Newsletter & Legal Alerts

Q1/2017 Amendments to the Corporate Income Tax General Communiqué (Serial No. 1)

Under the Corporate Income Tax General Communiqué (Serial No. 11) [published in the Official Gazette dated December 31, 2016 and numbered 29935 (3rd bis)], amendments are made on the explanations stated under the Corporate Income Tax General Communiqué in relation to the implementation of undermentioned issues.    

Exemption on regional management centers, Exemption for the incomes derived through operating educational facilities, nurseries, day care and rehabilitation centers, Exemption on industrial property rights, Exemption on the income derived through sale and lease back transactions, Exemption on income derived through the sale of all sorts of assets and rights aimed at lease certificate issue, Deductions for Research & Development, Deduction on services delivered to entities and corporations resident abroad, Reduced corporate income tax application.

Published on: April 2017


Q1/2017 Amendments to Turkish Tax Legislation by the Law No. 6770

The amendments stated below are made by the Law No. 6770 (published in the Official Gazette dated January 27, 2017 and numbered 29961):

Incomes derived by the SMEs merged within the scope of first paragraph of Article 19 of the Corporate Income Tax Law, holding an industrial registry certificate and carrying out manufacturing activities will temporarily be subject to a reduced corporate income tax rate. The reduced rate shall apply over the transferor SME's income until the date of merger only, the transferee SME's 3 years of income including the accounting period in which the merger took place. The reduction rate is determined by the Council of Ministers providing that it shall not exceed 75%, VAT exemption will be applicable on documented software, deliveries intangible of rights and leasing to the taxpayers with incentive certificate, VAT refund may be claimed regarding the construction businesses within the scope of investments made through investment incentive certificate in the manufacturing industry. However, it should be noted that such application is only valid for the year 2017. In this regard, the VAT incurred in 2017 for the abovementioned construction businesses that could not be compensated through deductions may be refunded upon claims of the taxpayers, Taxes which could not be refunded on account due to the transactions that are subject to reduced rate will be refunded in cash throughout their year in respect of sectors, goods/services groups and periods set by the Finance Ministry, Income derived through the transfer of ships and yachts registered at Turkish International Ship Registry by cancelling those out of the registry in order for enrolling to another registry or transfer of those through another method (as scraping or export) will also be considered as being exempt from income and corporation tax. The goods located abroad as of January 27, 2017 which are foreign flagged and classified under HS codes of 8901.10.10.00.11 and 8901.10.90.00.11 and as well as yacht, cruiser, boats and excursion snips existing under 89.03 tariff position are exempt from; Inheritance and gift tax in case of free of charge transfer to individuals and legal entities resident in Turkey, Any and all kinds of taxes including customs duties with respect to the transactions for their imports to Turkey, registration and enrollment.

Published on: April 2017


Q1/2017 Amendments on the Application of VAT Law and Corporate Income Tax Law regarding the Investments made through Investment Incentive Certificate

Certain amendments are made on the application of VAT Law and Corporate Income Tax Law through the Law No. 6770 (published in the Official Gazette dated January 27, 2017 and numbered 29961) regarding the investments made with investment incentive certificate.

According to the abovementioned Law:

VAT exemption will be applicable to the documented software, deliveries of intangible rights and leasing regarding the investments with incentive certificate, VAT which has been incurred but could not be compensated through deductions in 2017, with respect to the construction business expenses borne for the investments made in the manufacturing industry through investment incentive certificate may be refunded, For investment expenses borne during 2017 within the scope of investments made in the manufacturing industry through investment incentive certificates, the authorities granted to the Council of Ministers are extended in respect of the reduced corporate income tax application, The authority to apply the reduced rate of corporate income tax up to 75% over the incomes arising from the merger transactions of SMEs is granted to the Council of Ministers.

Published on: April 2017


Q1/2017 Amendments on VAT Rates Applicable to the Delivery of Certain Residences

Under the Decree of the Council of Ministers (Decree No. 2017/9759) (published in the Official Gazette dated February 3, 2017 and numbered 29968), VAT rates applicable to residence construction projects the building licenses of which are obtained after January 1, 2017 (including this date) and residence construction projects to be tendered by public institutions and their affiliates after January 1, 2017 are re-determined.

In this regard, for the abovementioned residences with the net area up to 150 square meters that are built up as luxurious or first class construction within metropolitan regions, the VAT that shall apply in accordance with the tax value per unit square meters of its area on the date its license was obtained are stated below;

8% for deliveries between TL 1,000 and TL 2,000 (TL 2,000 included), 18% for deliveries over TL 2,000 (8% until September 30, 2017).

It should be noted that any amendment is not made with respect to the VAT rate applicable to deliveries within the scope of residence construction projects with building licenses obtained between January 1, 2013 - December 31, 2016 and projects to be tendered by public institutions and their affiliates after January 1, 2013.

In addition, through the Decree of the Council of Ministers (Decree No. 2017/9759), the VAT for the delivery of residences that are subject to 18% will continue to apply at a rate of 8% until September 30, 2017.

Published on: April 2017


Q1/2017 Reduction on VAT Rates on the Delivery of Vessels and Furniture

VAT rates applicable to the delivery of following goods are re-determined by the Decree of the Council of Ministers (Decree No. 2017/9759) (published in the Official Gazette dated February 3, 2017 and numbered 29968).

VAT rate for the delivery of yacht, cruiser, boat and excursion boats are re-determined as 1%. VAT rates for the delivery of goods (furniture) the HS Codes and description of which are introduced under the VAT Law are re-determined as 8% to be applicable until April 30, 2017 (including this date).

Published on: April 2017


Q1/2017 Special Consumption Tax Rates on certain White Appliances and Vessels

Through the Decree of the Council of Ministers (Decree No. 2017/9759) (published in the Official Gazette dated February 3, 2017 and numbered 29968); Special Consumption Tax (“SCT”) rates applicable to certain goods and vessels are re-determined as below:

SCT rate applicable to yachts, cruisers, boats and excursion boats the HS Codes and descriptions of which are introduced under the List (No. 2) attached to the SCT Law is re-determined 0% (zero percent). SCT rate applicable to goods (refrigerators, freezers, water heaters, washing machines, tumbler dryers, dish washers and air conditioners) the HS Codes and descriptions of which are introduced under the List (No. 4) attached to the SCT Law are re-determined as 0% (zero percent) to be applicable until April 30, 2017.

Published on: April 2017


Q1/2017 Stamp Tax Rates applicable to Promise to Sell Agreement and Pre-Paid Residence Sales Agreement

Through Article 28 of the Law on the Amendment of Certain Laws for the Improvement of the Investment Landscape (Law No. 6728) (published in the Official Gazette dated August 9, 2016 and numbered 29796), “Promise to Sell Agreements” and “Pre-Paid Residence Sales Agreements” were added to the Table (No. 1) which is attached to the Stamp Tax Law and includes the documents that are subject to stamp tax. In this regard, as of the enforcement date of such Article, the stamp tax rate applicable to such agreements has been applied at the general rate of 0.948%.

However, with the Article 1 of the Decree of the Council of Ministers (Decree No. 2017/9759) (published in the Official Gazette dated February 3, 2017 and numbered 29968), stamp tax rate applicable to Promise to Sell Agreements and Pre-Paid Residence Sales Agreements are decreased to 0%.

Published on: April 2017


Q1/2017 Amendments to the VAT General Implementation Communiqué in relation to Investments made through Investment Incentive Certificate

As known, certain amendments were made on the VAT Law in relation to investments made with incentive certificate by the Law No. 6770. Procedure and principles in relation to the application of such legal regulation are explained under the VAT Communiqué (Serial No. 10) (published in the Official Gazette dated February 03, 2017 and numbered 29968) which makes amendments on the VAT General Implementation Communiqué:

Sale and lease of software and intangible rights through certificates in relation to investments made with investment incentive certificate have been held as exempt from VAT.

VAT incurred in 2017 for the construction business expenses within the scope of investments made with incentive certificate in the manufacturing industry which could not be compensated through deductions may be refunded. The refund procedure and requirements are explained in detail under the VAT Communiqué (Serial No. 10).

Published on: April 2017


Q1/2017 Reduced Corporate Income Tax applicable to SME Mergers and the Application of Exemption for the Transfer of Ships Registered to TISR

Under the Corporate Income Tax General Communiqué (Serial No.12) (published in the Official Gazette dated February 11, 2017 and numbered 29976), explanations are made in relation to the application of reduced corporate income tax on mergers of Small and Medium Sized Enterprises (“SME”) and the application of corporate income tax exemption for the income derived through the transfer of ships registered to Turkish International Ship Registry (“TISR”).

Income derived through the transfer of ships and yachts registered to TISR by cancelling those out of the registry in order for enrolling to another registry or transfer of those through another method shall be considered as exempt from income and corporate income taxes.

Incomes derived by SMEs merging in accordance with Article 19 of the Corporate Income Tax Law and holding industrial registry certificate and carrying out manufacturing activities shall temporarily be subject to reduced corporate income tax rate. The reduced rate would be applicable to the income of the transferor SME only until the merger date while it would be applicable to the transferee SME's three years of income including the accounting period in which the merger took place. The reduction rate is determined by the Council of Ministers providing that it shall not exceed 75%.

In order to apply the reduced corporate income tax rate on the income derived by SMEs solely from manufacturing activities;

The merger shall fulfill the requirements regulated under Article 19 of the Corporate Income Tax Law, Merging companies shall be operating as SMEs, As of the transfer date, merging companies shall be holding an industrial registry certificate and actually carrying out manufacturing activities.

Published on: April 2017


Q1/2017 Amendments made by the VAT General Communiqué (Serial No. 11) to the VAT General Implementation Communiqué

Through the VAT General Communiqué (Serial No. 11) (published in the Official Gazette dated February 15, 2017 and numbered 29980), numerous amendments are made to different sections of the VAT General Implementation Communiqué. Significant explanations and amendments made by the VAT General Communiqué (Serial No. 11) would be stated as follows:

Explanations in relation to the documents which are required for the implementation of roaming exemption, Explanations in relation to the VAT refund receivables arising from withholding and reduced rate due to the same transaction, Incremental guarantee application enabling to get VAT refunds in cash within 5 business days, Amendments to the calculation method of VAT upper limit to be refunded in export registered delivery of the goods produced with input obtained within the scope of Permit Certificate for Inward Processing, Amendments to the implementation of refunds for transactions subject to reduced rate, Explanations on the VAT exemption in relation to transportations made to free zones or transportations made from free zones with exportation purposes, Amendments to the application of partial withholding, Amendment to the Section (No. III/C-5.6) titled “Time of Deduction”, Amendment to the Section (No. III/B-2.1.1) titled “VAT Rate to Be Applied”.

Published on: April 2017