Insights

Through the promulgation of Law No. 7394 on the Amendments of Treasury-Owned Immovable Property Valuation and the Value Added Tax Law and on the Amendments of Certain Other Laws and Decrees (“Law No. 7394”), published in the Official Gazette dated 15 April 2022 and No. 31810, significant amendments have been made in some tax laws.

Essential amendments introduced through the Law No. 7394 may be summarized as follow:

New Corporate Tax Rate in Finance Sector

Through Article 25 of Law No. 7394, the corporate tax rate to be applied to the corporate income of companies within the scope of the Law No. 6361 on Financial Leasing, Factoring, Finance, and Savings Finance Companies, electronic payment and money institutions, authorized foreign exchange institutions, asset management companies, capital market institutions, insurance, and reinsurance companies and pension companies, has been increased to 25% for the corporate income for the 2023 tax period.

The new corporate tax rate will also be applied to the corporate income of the aforementioned companies, starting from the declarations that shall be submitted as of 01.07.2022 and for the tax period starting from 01.01.2022.

It should also be noted that there is an argument regarding that the new corporate tax rate of 25%, which is envisaged to be applied in the finance sector, will only be valid for 2023 due to the wording of the regulation.

Capital Replenishment Funds

Through Article 23 of Law No. 7394, it is regulated that capital replenishment fund amounts transferred by the shareholders of the companies who have lost their capital as per Article 376 of Turkish Commercial Code no. 6102, will be exempt from corporate tax. The corporate tax exemption will be limited to the capital loss amount.

Prior to the said regulation, the approach of the tax administration was of the opinion that capital replenishment fund amounts should be subject to corporate tax and value added tax (“VAT”), although there is no such regulation in tax laws.

Tax exemption regarding income obtained by returning mutual fund participation shares to the fund

Through Article 22 of Law No. 7394, the incomes obtained by returning the mutual fund participation shares to the fund were also included in the scope of corporate tax exemption, in addition to the profit shares obtained from the mutual funds specified in the 3rd and 4th sub-paragraphs of Article 5/1-a of Corporate Tax Code No. 5520.

Also, it is regulated that the capital gains arising from the valuation of the aforementioned mutual funds participation certificates according to the stock market are exempted from corporate tax.

Infrastructure real estate investment trusts’ incomes exclusion from tax exemption

Through Article 22 of Law No. 7394, it is regulated that the income of companies other than those established to operate the portfolio consisting of real estate, real estate projects, and real estate-based rights in terms of their main field of activity was excluded from the scope of corporate tax exemption. Pursuant to this regulation, the earnings of infrastructure real estate investment trusts are not exempt from corporate tax.

The said amendment will also be applied to the corporate income of the aforementioned companies, starting from the declarations that shall be submitted as of 01.07.2022 and for the tax period starting from 01.01.2022.

Disposal period condition for VAT exemption related to real estate purchases by non-residents

Through Article 10 of Law No. 7394, a significant amendment has been made in Article 13/1-i of Value Added Tax Law No. 3065 regarding VAT exemption’s disposal period condition related to real estate purchases by non-residents. Accordingly, in the deliveries within the scope of the said exemption, the condition for holding the purchased real estate within a one-year disposal period, has been changed to three years. This provision will enter into force on 1 May 2022.

Other provisions stated above are entered into force on the date of Law No. 7394’s publication (15 April 2022).

You may find the full text of Law No. 7394 here (Turkish).