Republic of Türkiye
Revenue Administration
Istanbul Tax Office
Income and Corporate Tax Group Directorate
Date: 29.07.2024
Number: E-62030549-125-….
Subject: Application of 5% Discount on Corporate Tax Rate for Foreign Currency Conversion Support Received from Export Revenues
In the request for a private ruling, it was stated that part of the foreign currency revenues brought into the country from exports made in [year] was sold under the “Communiqué on Supporting the Conversion of Companies’ Foreign Currency into Turkish Lira” and that, based on the provisions of the relevant Communiqué, the foreign currency conversion support provided to institutions that converted foreign currency into Turkish Lira at the conversion rate is [percentage] of the converted amount. The inquiry is whether such foreign currency conversion support income should be considered within the scope of export activities and whether the corporate tax rate can be reduced by 5 percentage points for this income.
Article 32, paragraph 7 of the Corporate Tax Law No. 5520 states:
“… (7) The corporate tax rate for the profits obtained exclusively from export activities by exporting companies is reduced by 5 percentage points. This reduction also applies to profits obtained by manufacturing or supplying companies from export activities carried out through foreign trade capital companies or sectoral foreign trade companies based on intermediary export contracts. …
(9) The discounted rates in paragraphs 7 and 8 are applied to the corporate tax rate after other discounts under this article have been applied.”
Detailed explanations on this subject can be found in the Corporate Tax General Communiqué No. 1.
On the other hand, Article 5 of the “Communiqué on Supporting the Conversion of Firms’ Foreign Currency into Turkish Lira” No. 2023/5 states that: (1) If at least 40% of the foreign currency brought into the country is sold to the Central Bank, the remaining foreign currency can be converted into Turkish Lira time deposit and participation accounts at the conversion rate, and a commitment to not purchase more foreign currency than the amount sold to the Central Bank for the duration specified by the Central Bank is required. Firms that make this commitment will receive foreign currency conversion support equal to 2% of the amount converted into Turkish Lira at the conversion rate.
According to these provisions and explanations, the 5 percentage point reduction in the corporate tax rate is limited to profits obtained exclusively from export activities. Therefore, it is not possible to apply the 5 percentage point reduction in the corporate tax rate to the foreign currency conversion support received by your company for converting export-derived foreign currency into Turkish Lira.
Source: Revenue Administration
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