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Local minimum corporate income tax has been enacted in Turkish Tax Legislation
The Local Minimum Corporate Income Tax legislation has been enacted in Türkiye effective from August 2, 2024, which mandates a comparison between a 10% corporate income tax if the effective corporate income tax calculation is below 10% under routine declaration. Newly incorporated entities will be exempt for their first three fiscal years from local minimum tax calculation and this law will fully apply from 2025.
02 August 2024 / Official Gazette No. 32620
28 September 2024 / Official Gazette No. 32676
Türkiye introduced OECD’s Global Minimum Taxation
Türkiye’s Law No. 7524, effective January 1, 2024, introduces OECD’s Pillar 2 global minimum tax rules, requiring multinational corporations (MNCs) with over €750 million in annual revenue to pay a minimum 15% tax per jurisdiction. This ensures MNCs with low effective tax rates (ETR) pay a “top-up” tax on under-taxed income. Türkiye’s legislation aligns with OECD guidelines for calculating Global anti-Base Erosion (GloBE) income and ETR, including safe harbor rules and carve-outs based on asset values and payroll expenses. Compliance demands detailed ETR calculations and self-assessment, with declarations due by specific fiscal deadlines and an upcoming implementation guide.
Türkiye’s Law No. 7524 (gib.gov.tr)
Türkiye signed the Multilateral Agreement for implementing STTR under OECD’s Pillar 2 rules
On September 19, 2024, nine jurisdictions within the OECD’s Inclusive Framework, including Türkiye, signed a multilateral treaty to implement the Subject-to-Tax Rule (STTR) under Pillar 2. STTR enables developing countries to impose up to a 9% tax on specified cross-border payments, such as interest, royalties, and service fees, when payments are made to entities in low-tax jurisdictions (under 9%). Unlike other Pillar 2 rules, STTR applies to all payments meeting its criteria, not just large multinationals. This treaty aids developing countries in reducing tax avoidance, and multinational corporations must review compliance for cross-border transactions under STTR.
Important change on taxation of Companies manufacturing in Turkish Free Trade Zones
Türkiye’s Law No. 7524, effective August 8, 2024, modifies corporate tax exemptions for businesses in Turkish free trade zones. Amending Provisional Article 3 of the Free Zones Law (Law No. 3218), this law limits tax exemptions to income from foreign sales only. Earnings from domestic sales by companies manufacturing in these zones no longer qualify for exemption and are now subject to a 25% corporate tax rate. This change redefines the scope of tax relief for free zone businesses, distinguishing between foreign and domestic revenue sources and ensuring tax compliance on local sales profits.
Türkiye’s Law No. 7524 (gib.gov.tr)
Green Transformation Support Programme
Türkiye’s Green Transformation Support Program, detailed in a communiqué on July 26, 2024, aims to foster climate-friendly, resource-efficient, and low-carbon production in the manufacturing sector. Turkish manufacturing companies are eligible and must submit a roadmap report to the Ministry of Industry and Technology outlining green transformation practices. The Ministry will open calls specifying application conditions and durations. Projects aligning with circular economy goals, including land acquisition, construction, equipment, technology, and consultancy, may receive support. Approved projects will receive an Investment Incentive Certificate from the General Directorate, streamlining state aid and incentive processes under the relevant legislation.
26 Temmuz 2024 CUMA (resmigazete.gov.tr)
Important Corporate Tax Rate Increase on the Built Operate Transfer Models
Türkiye’s Law No. 7524, effective August 8, 2024, introduces a 30% corporate tax rate rather than 25%, on Public-Private Partnership (PPP) projects under specific frameworks. This amendment modifies Article 32 of the Corporate Tax Law No. 5520, particularly targeting corporations engaged in Build-Operate-Transfer (BOT) models under laws related to specific public service and healthcare projects. Previously, pension companies were subject to adjusted rates, but the law now extends this to corporations constructing and operating projects under PPP models. This higher tax rate applies to construction companies’ income from BOT or PPP model projects, ensuring increased revenue contribution from these partnerships.
Türkiye’s Law No. 7524 (gib.gov.tr)
