The new supplementary tax for corporate taxpayers

In detail

Law No. 7440, published in the official gazette on 12 March 2023 established a new tax liability in Turkey. Below we present the main points of the new tax.

• The additional tax applies to corporate taxpayers. Individuals are not in the scope of the new liability.
• The new tax will apply to the following base:
  • deductions and exemptions which are excluded from the taxpayer’s corporate income tax base on the annual corporate tax return of the year 2022 and
  • corporate income tax base which is taxed at reduced rates in the year 2022 due to the investment incentives available under Article 32/A of the Corporate Tax Law
• The term “deductions” in this new measure refers to the deductions that are claimed further to Article 10 of the Corporate Tax Law. Other deductions, for example deductions that are caused by application of different accounting principles (such as expense invoices arriving after year-end or reversal of provisions for severance payments), are not included in the base for the new tax.
• In addition, some deduction and exemption items have been specifically excluded from the base of the new tax. Most notably, these include: tax-exempt income from foreign currency protected lira deposit scheme, tax-deductible donations, tax-exempt revenues of investment funds and partnerships from portfolio management, tax-exempt earnings of venture capital investment funds, real estate investment fund and pension funds subject to certain conditions, income offsetted by investment incentive allowance and subjected to withholding tax, among the others.
• The additional tax applies at 10%. For deductions claimed further to the participation exemption on dividends received from Turkish companies and the participation exemption available on foreign-sourced dividends which have been subjected to at least 15% tax in the subsidiary’s country (among the other conditions), the tax rate is set as 5%.
• The base for additional tax should be assessed regardless of whether the taxpayer has a corporate income tax liability in 2022. Tax shields prescribed by special regulations, such as the right to investment incentives or the use of tax losses brought forward from earlier periods, should not be considered when determining the tax base for the additional tax. Accordingly, it is possible that some taxpayers will not have corporate income tax liability in 2022 but will be subject to the additional tax.
• The deadline for payment of the first installment of new tax is the same as the deadline for payment of the corporate tax for 2022 (30 April 2023), the second installment is payable in the fourth month following this period (31 August 2023).
• Corporate taxpayers that have their tax registration in Adana, Adıyaman, Diyarbakır, Elazığ, Gaziantep, Hatay, Kahramanmaraş, Kilis, Malatya, Osmaniye, Şanlıurfa and in the Gürün district of Sivas province as of 6 February 2023, are exempt from paying the new tax.
• The supplementary tax cannot be treated as tax-deductible expense in the calculation of corporate tax and it cannot be used as a tax credit for any other tax