Can I benefit from the 80% profit discount for written and oral translation services provided to customers abroad?

REVENUE ADMINISTRATION

Ankara Tax Office

Income Tax Department – Income Tax Group Directorate

Date: 23.09.2024

No: E-38418978-120[89-2024/2]-541828

Subject: Whether the income from translation services provided to non-resident individuals or companies can be subject to a tax deduction

In the private ruling request form submitted, it is stated that you are a taxpayer registered with the Etimesgut Tax Office due to your translation and interpretation activities, and that you provide translation and interpretation services to foreign clients. You are requesting the opinion of our Directorate on whether 80% of the income obtained from these services can be deducted from the declared income under Article 89, Paragraph 1, Subparagraph (13) of the Income Tax Law No. 193.

Article 89 of the Law No. 193, titled “Other deductions,” lists the deductions that can be made from the income declared by income taxpayers through their annual tax returns. Subparagraph (13) of Paragraph 1 of this article states:

“80% of the income obtained from activities of service companies operating in the fields of architecture, engineering, design, software, medical reporting, bookkeeping, call centers, product testing, certification, data storage, data processing, data analysis, and professional training activities determined by the Ministry of Finance in consultation with the relevant ministries, provided exclusively to non-resident individuals and entities with no permanent establishment, legal or business center in Türkiye, and from companies operating in the education and health sectors, provided the income is transferred to Türkiye in full by the deadline for submitting the annual income tax return for the relevant calendar year. To benefit from this deduction, the invoice or similar document must be issued in the name of the foreign client. The President of the Republic is authorized to reduce the ratio in this subparagraph to zero or increase it up to 100%, and to reduce or increase the amount of income to be transferred to Türkiye to zero or to its legal level, with the Ministry of Finance being responsible for determining the procedures and principles related to the implementation and supervision of this subparagraph after consulting the relevant ministries.”

The explanations in the Communiqué No. 1 on Corporate Tax also include the following:

• In section “10.5.2.1. Main business activity stated in the articles of association for companies eligible for the deduction,” it is required that the companies’ main business activity stated in their articles of association must include architecture, engineering, design, software, medical reporting, bookkeeping, call centers, product testing, certification, data storage, data processing, data analysis, professional training, and education and health services.
• In section “10.5.2.2. The service must be exclusively provided to non-resident individuals and/or entities,” it is stated that services such as architecture, engineering, design, software, medical reporting, bookkeeping, call centers, product testing, certification, data storage, data processing, data analysis, and professional training must be provided to non-resident individuals and entities, and services in the education and health sectors must be provided to non-resident individuals. It is emphasized that such services must be provided in practice, and that services such as assistance, consulting, and brokerage in these fields are not included within this scope.
• In section “10.5.2.3. The invoice must be issued in the name of the non-resident individual and/or entity,” it is explained that the invoice for the provided service must be issued in the name of the non-resident individual and/or entity.
• In section “10.5.2.4. The service must be utilized abroad,” it is stated that the service must be utilized abroad, and that the service provided to non-resident individuals and/or entities must not be related to their activities in Türkiye.

According to the above provisions and explanations, since translation and interpretation activities are not included among the services listed in Subparagraph (13) of Paragraph 1 of Article 89 of Law No. 193, it is not possible for you to benefit from the deduction specified in that subparagraph for the translation services you provide to foreign clients.