Turkey: Amendment in tax laws in Türkiye including CIT and VAT rate increases

Presidential Decree No. 7346, which regulates the increase in VAT rates, was published in the Official Gazette dated July 7, 2023 and became effective as of July 10, 2023. With the Decree, the general VAT rate of 18% has been increased to 20% and the VAT rate of deliveries and services subject to 8% VAT has been increased to 10%. The VAT rate applied as 8% over certain products has been increased to 20% as well.

Article 21 of Law No. 7456 “Law on the Amendment of Additional Motor Vehicles Tax for Compensation of Economic Losses Caused by Earthquakes Occurring on 6/2/2023 and Amendments to Some Laws and Decree-Law No. 375” which introduces significant changes in tax rates and exemption entered into force by being published on Official Gazette on July 15, 2023.

The changes in the corporate income tax rated introduced by the new Law are as follows;

·         Corporate income tax rate of 20% is increased to 25%.

·         Corporate income tax rate will be applied at a rate of 30% for the corporate income of banks, companies within the scope of the Financial Leasing, Factoring, Financing and Savings Financing Companies Law No. 6361, electronic payment and money institutions, authorized foreign exchange institutions, asset management companies, capital market institutions, insurance and reinsurance companies and pension companies.

·         The corporate income tax rate reduction of 1 percentage point applied over the earnings derived from the export activities is increased to 5 percentage points.

These changes entered into force on the date of publication of the new Law to be applied to the earnings of the corporations obtained in 2023 and the following taxation periods, starting from the declarations to be submitted as of October 1, 2023, and to the earnings of the corporations subject to special accounting period, obtained in the special accounting period starting in the calendar year 2023 and the following taxation periods.

In addition to these, the corporate income tax and VAT exemptions applied on the sale of immovables have been removed. Before the amendment, for the immovables recorded in the assets of the taxpayers for a period more than 2 years, taxpayers could benefit from VAT exemption, while 50% of the capital gains would be exempt from corporate income tax. For the immovable properties recorded in the assets of the taxpayers before the publication date of the Law, a transitional application has been added to the regulation. Accordingly, if the conditions in the relevant articles of the relevant laws are fulfilled, on the sale of immovables recorded in the assets before this date VAT exemption will be applied, and the corporate income tax exemption will be applied as 25% instead of 50%.

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Reference/ citation

Presidential Decree No. 7346

Article 21 of Law No.