CIT Communiqué no:20 is published
in the Official Gazette dated 14.05.2022. The Communiqué explains the
implementation of the CIT rate reduction passed with the Law no:7351. This Law
allows to calculate a %1 reduced CIT rate for the export incomes of exporters
and the incomes derived from manufacturing activities for the eligible
manufacturers.
Let’s go through some of the
questions that will probably arise in the minds of taxpayers.
If a manufacturer company
exports the goods manufactured, can it benefit 1% reduction two times for these
manufactured goods that are exported?
No. The 1 % rate reduction will
be applied for the profits from manufacturing activity whether these goods are
sold abroad or within the country.
Are all manufacturers eligible
for this CIT rate reduction of 1%?
Only the companies with industrial registry certificate and who are actually
doing the manufacturing activity will be eligible for this reduction.
Can the exporters of service
benefit from the CIT rate reduction of 1%?
Service exporters can also
benefit from the reduced rate as long as the service is provided for the
customers abroad and the service is used/benefited abroad.
In which period will this reduced rate be effective?
The reduced rate will be effective for the earnings
beginning 01.01.2022 and onward. If a taxpayer has a taxing period other than
the calendar year, the reduced rate will be effective from the beginning of the
special taxing period starting in the year 2022.
Can taxpayers producing software/informatics benefit
from the 1% reduced rate?
As long as they have
an industrial registry certificate and producing software
etc. under this certificate, they are eligible for the reduced rate.
Are the exports made to free
zones and duty-free shops considered as exports for the application of the 1%
reduction?
Yes, these sales will be
considered as exports and will benefit from the reduction.
What is the basic formula of
the tax base that will be taxed at the reduced rate?
The tax base with 1% reduced CIT rate =
Overall Tax Base x Profit from the manufacturing activities
Net Accounting Profits
The tax base with 1% reduced CIT rate =
Overall Tax Base
x
Profit from exports
Net Accounting Profits
If a taxpayer’s profit from
the exports/manufacturing is more than the overall tax base, how will the
reduction be applied? If the exports/manufacturing profit is bigger than the
net accounting profits, what will happen then?
The calculation will be as in the
folowing example:
Profits from the manufacturing
activity: 600.000-TL
Other Losses
100.000-TL
Net Accounting
Profits:
500.000-TL
Non-deductable
Expenses:
100.000-TL
Losses from prior
years:
300.000-TL
Overall Tax
Base:
400.000-TL
The tax base with 1% reduced CIT rate =
400.000-TL x 600.000-TL
500.000-TL
Since 600.000 ˃ 500.000, 100% is
the rate of the accounting profit that will be taxed with the reduced rate.
However, in this case the overall
tax base is smaller than the net accounting profit.
So, the whole amount of the
400.000-TL tax base will be taxed at the 23% - 1% =22 % CIT rate.
If a taxpayer has an
investment incentive certificate (IIC) and already has a reduced CIT rate, can
it still benefit from this 1% reduction for its manufacturing/export profits?
Yes, a taxpayer can benefit from
both reductions. The taxpayer will first apply the reduced rate for the
manufacturing/exports. Then it can benefit from the rate reduction as defined
in its IIC.
If a taxpayer is doing
manufacturing/exports and other facilities (i.e. operations that can not
benefit from reduced rate) together, how will the general expenses be treated?
Taxpayers should calculate the
revenues and costs of these activities separately. The accounting records
should be kept in a detailed manner to differentiate the profits that can be
taxed with a reduced rate with the ones that cannot. If some equipments,
machines or vehicles are used in both kinds of activities, the costs of these
amortizations will be allocated according to the number of days of use.
How will the foreign exchange
differences, interests and other revenues be treated?
If the foreign exchange
differences, interest gains and other revenues are born out of the receivables
of the exports or manufacturing, they will be included in the profit that will
be taxed with 1% reduced rate. However, the interest gains, foreign exchange
differences, etc.. that arise after these receivables are collected, cannot
benefit from the reduced rate.
