Source: Türkiye
The preparation of a reform package aimed at ensuring tax fairness has been completed. The package is expected to be submitted to the Turkish Grand National Assembly. There are regulatory recommendations to strengthen tax justice, introduce capital-oriented tax practices and increase the share of direct taxes.
According to the draft bill, a new chapter in the Corporate Tax Code will see minimum corporate tax being levied from multinational companies.
It was found that about half of corporate taxpayers declared losses or did not declare their tax base but continued to operate with high turnover. Having studied global practice on this issue, the ministry created a hybrid model that compares taxpayers’ declarations, income and ability to pay with each other.
The amount of corporate tax to be paid is calculated based on a certain percentage of the profit before deductions and exemptions declared and a certain percentage of the profit on the income statement. It is determined based on whichever tax rate is higher.
The minimum corporate tax payable will be offset against taxes payable for the next five accounting periods if the company is required to pay a higher tax. Taxpayers’ rights to make investment expenditures within the scope of their investment promotion certificates are protected. Taxpayers who start new jobs are exempt from minimum tax for three years.
The minimum income tax also applies to commercial, agricultural and self-employed income that is actually taxable. Thus, the income declared by a taxpayer cannot be less than a prescribed percentage of the amount declared in the Income and Profit Declaration Schedule.
For those who earn income through self-employment, the income declared cannot be less than the annual gross minimum wage. The difference in the minimum tax paid on earnings is allowed to be offset over five accounting periods.
The increase in corporate tax will also apply to profits earned from large Turkish investments. It is recommended that the corporate tax rate on profits earned by entities operating within the scope of public-private cooperation projects under the build-operate-transfer model be set at 30 percent instead of 25 percent.
