Corporate Income Tax, Corporate Tax, Excise Duty, Excise Tax, Incentives, Special Consumption Tax (SCT)

Omnibus Law 7186 made Amendments on Several Tax Laws

“Law on Amendment of Income Tax Law and Certain Laws” no.7186 was published in the Official Gazette dated 19 July 2019 no.30836. This omnibus law contains of 35 articles. The very high-level summary of the amendments brought by the law are;

  • Capital repatriation: Initially, the Law 7143 was introduced on 18.05.2019, this new regulation reduces the tax rate for the repatriated captial from 2% to 1% and makes some amendments in the scope of capital
  • Recording credit repayments -that are not collected or not expected to be- as bad debt: Banks will be able to regard not collected or collecteble credit repayments as bad debt and write these off in the tax calculations.
  • Special provisions used by factoring firms to be regarded as expense in the tax calculation.
  • Tax exemption on financial restructuring
  • Supporting the production/use of electric motor vehicles by tax arrangements: Presidency has been authorised to allow companies that conduct the R&D in Turkey for the development of electric motors to be used in the new generation zero emission vehicles to deduct investment contribution gained by investment incentives over the Special Consumption Tax. (Normally, investment contribution is only deductible by the corporate tax)
  • Increase in departure to abroad fees: 15TL fee that was paid by Turkish citizens that depart abroad is increased to 50TL
  • Revenue based taxation: President has been authorised to determine the businesses that will be able to prefer income taxation over the business revenue.
Customs, Free Trade Zone, Incentives

Free Trade Zones in Turkey

Free Trade Zones (FTZs) in Turkey are special areas that are determined by the Council of Ministers where all types of industrial, commercial and certain service activities are encouraged by tax exemptions and incentives.

According to Article 1 of the Free Trade Zones Law; purposes of FTZs are:

  • to improve investments and production for export purposes
  • accelerate foreign direct investment and technological development,
  • direct companies to export activities and improve international trade.

Free Trade Zones are within the political borders of Turkey, but from a Turkish customs legislation perspective, they are considered and treated outside the customs borders of Turkey. Therefore, products brought to FTZ from abroad are not subject to import regime but movement of goods from a Turkish FTZ to Turkey is subject to import regime. On the contrary, movement of goods from Turkish customs territory to a FTZ is considered as export. This consideration allows significant advantages for companies operate in a FTZ.

Production, trade and service activities are allowed in Free Trade Zones. For this purpose, companies should obtain the related activity licence.

Some other advantages are;

  • Corporate Tax exemption for production companies
  • Income Tax withholding on employee salaries exemption for companies exporting more than 85%
  • Procure goods and services from Turkey with VAT exemption

If you have further queries on this issue, please feel free to contact us.

Incentives

Investment Incentive Mechanism in Turkey (State Aids)

Turkey’s new investment incentive system is published in June 2012 with “Council of Minister’s Decree No. 2012/3305 on Government Subsidies for Investments”. The Regulation No. 2012/1 defines procedures and principles for the implementation of the Decree as well.

The new Investment Incentive Program which is important for Turkey on reaching 2023 vision aims to:

  • Creating high value added investments,
  • Increase production and employment,
  • Encourage big scale investments to fall into international competitiveness,
  • Increase foreign direct investments (FDI),
  • Reduce regional development differences,

The investment incentive legislation is updated regularly by the Council of Minister’s to respond investor’s expectations. As a result, average 600 companies obtain investment incentives per month.

WHO CAN BENEFIT FROM INVESTMENT INCENTIVES ?

  • Real persons, ordinary partnerships, stock corporations, cooperatives, joint ventures;
  • Public institutions and agencies,
  • Public professional organizations,
  • Associations and foundations,
  • Turkish branches of foreign based companies

Continue reading “Investment Incentive Mechanism in Turkey (State Aids)”