Amendments in Corporation Tax Law in Turkey – December 2017

Amendment in Corporate Tax Rate for the Years 2018, 2019, 2020

The communiqué regarding the “Amendments in Corporation Tax Law No 7061” has been announced and published in the Official Gazette on 5 December 2017 and has come into force, except for certain articles.

With the publication of the aforementioned communiqué, the corporate income tax rate, which was 20% previously, has been increased to 22% for the years 2018, 2019 and 2020 and the Council of Ministers have  been entitled to reserve the right to decrease the rate of 22% to 20%.

The increased rate of 22% will be applied on the income generated in the year 2018 (starting from January 1st), meaning that the first application of the increased rate will take place in the provisional income tax return period for the 1st quarter of 2018.

Tax Reduction Benefit for the Personal & Corporate Income Taxpayers

As per the communiqué numbered 30297 and dated 23 December 2017, the announcement and amendment regarding the “Tax Reduction Benefit for the Taxpayers” has been made.

According to the published communiqué, below listed taxpayers will benefit from the said tax reduction:

• The individuals who are liable to pay Personal Income Tax (PIT) based on their commercial, agricultural and professional activities
• The Corporate Income Tax (CIT) payers except for the entities operating in finance and banking sector, insurance and reinsurance companies, pension companies and pension mutual funds.

The tax reduction rate has been announced as 5% and this rate will be applied on the income declared in the annual PIT and CIT returns of the above listed taxpayers who meet the set criteriea.

In order to benefit from the said tax relief; the taxpayers have to meet the below criteria:

• The tax returns for the years in the tax reduction period and the two preceding years, should be accrued within their legal deadlines. Moreover, the related due taxes must be paid within the statutory deadlines as well. If the tax returns need to be corrected due to mistakes or voluntary diclosure purposes after the statutory period, they are still evaluated in the content of the tax relief.
• The taxpayer should not be subject to any tax assessment for the year in which the tax reduction will be calculated and for the two preceding years. If the related assessment is cancelled via court decision or evaluated within the scope of correction provisions of the Tax Procedure Code, it still considered as “valid” for meeting the related criterium.
• The taxpayer should not have any overdue tax debts (including tax penalties) over TRY 1.000 as of the submission date of the corporate income tax return.
• The taxpayer should not commit any fraudulent acts under Article 359 of the Tax Procedure Code in the declaration year and for the four preceding years.

It is important to note that the new tax relief is applicable for annual individual and corporate income tax returns submitted after January 2018.