The Omnibus Bill on the Amendment of Certain Laws and the Decree Law No. 375 on the Additional Motor Vehicles Tax for the Compensation of the Economic Losses Caused by the Earthquake Disaster that Occurred on February 6, 2023 Contains Important Changes

The Omnibus Bill (“Bill”) on the Amendment of Certain Laws and the Decree Law No. 375 on the Additional Motor Vehicles Tax for the Compensation of the Economic Losses Caused by the Earthquake Disaster that Occurred on February 6, 2023 was introduced to the Parliament on July 05, 2023.

The significant amendments to the Bill are summarized below.

I. Corporate Income Tax Rate Increased by 5 Points

The general corporate income tax rate is proposed to be raised from 20% to 25% in Article 10 of the Bill. The 25% rate that is currently applied to the earnings of banks, companies subject to Law No. 6361, electronic payment and money institutions, authorized foreign exchange institutions, asset management companies, capital market institutions, insurance and reinsurance companies, and pension companies is proposed to be increased to 30%.

It is anticipated that these changes will be implemented for the 2023 accounting period and subsequent accounting periods of companies, commencing with tax returns due after October 1, 2023. Moreover, the new rates must be applied to taxpayers’ subject to the special accounting period starting with accounting periods beginning in 2023 and subsequent years.

II. Corporate Income Tax Discount Rate Has Been Amended

With the Bill, it is envisaged that the 1-point discount applied to the corporate income tax rate of exporting corporations exclusively on their earnings from exports will be applied as 5 points.

III. Corporate Tax and VAT Exemption for Real Estate Sales of Corporations Has Been Abolished

Pursuant to the Corporate Income Tax Law No. 5520, 50% of the gains arising from the sale of immovable properties that have been in the assets of corporations for at least two years are exempt from corporate income tax and the sale is exempt from VAT, provided that other conditions stipulated under the law are also met; however, it is envisaged that the corporate income tax and VAT exemption will be abolished for the immovable properties that have been in the assets after the effective date of the law, and necessary amendments have been proposed in this regard.

On the other hand, the corporate income tax exemption rate of 50% for the sale of immovable properties that are already in the assets of the corporations as of the effective date of the law has been reduced to 25%. Besides, Article 4 of the Bill stipulates that VAT exemption will continue to apply to the sale of immovable properties that are already in the assets of corporations as of the effective date of the relevant law.

IV. Tax-Free Transfer of Immovable Properties Through Partial Spin-off Has Been Abolished

Article 9 of the Bill proposes to terminate, effective January 1, 2024, the practice of transferring immovable properties at their book value through partial spin-off, as required by Article 19 of the Corporate Income Tax Law No. 5520.

V. Exemption for Certain Funds Has Been Abolished

It is also envisaged to abolish the exemption for the dividends earned by corporations from other mutual fund participation shares subject to full taxation and the income arising from the return of participation shares to the fund, valid for those acquired after the publication date of the Law.

VI. Additional Motor Vehicle Tax Has Been Introduced

It is proposed to levy additional Motor Vehicles Tax equal to the Motor Vehicles Tax accrued for the year 2023 as a one-off for the vehicles registered in the relevant registry as of the publication date of the Law and to be registered for the first time until December 31, 2023.

The additional Motor Vehicle Tax can be paid in two equal installments, the first installment until the end of the month following the publication of the Law and the second installment until the end of November.

In addition to the aforementioned, the Bill also envisages regulations regarding the powers granted to the President of the Republic regarding the Recycling Participation Fee collected in accordance with the Environmental Law and the determination of the Special Consumption Tax rate applied to certain goods in accordance with the Special Consumption Tax Law.

The full text of the Bill referred to in this reminder is available at this link.

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