholding, limitation on the carried forward value-added tax (VAT) and restrictions on certain exemptions related to income tax, special consumption tax and VAT.

This alert covers certain key amendments included in the Draft Law. Meanwhile, various provisions of the Draft Law may change during the enactment process. Therefore, we will closely monitor the process and publish detailed legal alerts containing comprehensive explanations on the amendments once the Draft Law is enacted.

New Tax Regulations Under The Draft Law

a. Key amendments to Income Tax Law No. 193 and Corporate Income Tax Law No. 5520

— A domestic minimum corporate income tax mechanism will be introduced.

— Global minimum corporate income tax including domestic top-up tax, as developed within the framework of the OECD’s Pillar 2, will be implemented.

— Tax facilitation and income tax exemption will be introduced for employee stock option plans provided by tech-initiatives (start-ups).

— The income tax base of the independent professionals will be monitored through regular examinations of their revenue.

— Scope of income tax withholding and corporate income tax withholding will be expanded to include e-commerce transactions.

— Corporate income tax exemption for investment funds and partnerships’ income from real estate will be applicable on condition that such income is distributed through dividends until the end of the second month following the filing of the corporate income tax return.

— The corporate income tax rate will be increased for projects undertaken under the build-operate-transfer model and public-private partnerships.

​b. Key amendments to Value-Added Tax Law No. 3065

— Scope of VAT exemption for services provided to sea and air transport vehicles will be restricted and the principles for the application of this exemption will be amended.

— VAT and special consumption tax application on imports related to deliveries and services made to the national security institutions for national defense and internal security needs will be amended.

— Deduction of the carried forward VAT of a taxpayer, who is subject to a merger, transfer, demerger or conversion of company type, by the acquiring taxpayer will only be allowed upon a tax audit.

— Deduction of the carried forward VAT will be limited for five years, after which the carried forward VAT may be deemed an expense in the calculation of income tax and corporate income tax base on condition that a tax audit is conducted upon the request of the taxpayer.

— The main principle for VAT refunds will be changed to be based on a tax audit.

c. Key amendments to Tax Procedural Law No. 213

— If a taxpayer’s registration is ex officio terminated due to the findings that the taxpayer is registered only to issue forged documents, those who are partners in such deregistered partnerships, or legal representatives, board members or shareholders holding at least 10% of the deregistered commercial company, or others listed in Article 153/A of the Tax Procedural Law, are subject to specific conditions when they make a new tax registration, obtain similar status at another taxpayer, acquire or are acquired by another taxpayer. The Draft Law will amend these conditions.

— Scope of the reporting obligation for digital service providers and intermediaries will be expanded.

— Valuation of precious metals based on the stock exchange price will be allowed.

— Tax loss penalty applicable to those conducting commercial, agricultural activities or providing professional services without a taxpayer registration will be increased by 50%.

— Significant regulations and increases will be made regarding the scope and amounts of irregularity fines and special irregularity fines.

— Original tax amounts will be excluded from the scope of settlement applications, and the option to pay the settled amounts with a discount will be removed.

​​d. Other regulations in the Draft Law

— The income tax and corporate income tax exemptions in free trade zones will be limited to the income generated from exports.

— Obligation to obtain a tax clearance certificate will be expanded to include payments to be made upon court decisions and enforcement orders.

Conclusion

Taxpayers must closely follow these significant regulations to be introduced in the Draft Law and carefully take the necessary steps to comply with them.