After February 6, 2023, in order to meet the financing needs arising from the earthquake in Kahramanmaraş, a legislative proposal was submitted to the parliament which establishes an Additional Motor Vehicle Tax for 2023 and includes significant amendments to the corporate tax law and the value added tax law, including an increase in the corporate tax rate.

The regulations in the Bill are summarized as follows.

1. Corporate Tax Rate is Increased From 20% to 25%.

The Corporate Tax rate is increased from 25% to 30% for banks and financial institutions, and from 20% to 25% for other institutions, to be implemented in the declarations to be submitted as of October 1, 2023.

If the proposal becomes enacted in its current form, these increased rates will be applied to the earnings included in the provisional corporate tax return for the 3rd period and the annual corporate tax return.

2. The Corporate Tax Deduction for Exports is Increased From 1 point to 5 point.

The regulation also stipulates that the 1-point deduction applied to the export earnings of exporting corporations will be increased to 5 points.

3. The Corporate Tax Exemption on The Income of Investment Funds and Partnerships is Annulled Except Venture Capital Investment Trusts and Funds. 

Pursuant to the Article 8 of the bill, the corporate tax exemption applied to income from investment funds, except for the exemption applied to income from participation shares of venture capital investment funds and shares of venture capital investment trusts, is annulled. 

4. Corporate Tax Exemption is Expiring for Real Estate Sales Income.

It is proposed to abolish the corporate tax exemption applied to 50% of the gains arising from the sale of immovable properties that have been in the assets of corporations for at least two full years.

However, with the provisional Article 16 added to the Corporate Tax Law, it is envisaged that 25% of the income to be obtained from the sale of real estate, which were in the assets of the corporations before this amendment and which they did not trade, will be exempt from corporate tax.

5. Immovables Are Excluded from The Partial Spin Off Regulation of The Corporate Tax Law.

The immovables included in the balance sheet of Turkish resident company or the place of business or permanent representative in Türkiye of a foreign corporation in the characteristics of a capital company, are envisaged to be excluded from tax free partial spin off regulations. 

6. VAT Exemption for Real Estate Sales by Corporations Ends.

The VAT exemption applied to the sale of immovable properties that have been in the assets of organizations for at least two full years, as stipulated in Article 17/4-r of the VAT Law, ends starting from the publication date of the law.

However, with the provisional article added to the VAT Law, the VAT exemption will continue to be applied in the sale of real estate in the assets of the corporations that they do not hold such assets for the purpose of trade prior to this amendment.

7. Additional Motor Vehicle Tax

 It is envisaged that an additional motor vehicle tax will be imposed for once only, equal to the motor vehicle tax imposed in 2023.

8. Recycling Contribution Fees

The President is authorized to increase the recycling contribution fees under the Environment Law by up to two times or reduce them by up to half. 

9. Authorization to the President Related to the Lump Sum Tax Amounts in the Special Consumption Tax Law

The President is authorized to update the lump sum tax amounts stated in the lists I and III of the Special Consumption Tax Law. The List I cover the oil and lubricants products and list III cover alcoholic beverages and tobacco products.

10. Minimum Wage Support

Pursuant to the Provisional Article 96, to be added to the Social Security and General Health Insurance Law No. 5510, it proposes that the employers will be provided with a minimum wage support of TRY 500 per month between July and December 2023, to be covered by the Unemployment Insurance Fund.        

The text of the law contains very detailed provisions, therefore, the explanations in our bulletin are only intended to provide general information.

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Bill Amending the Corporate Tax Law and Value Added Tax Law and Introducing Additional Motor Vehicle Tax are submitted to the Parliament