REPUBLIC OF TÜRKİYE
REVENUE ADMINISTRATION PRESIDENCY
Istanbul Tax Office Presidency
Revenue Laws Income and Corporate Taxes Group Directorate
Number: E-62030549-125-….
Date: 28.05.2024
Subject: Taxation of Transportation Services Provided to Employees through a Company
In the special letter request form, it is stated that a rental agreement with a driver and a transportation service agreement has been signed between your company and […], covering the provision of vehicles with drivers to employees and guests of the institution, and the transport of the specified employees and guests. It is also mentioned that a fee is charged per kilometer for these services. Information is requested on whether the payments are subject to restrictions on passenger car expenses under Article 40, Paragraph 1, Item 5 of the Income Tax Law, and whether the VAT amounts specified in the invoices can be deducted. The views of our Presidency on this matter are explained below.
I. REGARDING CORPORATE TAX LAW:
Article 6 of the Corporate Tax Law No. 5520 states that corporate tax is calculated on the net corporate income obtained by taxpayers during an accounting period, and the provisions of the Income Tax Law regarding commercial income are applied in determining net corporate income. Article 8 of the Corporate Tax Law and Article 40 of the Income Tax Law specify deductible expenses in determining net income.
Article 40 of the Income Tax Law No. 193, titled “Deductible Expenses,” states:
(1) General expenses made for obtaining and maintaining commercial income. (Except for those whose activities are partially or wholly related to the rental or operation of passenger cars, the monthly rental expense for each passenger car acquired through rental is up to 5,500 Turkish Lira (26,000 TL for 2024), and the special consumption tax and VAT related to the acquisition of passenger cars can be considered as expenses up to a maximum of 115,000 Turkish Lira (690,000 TL for 2024).)
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(5) Expenses related to vehicles acquired or included in the business through rental (provided that the expenses for passenger cars are no more than 70% deductible, except for those whose activities are partially or wholly related to the rental or operation of passenger cars.)
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Detailed explanations are provided in the fifth section of the General Communiqué on Income Tax Serial No. 311, titled “Expenses and Depreciation of Passenger Cars and Their Deductibility from Tax Base.”
According to the above provisions and explanations:
- If the amounts paid for passenger cars rented with a driver are not itemized on the invoice and are billed as a single amount, the monthly rental expense restriction specified in the parentheses of Article 40, Paragraph 1, Item 1 of the Income Tax Law will apply to the entire amount.
- If the amounts paid for passenger cars rented with a driver are itemized separately on the invoice based on documents such as the contract and accounting records, the restriction on the monthly rental expense specified in the parentheses of Article 40, Paragraph 1, Item 1 of the Income Tax Law will apply only to the part corresponding to the car rental. In this case, the expenses related to driver provision within the use of the passenger car, borne by your company, can be deducted as expenses up to a maximum of 70% according to the provision in Article 40, Paragraph 1, Item 5 of the Law.
II. REGARDING VAT LAW:
Article 1 of the VAT Law No. 3065 states:
- Deliveries and services performed within the scope of commercial, industrial, agricultural activities, and free professions in Turkey are subject to VAT.
- Article 29/1 states that taxpayers can deduct VAT calculated on deliveries and services provided to them related to their activities from the VAT calculated on their taxable transactions.
- Article 30/d states that VAT paid on expenses that are not accepted as deductible in determining income according to the Income and Corporate Tax Laws cannot be deducted from VAT calculated on taxable transactions.
Therefore, VAT amounts related to the portion of expenses for driver-rented vehicles that are not accepted as deductible expenses in determining income under the Income Tax Law cannot be deducted.
