Law Article Before Amendment

Law Article After Amendment

Reduced Corporate Tax

Article 32/A 

(1) Excluding institutions operating in the finance and insurance sectors, joint ventures, construction and contracting works, investments made under Law No. 4283 dated 16 July 1997 and Law No. 3996 dated 8 June 1994, and investments under royalty contracts, profits earned from investments covered by an investment incentive certificate issued by the Ministry of Economy are subject to corporate tax at reduced rates. This reduction applies starting from the fiscal period when the investment is partially or fully placed into operation and continues until the investment contribution amount is fully utilized.

(2) In the implementation of this article, the investment contribution amount refers to the amount to be covered by the State through the tax waived by applying the reduced corporate tax, and the rate obtained by dividing this amount by the total investment made refers to the investment contribution rate. Provided that the investment is completed, the remaining investment contribution amount, excluding the portion utilized through the application of the reduced corporate tax, shall be taken into account in the years following the fiscal year in which the investment is completed, increased according to the revaluation rate determined for those years in accordance with the provisions of the Tax Procedure Law.

The President is authorized to:

a) Group provinces by considering the classification of statistical regional units, per capita income, or levels of socio-economic development, and to determine, for each group, the sectors to be supported and the investment and employment thresholds for these sectors, as well as for investments made in organized industrial zones, in Gökçeada and Bozcaada, and for tourism investments made in the cultural and tourism conservation and development regions designated by the President,

b) Determine the investment contribution rate up to a maximum of 55% for each provincial group, strategic investment, or location specified in subparagraph (a), and up to 65% for large-scale investments exceeding 50 million Turkish Liras, and apply the corporate tax rate at a reduced rate of up to 90%,

c) From the date the investment commences, to partially allow the use of the investment contribution amount by applying the reduced corporate tax rate to the profits derived from the company’s other activities during the investment period, provided that it does not exceed 50% of the total investment contribution amount and the amount of investment expenditure realized; and to reduce this rate to zero or increase it up to 100% for each provincial group, regional, large-scale, strategic and priority investments, and for investments supported on a project basis due to their subject, sector, and nature,

ç) To limit the proportions of expenditures such as land, buildings, used machinery, spare parts, software, patents, licenses, and know-how costs within investment expenses, either separately or collectively,

shall be authorized.

(3) According to the second paragraph, in the case of investments made by the same taxpayer in different provinces, the investment contribution rate and the reduced corporate tax rate applicable in each respective province shall be applied based on the proportion of the total investment amount corresponding to each province.

(4) In expansion investments, if the income generated can be identified by being monitored under separate accounts within the integrity of the business, the reduced tax rate shall be applied to such income. If the income cannot be identified separately, the income to which the reduced rate will be applied shall be determined by proportioning the amount of the expansion investment to the total fixed asset value recorded in the company’s assets at the end of the period (including amounts related to ongoing investments). During this calculation, the book value of the fixed assets in the company’s assets shall be taken into account based on their revalued amounts.The application of the reduced rate shall commence in the provisional tax period in which the investment is partially or fully put into operation.

(5) In the event that it is determined, as of the fiscal period, that the conditions specified in the second paragraph have not been met, the taxes that were not timely assessed due to the application of the reduced tax rate in the relevant taxation period shall be collected together with late payment interest, without applying any tax loss penalty.

(6) In the event of transfer before the investment becomes operational, the acquiring entity shall benefit from the reduced tax rate provided that the same conditions are fulfilled. In cases where the reduced corporate tax rate is applied before the investment is partially or fully put into operation, if the investment is not completed and put into operation, the taxes that were not timely assessed due to the application of the reduced tax rate pursuant to subparagraph (c) of the second paragraph shall be collected together with late payment interest, without applying any tax loss penalty.

(7) In the event of transfer after the investment is partially or fully put into operation, the transferor shall benefit from the reduced tax rate for the period up to the date of transfer, and the transferee shall benefit for the remaining portion of the investment contribution amount from the date of transfer onwards, provided that the same conditions are fulfilled.

(8) Ten percent (10%) of the amount determined by applying the investment contribution rate to the investment expenditure made based on the investment incentive certificate may be used by being offset against other accrued tax liabilities, excluding special consumption tax and value-added tax, provided that a request is made by the end of the second month following the month in which the corporate tax return is filed. The amount that can be requested for offset shall not exceed half of the remaining investment contribution amount after deducting the portion utilized through reduced corporate tax. The investment contribution amount waived shall be deemed equivalent to the amount used through the offset of other tax liabilities, and reduced corporate tax shall not be applied to the tax base for the amounts requested to be offset against other taxes and the corresponding waived investment contribution amounts. The total amount that can be offset against other tax liabilities under this paragraph shall not exceed 10% of the amount calculated by applying the investment contribution rate to the actual investment expenditures made within the scope of the relevant investment incentive certificate.

(9) This article also applies to income tax payers.

(10) The Ministry of Finance is authorized to determine the procedures and principles regarding the implementation of this article.

Reduced Corporate Tax

Article 32/A 

(1) Institutions operating in the finance and insurance sectors, joint ventures, contract works, investments made under Law No. 4283 dated 16/7/1997 and Law No. 3996 dated 8/6/1994, and investments made pursuant to royalty agreements are excluded. However, under Article 32, the corporate tax rate shall be applied to the profits obtained from investments realized within the scope of the investment incentive certificate issued by the Ministry of Industry and Technology, starting from the fiscal period in which the investment is partially or fully put into operation, for a maximum of ten fiscal periods including the first fiscal period in which the right to benefit from the reduction can be exercised, at a 60% reduced rate, until the investment contribution amount is reached.

However, investment contribution amounts not utilized despite the presence of earnings shall not be taken into account in subsequent periods.

(2) In the implementation of this article, the investment contribution amount refers to the amount to be covered by the State through the tax waived by applying the reduced corporate tax, and the rate obtained by dividing this amount by the total investment made refers to the investment contribution rate. Provided that the investment is completed, the remaining investment contribution amount, excluding the portion utilized through the application of the reduced corporate tax, shall be taken into account in the years following the fiscal year in which the investment is completed, increased according to the revaluation rate determined for those years in accordance with the provisions of the Tax Procedure Law.

3) The President is authorized to:

a) Classify provinces and districts by considering the statistical regional units classification, per capita national income, or levels of socio-economic development, and to determine the investment and employment sizes related to investment subjects to be incentivized by these groups, investments made in Gökçeada and Bozcaada, sectors, technology fields, R&D or design activities, industrial zones, cultural and tourism protection and development regions, or incentive programs to be established,

b) Determine the investment contribution rate for the investments specified in subparagraph (a) up to a maximum of 50%,

c) Partially allow the use of the investment contribution amount calculated under this article within the scope of the investment incentive certificate by applying the reduced corporate tax rate on earnings derived from the corporation’s other activities, up to 50% of the total investment contribution amount and not exceeding the accrued investment contribution amount, until the end of the fourth accounting period including the first accounting period in which the right to use the reduction can be exercised, and to reduce this rate up to zero,

ç) To limit the proportions of expenditures such as land, buildings, used machinery, spare parts, software, patents, licenses, and know-how costs within investment expenses, either separately or collectively,

d) For investments within the scope of Law No. 6745, the durations stipulated in the first paragraph and subparagraph (c) may be extended up to twofold, and the rate specified in subparagraph (c) may be increased up to 100%.

shall be authorized.

(4) In expansion investments, if the income generated can be identified by being monitored under separate accounts within the integrity of the business, the reduced tax rate shall be applied to such income. If the income cannot be identified separately, the income to which the reduced rate will be applied shall be determined by proportioning the amount of the expansion investment to the total fixed asset value recorded in the company’s assets at the end of the period (including amounts related to ongoing investments). During this calculation, the book value of the fixed assets in the company’s assets shall be taken into account based on their revalued amounts.The application of the reduced rate shall commence in the provisional tax period in which the investment is partially or fully put into operation.

(5) If it is determined as of the fiscal period that the conditions specified in the second and third paragraphs have not been met, the taxes that were not timely assessed due to the application of the reduced tax rate in the relevant taxation period shall be collected together with late payment interest, without applying any tax loss penalty.

(6) In the event of transfer before the investment becomes operational, the acquiring institution shall benefit from the reduced tax rate provided that the same conditions are fulfilled. In cases where the reduced corporate tax is applied before the investment is partially or fully put into operation, if the investment is not completed and put into operation, the taxes that were not timely assessed due to the application of the reduced tax rate pursuant to subparagraph (c) of the third paragraph shall be collected together with late payment interest, without applying any tax loss penalty. 

(7) In the event of transfer after the investment is partially or fully put into operation, the transferor shall benefit from the reduced tax rate for the period up to the date of transfer, and the transferee shall benefit from the remaining portion of the investment contribution amount from the date of transfer onwards, provided that the same conditions are fulfilled. 

(8) Ten percent (10%) of the amount determined by applying the investment contribution rate to the investment expenditure made based on the investment incentive certificate may be used by being offset against other accrued tax liabilities, excluding special consumption tax and value-added tax, provided that a request is made by the end of the second month following the month in which the corporate tax return is filed. The amount that can be requested for offset shall not exceed half of the remaining investment contribution amount after deducting the portion utilized through reduced corporate tax. The investment contribution amount waived shall be deemed equivalent to the amount used through the offset of other tax liabilities, and reduced corporate tax shall not be applied to the tax base for the amounts requested to be offset against other taxes and the corresponding waived investment contribution amounts. The total amount that can be offset against other tax liabilities under this paragraph shall not exceed 10% of the amount calculated by applying the investment contribution rate to the actual investment expenditures made within the scope of the relevant investment incentive certificate.

(9) This article also applies to income tax payers.

(10) The Ministry of Treasury and Finance is authorized to determine the procedures and principles regarding the implementation of this article.