Brief explanations regarding the changes in tax legislation of the Law No. 7394 published in the Official Gazette dated April 5, 2022 are as follows:  

A. Capital completion

Net corporation profit is defined in the article 6 of the Corporate Tax Law. Article 376 of the Turkish Commercial Code No. 6102, includes provisions regarding capital loss and debt.

It is ensured that the amounts transferred by the shareholders of the company, whose capital is decided to be completed, in an amount to cover the unrequited portion due to loss pursuant to Article 376 of the Turkish Commercial Code, are not taken into account in the determination of corporate income, by adding a new paragraph to the article with the article 23 of the Law No. 7394.

B. Corporation tax rate

In accordance with the provisional article 13 added to the Corporate Tax Law, Corporate Tax is applied as 23% for the taxation period of 2022. In accordance with the article 25 of Law No. 7394, this rate has been increased to 25% for banks, companies within the scope of the “Financial Leasing, Factoring, Financing and Savings Finance Companies Law” numbered 6361, electronic payment and money institutions, authorized foreign exchange institutions, asset management companies, capital market institutions, insurance and reinsurance companies and pension companies.

This provision is in force to be applied to the company profits of the 2023 taxation period, and the rate change is applied to the 2022 profits of the relevant institutions in accordance with article 26 of the Law No. 7394,

C. Amendments made in the Tax Procedure Law

New regulations have been introduced with the provisional article 34, which has entered into force within the scope of article 359 and 367 of the Tax Procedure Law (“TPL”) regarding the smuggling offenses and penalties and penalties of some smuggling offenses. You can find our explanations regarding the new provisions below;

  1. The prison sentences stated in the article 359 of the TPL and, with upper limit of 3 years have been increased to 5 years; and those with upper limit of 5 years have been increased to 8 years.
  2. Effective repentance provisions can be applied during investigation and prosecution stages, depending on the conditions that if the taxes levied in accordance with the crimes listed in article 359, the default interest, late fee and half of the fines are paid, no lawsuit is filed in the tax court and waived if filed, not applying to appeal and waived if applied, Thus, it is possible to decrease prison sentences to be imposed in this regard.
  3. In addition to the tax levied, a provision regarding reducing the prison sentence by 50%, which will be applied when there is no penalty imposed depending on the original tax, has been introduced.
  4. In case the smuggling offenses are executed more than once within one calendar year or taxation period, the provisions of “successive offence” in article 43 of the Turkish Criminal Law shall be applied.
  1. It is ruled that the condition of preparing a report and consideration is not required in order to file a public prosecution if it is revealed that the act subject to the consideration was committed by another person other than the person who is being investigated or prosecuted, or that it was carried out together with another person, in the investigations and prosecutions carried out regarding the crimes within the scope of Article 359 of the TPL, according to the provision added to Article 367 of the TPL.
  2. A provisional article has been regulated to ensure that effective repentance and successive offense can also be applied to cases that are in the judicial authorities or execution phase, in accordance with the conditions specified in the law.

The issues explained in this section entered into force on April 15, 2022.

D. Other Regulations

Explanations regarding the other regulations made within the scope of the Law No. 7394 are given below. The effective dates of the amendments are listed at the beginning of each heading:

  • July 1, 2022 – The phrase “(Excluding the profits of those established for the purpose of operating the portfolio consisting of real estate, real estate projects and real estate-based rights in terms of their main field of activity)” has been added to the said sub-paragraph 4, with the article 22 of the Law No. 7394. In accordance with this regulation, the profits of infrastructure real estate investment trusts will not be an exception according to the aforementioned subparagraph.
  • April 15, 2022 – Incomes related to the income obtained by returning mutual fund participation shares to the fund are exempt from corporate tax. In addition, the incomes that may arise as a result of valuation of mutual fund participation certificates according to the stock exchange price will also be exempt from corporate tax.
  • April 15, 2022 – In accordance with the additional article 4 of the Law No. 5651, advertisements given to those who are subject to advertising ban will not be considered as an expense in the determination of commercial and corporate profit.
  • April 15, 2022 – Doctors who carry out the practice of medicine by signing a contract with one or more private health institutions will be considered as self-employed.
  • Profits of The Year 2022 – The corporate tax rate for banks and companies under the 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 will be applied as 25%, starting from 2022 profits.
  • April 15, 2022 – Pursuant to Article 376 of the Turkish Commercial Code, it is ensured that the amounts transferred by the shareholders of the company, whose capital is decided to be completed, in an amount to cover the unrequited portion due to loss, are not taken into account in the determination of corporate income. Incomes obtained by returning mutual fund participation shares to the fund, which are included in sub-paragraphs 3 and 4 of article 5/1-a of the Corporate Tax Law, are included in the scope of corporate tax exemption.
  • April 15, 2022 – We consider that the income obtained from the sale of mutual fund participation certificates held for more than two years may be subject to Corporate Tax exemption at the rate of 75%.
  • May 1, 2022 – In case the residences or workplaces delivered to foreigners as an exemption from VAT are disposed of within one year, the tax not collected on time is collected together with the deferred interest. The period of 1 year is increased to 3 years.
  • May 1, 2022 – Good deliveries and services related to construction works will be exempt from value added tax until December 31, 2025 for taxpayers holding investment incentive certificates for the manufacturing industry and tourism.
  • April 15, 2022 – Engineering services provided to taxpayers who manufacture electric motor vehicles developed for R&D activities in Turkey for the development of these vehicles and within the scope of investment incentive certificate will be exempted from VAT until December 31, 2023.
  • May 1, 2022 – National security expenditures and investments will be exempted from Value Added Tax.
  • May 1, 2022 – The holding period has been increased from 1 year to 3 years – within the scope of Value Added Tax exemption applied in real estate sales to foreigners.
  • May 1, 2022 – Regulation on VAT exemption for construction works carried out within the scope of investments with incentive certificates.
  • May 1, 2022 – Regulation regarding the exceptional application in engineering services related to electric motor vehicles developed in Turkey within the scope of R&D activities in Turkey.
Barış Kencebay
Tax Counsel | baris.kencebay@bener.com
Sevim Özkan
Associate | sevim.ozkan@bener.com