Law on Certain Amendments to Tax Laws Have Been Published

The Law No. 7524 on Amendments to Certain Tax Laws and Decree No. 375 (“Law No. 7524”), has been published in the Official Gazette dated August 2, 2024 and numbered 32620.

The essential amendments introduced by Law No. 7524 are presented below.

Granting Shares to Employees: It is proposed that shares granted free of charge or at a discount to employees by employers qualifying as techno-enterprise companies will be exempt from income tax, provided the market value of these shares at the time they are given does not exceed the annual gross wage of the employee for that year.

Revenue Determination for Income Taxpayers: Taxpayers may be requested to provide an explanation if the revenue determined through periodic inspections and the declarations made by taxpayers differ by more than 20%. Law No. 7524 allows taxation based on the revenue that has been determined through periodic inspections if the explanation is deemed insufficient.

Withholding Tax on Certain Payments: Withholdings are allowed for certain payments made to income and corporate income taxpayers earning commercial income.

Providing Collateral for Those Issuing Fake Documents: Those found to have established tax liability solely for the purpose of issuing fake documents, and those associated with them, will be required to provide collateral if they become legal representatives or hold more than 10% shares in another company. In the event that those persons are not disassociated from the company or do not provide collateral; a special irregularity fine will be imposed.

Increase in Irregularity Penalties: Law No. 7524 increases the amounts of irregularity and special irregularity penalties.

Exclusion of the Tax Amount from the Scope of Reconciliation: By amending the provisions of the Tax Procedure Law regulating reconciliation, it is envisaged that the tax amounts will be excluded from the scope of reconciliation. There is also a transitional provision stating that this amendment will be valid for the reconciliation applications made after the enactment of Law No. 7524.

VAT Inspection in Merger, Transfer, and Spin-Off Transactions: The Law No. 7524 stipulates that in mergers, transfers, and spin-offs, the transfer of deferred VAT and refund rights to the new company will be allowed through a tax inspection, without being subject to the 5-year statute of limitation.

Deduction of the charged VAT: The Law No. 7524. includes a provision that limits the deduction of incurred VAT to 5 calendar years, and after this period, any non-deducted VAT will be considered an expense through a tax inspection.

Limitation of Exemption in Free Zones: The Law No. 7524. includes a provision that limits the corporate income tax exemption provided to businesses operating in free zones to export revenues.

Exemption on Investment Funds and Partnerships: With the addition made to Article 5/1-a of the Corporate Income Tax Law, benefiting from the exemption provided under this article is conditioned upon distributing at least 50% of the income earned from immovables owned by funds and partnerships (excluding pension investment funds) as dividends by the end of the second month following the month in which the corporate income tax return for the period in which the income was earned is due.

Domestic Minimum Corporate Income Tax: The Law No. 7524 introduces a Minimum Domestic Corporate Income Tax for corporate income taxpayers. It is also provided that the minimum corporate income tax shall not be less than 10% of the corporate income remaining after deducting the deductions and exemptions stipulated in the Law No. 7524 from the corporate income tax base.

Global Minimum Corporate Income Tax Implementation: The Law No. 7524 includes common regulations on Global Minimum Corporate Income Tax and Domestic Minimum Corporate Income Tax to be collected by multinational business groups when they exceed certain thresholds.

Departure Fee for Foreign Travel: The departure fee for overseas travel is set at TL 500.

The effective dates of the relevant amendments are subject to change and please do not hesitate to reach out to us if you have queries.