Republic of Turkey
MINISTRY OF FINANCE
Izmir Revenue Office
Income Taxes Group Directorate
Date: 17.09.2024
Number: E-84098128-125[5-2023/20]
Subject: Whether the supports received under the E-Turquality Program are exempt from corporate tax as part of R&D and design projects.
Upon examining your special request form registered in relation to the above, it has been noted that you are engaged in software activities in the Teknopark Technology Development Zone, and that the advertising expenses incurred for the promotion of the software produced for your activity abroad, amounting to 60% of the expenses, and commission payments, amounting to 50%, have been reimbursed by the Central Bank of the Republic of Turkey under the “Nationalization of the Turkish IT Sector and E-Turquality Program.” The request is for the opinion of our Presidency on whether these reimbursed amounts can be exempt from corporate tax.
Article 6 of the Corporate Tax Law No. 5520 states that corporate tax is calculated on the net corporate income obtained by taxpayers within an accounting period, and the provisions of the Income Tax Law regarding commercial income apply in determining net corporate income.
According to the temporary Article 2 of the Technology Development Zones Law No. 4691, “The profits obtained by managing companies under the application of this Law, as well as the profits obtained by income and corporate tax taxpayers operating in the Region, exclusively from software, design, and R&D activities in this Region, are exempt from income and corporate tax until December 31, 2028.”
If the profits obtained by income and corporate tax taxpayers operating in the Region come from the sale, transfer, or leasing of intangible rights, benefiting from the exemption is conditional on these rights being obtained through R&D activities and being registered or notified according to the relevant legislation. The right to the exemption will apply, starting from the taxation period in which the transactions giving rise to the profits took place, provided an application is made to the relevant authority for registration or notification by the end of the declaration period for the relevant taxation period. The relevant authorities for defining the procedures and principles regarding compliance with the registration, notification, or documentation requirements, as well as increasing the qualifying expenses as a proportion of total expenses up to 30%, are the Ministry of Finance and Treasury and the Ministry of Industry and Technology.
The general communique on Corporate Tax specifies that support provided to companies operating in technology development zones is considered capital assistance when provided conditionally as a reimbursement from other institutions, thus these supports will not be included in commercial income.
Additionally, according to the decision published in the Official Gazette No. 31815 on April 20, 2022, regarding the Nationalization of the Turkish IT Sector and the E-Turquality (IT Stars) Program, Article 2 states that the supports provided to companies, institutions, and collaboration organizations engaged in software, embedded software, digital games, IT services, and related sectors in Turkey are covered under this program. The 14th article states that 60% of the expenses incurred for general advertising, promotion, and marketing activities aimed at promoting services/products abroad will be supported, while the 16th article indicates that commission payments will be supported by 50%. Furthermore, Article 50 stipulates that payments will be made by the Central Bank of the Republic of Turkey based on the notification obtained from the Ministry of Commerce.
In light of these provisions and explanations, the advertising and commission support amounts paid to your company under the Nationalization of the Turkish IT Sector and the E-Turquality Program are not considered grants aimed at directly supporting and developing R&D and design projects. Therefore, these amounts cannot be exempted from corporate tax in accordance with the temporary Article 2 of Law No. 4691.
Source: Revenue Administration
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