Explanations and examples regarding revenue-based taxation are explained in the Income Tax Law Communiqué dated 3.12.2019 and numbered 309.
INCOME TAX GENERAL COMMUNIQUE NO. 309
Official Gazette Date: 03/12/2019
Official Gazette No: 30967
FIRST SECTION
Purpose, Scope and Basis
Purpose and scope
ARTICLE 1 – (1) The purpose of this Communiqué is to determine the procedures and principles regarding the implementation of Article 113 of the Income Tax Law No. 193 dated 31/12/1960.
(2) This Communiqué covers the explanations regarding the determination of the taxable incomes of income or corporate taxpayers who are engaged in urban passenger transportation activities and who obtain all of their incomes arising from these activities through electronic fee collection systems, through the Revenue Based Income Determination regulated in Article 113 of Law No. 193.
Basis
ARTICLE 2 – (1) Article 113 of the Income Tax Law, which was re-arranged with Article 1 of Law No. 7186, is as follows:
”Determination of Income Based on Revenue:
Article 113 – In case of request by taxpayers who are engaged in urban passenger transportation activities and who obtain all of their income from these activities through electronic fee collection systems, 10% of their gross income from the said activities (the amount including the value added tax calculated by taxpayers who are taxed according to the income based taxation method within the scope of Article 38 of the Value Added Tax Law No. 3065 dated 25/10/1984) shall be taken as the taxable income related to these activities. In this determination of the taxable income, the expenses related to the relevant activity shall not be taken into account and no deduction or exception shall be applied to this income.
Those whose income is determined within the scope of the first paragraph;
a) Expenses or costs related to these activities are not taken into account in determining other taxable earnings or incomes.
b) The provisions of this article shall not apply to other earnings or incomes subject to declaration other than these earnings.
c) It is not possible to exit this procedure unless two years have passed.
Taxpayers who have been fined twice within a calendar year in accordance with the provisions of the first and second paragraphs of Article 353 of the Tax Procedure Law No. 213 dated 4/1/1961 cannot benefit from the provisions of this article for their earnings for the year in which the fine was imposed and the following two calendar years.
The provisions of this article shall also apply to corporate taxpayers.
The President may increase the rate in the first paragraph by up to two times, reduce it by half, or bring it to the legal rate; The Ministry of Treasury and Finance is authorized to determine the procedures and principles regarding the implementation of the article.”
PART TWO
Revenue-Based Earnings Determination Application
Taxpayers who can benefit from the application and the conditions for benefiting
ARTICLE 3 – (1) Income (including those whose earnings are determined by the simplified method) or corporate taxpayers who are engaged in urban passenger transportation activities and who obtain all of their income from these activities through electronic fee collection systems will be able to benefit from the revenue-based earnings determination application.
(2) In order to benefit from the revenue-based earnings determination application;
a) Taxpayers who want to benefit from the application must be engaged in urban passenger transportation activities,
b) All of the income from these activities must be obtained through electronic fee collection systems,
c) A written request must be made to the tax office to which the tax office is affiliated in terms of income or corporate tax to benefit from the application. In this context, it is natural that taxpayers who are engaged in urban passenger transport activities cannot benefit from this practice if all of their revenues arising from these activities are not obtained through the electronic fee collection system.
Example 1: Mr. (A) is engaged in urban passenger transport activities with a private public bus. Mr. (A) collects a portion of his revenues arising from this activity through electronic fee collection systems and the other portion in cash from the passengers. Accordingly, Mr. (A), who does not obtain all of his revenues arising from urban passenger transport activities through the electronic fee collection system, cannot benefit from the revenue-based income determination practice in relation to this activity.
Request to benefit from the practice and evaluation of these requests
ARTICLE 4 – (1) Taxpayers who wish to switch to the revenue-based income determination procedure must apply to the tax office they are affiliated with in terms of income or corporate tax with a petition and request to switch to this procedure. These taxpayers are required to attach information and documents proving that they meet the conditions to benefit from the application to their petitions regarding their applications.
(2) Tax offices will review these applications within one month and inform the taxpayers in writing whether they meet the conditions and whether their requests are accepted.
(3) Taxpayers whose requests are accepted will switch to the revenue-based earnings determination method as of the beginning of the year following the date on which the notification was notified to them. Among the taxpayers who applied in this regard in December, those who meet the conditions and are notified in writing by the tax offices within the next calendar year will switch to the revenue-based earnings determination method as of the beginning of the calendar year in which the notification was made.
(4) Taxpayers who have started a new job and want to determine their earnings according to this method must state in a separate petition that they want to benefit from the revenue-based earnings determination method together with the notification of starting work. If their requests are accepted, these taxpayers will benefit from the revenue-based earnings determination application as of the date on which they start work.
Example 2: Ms. (B), whose commercial income is determined by the simple method, is engaged in urban passenger transportation activities with a private public bus and obtains all of her income through the electronic fee collection system. Ms. (B) applied to the tax office directorate she is affiliated with on 3/12/2019 to switch to the revenue-based income determination method. The tax office examined the taxpayer’s application and determined that she met the conditions, and notified her on 19/12/2019 that she could switch to the revenue-based income determination method. Accordingly, the taxpayer will calculate her income from this activity according to the revenue-based income determination method as of the beginning of the year following the date of notification, i.e. 1/1/2020.
Calculation of taxable income
ARTICLE 5 – (1) Taxpayers who are engaged in urban passenger transport activities and who obtain all of their revenues from these activities through electronic fee collection systems, and whose applications are accepted by the tax office, shall declare 10% of their gross revenues from these activities as taxable income related to these activities.
Example 3: Mr. (C), whose revenues related to urban passenger transport activities are determined according to the business account principle and who obtains all of his revenues related to this activity through the electronic fee collection system, has switched to the revenue-based income determination method as of 1/1/2020. The gross revenue and expenses of the taxpayer, who does not have any other taxable activity, for the 2020 calendar year are as follows.
|
Gross Revenue |
Expenses |
Profit |
|
90.000 TL |
70.000 TL |
20.000 TL |
Accordingly; (A) Ltd. Şti. shall declare (767,000 TL * %10) = 76,700 TL, calculated as 10% of the gross revenue amount obtained according to the revenue-based profit determination method, as taxable corporate profit in the corporate tax return to be submitted for the 2020 accounting period.
(3) In calculating the taxable profit related to the urban passenger transport activity according to the revenue-based profit determination method, the expenses related to this activity will not be taken into account and no deduction or exception will be applied to the profit determined according to this method.
Example 5: Mr. (Ç), aged 28, for whom income tax liability was established for the first time due to the urban passenger transport activity, started this activity on 1/4/2020 and stated that he wanted to benefit from the revenue-based profit determination method in his petition attached to the business start notification submitted to the tax office. Mr. (Ç) obtains all of his revenues related to urban passenger transport activities through the electronic fee collection system. In his petition submitted to the tax office to which he is affiliated on 5/7/2020, Mr. (Ç) stated that he has also started retail sales of apparel products as of 1/7/2020. Information regarding Mr. (Ç)’s revenues and costs from the said activities in the 2020 calendar year are as follows.
|
2020 Calendar Year |
Urban Passenger Transport Activity (1/4/2020 – 31/12/2020) |
Retail Sales of Apparel Products(1/7/2020 – 31/12/2020) |
|
Domestic Sales |
300.000 TL |
530.000 TL |
|
Cost of Sales |
260.000 TL |
480.000 TL |
Accordingly, Mr. (Ç);
a) Between 1/4/2020 – 31/12/2020, his earnings from urban passenger transportation activity calculated according to the revenue-based earnings determination procedure (300.000 TL * 10%) = 30.000 TL.
b) Between 1/7/2020 – 31/12/2020, the income from the retail sale of apparel products is (530.000 TL – 480.000 TL) = 50.000 TL.
The total taxable commercial income of Mr. (Ç) for the calendar year 2020 will be calculated as (Income from the sale of apparel products + revenue-based income) = (50.000 TL + 30.000 TL) = 80.000 TL.
Mr. (Ç), who meets all the conditions regarding the exemption of earnings for young entrepreneurs regulated in the 20th repeated article of the Income Tax Law, made a cash donation of 5.000 TL to a public benefit association on 20/8/2020.
Accordingly, Mr. (Ç) will only be able to benefit from the earnings exemption for young entrepreneurs regulated in the repeated Article 20 of the Income Tax Law for 50.000 TL from the retail sale of apparel products, and 30.000 TL, which is the earnings calculated according to the revenue-based earnings determination procedure from urban passenger transportation activity, will not be subject to the said exemption. Therefore, in the determination of Mr. (Ç)’s income tax base for 2020, his earnings from the retail sale of apparel products will not be taken into account as it is below the young entrepreneur earnings exemption amount, and only his commercial earnings from urban passenger transportation activity will be taken into account.
Since no discount or exemption can be applied to the earnings calculated from the urban passenger transportation activity according to the revenue-based earnings determination procedure, and since all of Mr. (Ç)’s earnings from the retail sale of apparel products are subject to the earnings exemption for young entrepreneurs regulated in the repeated Article 20 of the Income Tax Law, it is not possible for Mr. (Ç), who has no other income subject to declaration, to make the cash donation made to the public benefit association as a deduction on the declaration.
(4) In the event that the taxpayers who have switched to the revenue-based earnings determination procedure have other taxable activities or earnings or revenues besides urban passenger transportation activities, it is not possible to take into account the expenses or costs related to urban passenger transportation activities in the determination of other taxable earnings or revenues. These taxpayers will not be able to benefit from the provision of Article 113 of the Law No. 193 due to their earnings or revenues from other activities.
(5) In the event that the urban passenger transportation activity and the works not included in this scope are carried out together, the joint overhead expenses will be distributed by taking into account the ratio of the costs incurred in the current year in relation to these activities within the total costs. As a result of this distribution, the share of joint overhead expenses falling to the urban passenger transportation activity will not be taken into account in determining the taxable income and income or corporate tax base for other activities.
Example 6: (B) AŞ operates in hotel management as well as urban passenger transportation. (B) A.Ş., which obtains all of its revenue within the scope of urban passenger transportation activity with the electronic fare collection system, has switched to the revenue-based earnings determination procedure as of 1/1/2020. The information regarding the activities of (B) A.Ş. in 2020 is as follows.
|
Urban passenger transport activity |
Yurtiçi Satışlar |
500.000 TL |
|
Satışların Maliyeti |
420.000 TL |
|
|
Hotel management activity |
Yurtiçi Satışlar |
750.000 TL |
|
Satışların Maliyeti |
580.000 TL |
|
|
Joint general costs |
50.000 TL |
|
(B) A.Ş. will not consider the expenses or costs related to urban passenger transportation and the portion of joint expenses allocated to this activity when determining taxable income from other sources. Additionally, no deductions or exemptions will be applied to the income calculated under the revenue-based income determination method.
Accordingly, for (B) A.Ş. in 2020:
a) Regarding hotel management activities:
– Total revenue is 750,000 TL.
– The portion of joint general expenses allocated to hotel management [50,000 TL * (580,000 TL / (420,000 TL + 580,000 TL))] equals 29,000 TL.
– Total costs including the allocated joint expenses are (580,000 TL + 29,000 TL) = 609,000 TL.
b) The income calculated from urban passenger transportation using the revenue-based income determination method is (500,000 TL * 10%) = 50,000 TL.
(B) A.Ş.’s corporate income for the 2020 fiscal year is calculated as (Total revenue – Total costs) + revenue-based income = [(750,000 TL – 609,000 TL) + 50,000 TL] = 191,000 TL.
The portion of joint general expenses allocated to urban passenger transportation [50,000 TL * (420,000 TL / (420,000 TL + 580,000 TL))] = 21,000 TL cannot be considered when determining corporate income and the corporate tax base.
No deductions or exemptions will be applied to the income calculated under the revenue-based income determination method. This amount will also not be considered when calculating deductible amounts on the tax return for determining the corporate tax base.
(6) Taxpayers who have switched to the revenue-based income determination method and have other taxable activities besides urban passenger transportation must separately track revenue, costs, and expenses related to both taxable and non-taxable activities. The revenue, cost, and expense items related to the activity under the revenue-based income determination method should not be associated with other activities, and records should be maintained accordingly.
**Exiting the Application**
Article 6 – (1) Taxpayers whose income from urban passenger transportation is calculated under the revenue-based income determination method cannot exit this method within two years from the date they switched to it.
(2) Taxpayers wishing to exit this method can do so starting from the beginning of the following year, provided they submit a petition to the tax office they are registered with after completing the two-year period.
**Example 7:** Bay (D), who earns all his income from urban passenger transportation through an electronic fare collection system, switched to the revenue-based income determination method on 1/1/2020. Accordingly, Bay (D) cannot exit this method before 1/1/2022.
Bay (D) submitted a petition to his tax office on 15/7/2022, stating his intention to exit this method from the beginning of the following year. Therefore, Bay (D) will not apply the revenue-based income determination method for taxable income determination starting from 1/1/2023.
**Loss of Eligibility**
Article 7 – (1) Taxpayers benefiting from the revenue-based income determination method who receive two penalties in a calendar year under Article 353 of the Tax Procedure Law No. 213, limited to the periods they benefit from this method, will lose their eligibility for this application. These taxpayers will exit the application from the beginning of the calendar year in which the second penalty was imposed and will not be able to benefit from this application for the following two calendar years.
**Example 8:** (C) Ltd. Şti., which is engaged in urban passenger transportation and earns all its income through an electronic fare collection system, switched to the revenue-based income determination method on 1/1/2020. (C) Ltd. Şti. was imposed special irregularity penalties under Article 353 of the Tax Procedure Law by the tax office it is registered with on 25/10/2019, 2/1/2020, and 5/2/2020. Accordingly, the penalty imposed before the year in which the application was adopted does not prevent (C) Ltd. Şti. from benefiting from this application.
However, since (C) Ltd. Şti. was imposed two special irregularity penalties in a calendar year under the first or second paragraph of Article 353 of the Tax Procedure Law after switching to the revenue-based income determination method on 1/1/2020, the taxpayer company will not be able to benefit from the revenue-based income determination method starting from 1/1/2020 and will not be able to benefit from this application for the following two calendar years.
(2) If taxpayers benefiting from the revenue-based income determination method do not earn all their income through electronic fare collection systems, they will exit this application starting from the beginning of the year in which these conditions are not met.
**Effective Date**
Article 8 – (1) This Communiqué shall enter into force on the date of its publication.
**Execution**
Article 9 – (1) The provisions of this Communiqué shall be executed by the Minister of Treasury and Finance.
Source: Istanbul Chamber of Certified Public Accountants
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