Draft Turkish Communique on the Implementation of
Local and Global Minimum Top-Up Tax (Pillar 2) Has Been Published
In connection with the Domestic and Global Minimum
Top-Up Tax (Pillar 2) provisions introduced by Law No. 7524 as Part V of the
Corporate Income Tax Law, the Revenue Administration has published, a Draft
Communiqué on the implementation of Pillar 2 rules and the template of the
Global Minimum Top-Up Tax Information Return (“GIR”) on its official website.
As known, the provisions on Domestic and Global
Minimum Top-up Tax and Provisional Articles were added as Part 5 to the
Corporate Income Tax Law No. 5520 through Law No. 7524 and entered into force
on August 2, 2024, to be applied for the taxation periods starting in 2024 and
subsequent years.
Multinational enterprise (MNE) groups with a
consolidated annual revenue exceeding 750 million Euros in at least two of the
four fiscal years preceding the reporting year, as shown in the consolidated
financial statements of their ultimate parent entity, are in scope of Domestic
and Global Minimum Top-up Tax.
For entities operating on a calendar-year basis
(starting January 1, 2024), the first Domestic Minimum Top-up Tax (“DMTT”) return
must be submitted by December 31, 2025, covering resident parent entities and
all group entities resident in Turkey.
It is expected that the DMTT return will be made
available on the system as of December 1, 2025.
To improve the Draft Communique and contribute to its
development, opinions and suggestions may be submitted until Monday, October
27, 2025.
The Draft Communique includes detailed explanations
regarding the Domestic and Global Minimum Top-up Tax provisions introduced in
the Corporate Income Tax Law No. 5520:
- Definitions
and abbreviations used throughout the Draft Communique are provided in
detail. For example, the minimum corporate tax rate is specified as 15%.
Low-tax jurisdictions and low-taxed entities are specifically defined
within the scope of the Global Minimum Top-up Tax.
- The
Global Minimum Top-up Tax applies to constituent entities of MNE groups
whose consolidated revenues, as reported in the ultimate parent’s
financial statements prepared in accordance with applicable accounting
standards, exceed 750 million Euros in at least two of the previous four
fiscal years.
- The
revenue threshold is determined based on consolidated financial statements
prepared in accordance with applicable financial accounting standards,
covering the four fiscal years preceding the reporting year. Intra-group
transactions are eliminated in the consolidation process and are not
included in the threshold calculation. Special rules and examples are
provided for newly established entities.
- Group
structure and definition of constituent entities are detailed. A group
consists of entities under common control reported in the same
consolidated financial statements. To be classified as an MNE group, there
must be at least one constituent entity or permanent establishment outside
the country of the parent entity.
- Definitions
of the ultimate parent entity (“UPE”) and constituent entity (“CE”) are
provided in detail. The ultimate parent entity is defined as an entity
that has direct or indirect control over one or more other entities and is
not itself controlled by another entity. Certain public institutions and
sovereign wealth funds are exempt from the rules under specific
conditions.
- Exemptions
apply to public institutions, non-profit organizations, pension funds,
certain investment funds, and real estate investment funds. Companies
meeting specific conditions may also qualify for exemption. A waiver of
exemption is permitted under the rules.
- Income
derived from international shipping and related activities may be exempt
from taxation under specific conditions. The Draft provides examples
demonstrating how such exemptions are applied and how associated expenses
are to be calculated.
- The
liability for the Global Minimum Top-up Tax is established based on the
rules under the Income Inclusion Rule (IIR) and the Undertaxed Profits
Rule (UTPR). Under the IIR, the taxpayer for the Global Minimum Top-up Tax
is the ultimate parent entity, intermediate parent entity, or partially
owned parent entity located in Türkiye. The Draft provides examples
explaining how tax liability is attributed, who qualifies as the taxpayer
under the IIR or UTPR, and when such liability arises.
- Additional
tax accrual, tax credit mechanisms, and methods for computing taxes taking
into account taxes paid in other jurisdictions are illustrated through
comprehensive examples.
- The
Domestic Minimum Top-up Tax applies to members of MNE groups that are
fully tax resident in Turkey. The calculation and filing processes will be
based on the same accounting periods and standards used for the Global Minimum
Top-up Tax.
- Profit
and loss are determined based on financial statements prepared under
international accounting standards (including Turkish Financial Reporting
Standards/TFRS, as being an authorized accounting standard). Adjustments
and calculations related to specific income and expense items are
illustrated with detailed examples.
- The
allocation of profits and taxes is regulated in cases where the
constituent entity is a permanent establishment, a transparent entity, or
a hybrid entity. The rules governing the allocation of covered taxes are
also set out in detail.
- Guidance
is provided on how to handle group exits, transfers, and country-by-country
computations.
- Rules
for calculating the tax burden, global minimum top-up tax base, and rates
are included, with examples for substance-based income exclusion (SBIE)
calculated based on payroll and tangible assets.
- Special
provisions are defined for mergers, demergers, share transfers, joint
ventures, and specific investment entities such as insurance investment
entities.
- Detailed
explanations and examples are included on deductible dividends,
distribution-based taxation, deemed dividends, and how these are tracked
through specific accounting systems.
- The
filing obligation, the form and content of the DMTT and Global Minimum
Top-up Tax returns, filing and payment deadlines, principles of
information exchange, and the procedures applicable to filings and
payments made on behalf of and for the account of the group are specified.
- Permanent
and transitional Safe Harbour mechanisms (CbCR Safe Harbour, UTPR Safe
Harbour, Simplified Calculations Safe Harbour, QDMTT Safe Harbour) are
clearly described, along with eligible groups and applicable
periods/selections.
- Transitional
provisions include rules on SBIE rates, first filing and payment periods,
treatment of prior period losses and tax differences and technical
guidance on deferred tax assets and liabilities.
- The
Draft Communique also contains various examples, formulas, and
illustrative calculations related to implementation.
You may access the full
Draft Communique (in Turkish language) at the following link: