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Are Regional Administration Centers Exempt from Corporate Tax in Turkey?

MuhasebeNews — Thu, 16 Aug 2018 12:00:29 +0000

Regional Administration Centers will be exempt from tax if they fulfill the some conditions stated below;
1- If they are established with the permission of the Ministry of Economy.
2- If their cost are covered by a company whose legal and business center are abroad.
3- The cost should not be submitted to a company’s account which is a limited or fully taxpayer.
4- and the profit should not be apart.

*** Even if a company which is limited or fully taxpayer is under a regional administration center’s directorship, the exemption will be applied.

Source: Corporate Tax Law

Legal Notice: The information in this article is intended for information purposes only. It is not intended for professional information purposes specific to a person or an institution. Every institution has different requirements because of its own circumstances even though they bear a resemblance to each other. Consequently, it is your interest to consult on an expert before taking a decision based on information stated in this article and putting into practice. Neither MuhasebeNews nor related person or institutions are not responsible for any damages or losses that might occur in consequence of the use of the information in this article by private or formal, real or legal person and institutions.

What are the Meanings of Legally Obligated and Limited Taxpayer in Turkey?

MuhasebeNews — Mon, 19 Mar 2018 16:00:56 +0000

1- WHAT IS THE MEANING OF LEGALLY OBLIGATED?
Companies whose registered office [1] or business center [2] is in Turkey will be subjected to tax through their incomes that they gain both in Turkey and abroad.

If registered office or business center of institutions listed below is in Turkey, they will be subjected to tax as legally obligated.
    1.1- Company with share capital,
    1.2- Cooperatives,
    1.3- State-owned economic enterprise,
    1.4- Commercial enterprise belonging to associations or foundations,
    1.5- Joint ventures,

Sample-1: Fontaine citizen of France,
– He was employed on 20 March 2010 in Turkey and then he went on leave on 15 May 2016. (6 years 1 month 26 days).
– He came back to Turkey on 20 October 2016 and he kept at his job until 31 December 2016. (2 months 2 days).
Liabilities of Fontaine for 2016 are explained below.
Explanation-1:
Fontaine is legally obligated.
Even though he stayed in Turkey less than 6 months separately, the duration of his staying for a calendar year is more than 6 months.
Legal Basis-1:
Article related to “Legally Obligated” of the Income Tax Law is stated below;
Persons listed below are regarded as domiciled in Turkey and they are considered as legally obligated:
1- Person whose residence is in Turkey. (Residence is a place stated in article 19 and its consecutive articles of the Civil Law.)
2- Person who persistently resides in Turkey more than 6 months in a calendar year. (Provisional leaving does not affect time of settlement in Turkey.)

2- WHAT IS THE MEANING OF LIMITED TAXPAYER?
Companies whose registered office and business center are not in Turkey will be subjected to tax through their incomes that they gain only in Turkey.

If registered office and business center of institutions listed below are not in Turkey, they will be subjected to tax as limited taxpayer.
2.1- Company with share capital,
    2.2- Cooperatives,
    2.3- State-owned economic enterprise,
    2.4- Commercial enterprise belonging to associations or foundations,
    2.5- Joint ventures,

3- CORPORATE INCOME CONSISTS OF INCOMES AND REVENUES STATED BELOW IN LIMITED LIABILITY TO TAX;
3.1- Commercial incomes gained through businesses made with foreign institutions whose registered office or business center in Turkey or through these kinds of institutions.
(Even though they carry abovementioned conditions, if they gain incomes through goods purchased in Turkey for export and they send them to abroad without selling them in Turkey, their incomes will not be regarded as obtained in Turkey. Selling in Turkey means that either customer or supplier or both of them should be in Turkey or sales agreement should be made in Turkey.)
(In line with Tax Procedure Law provisions numbered 04.01.1961 – 213)
3.2- Incomes gained in Turkey from agricultural enterprise,
   3.3- Self-employment earnings gained in Turkey ,
   3.4- Revenues gained by renting estate and assets and rights in Turkey,
     3.5- Income from moveable capitals gained in Turkey
3.6- Other incomes and revenues gained in Turkey.

Sample 2: Mr. John citizen of USA,
– He was in Turkey between the dates of 01.10.2015-10.12.2016 and he gained commercial income from commercial activities that he carried out in Turkey and America in that period. (1 year 2 months 10 days)
– By 2015, he gained 100.000 TL in Turkey and 200.000 TL in USA
– By 2016, he gained 300.000 TL in Turkey and 500.000 TL in USA.
The income being subjected to tax is explained below.
Explanation -2:
Mr. John resided in Turkey less than 6 months in calendar year 2015, he was regarded as limited taxpayer.
During that period of time, his income gained in Turkey and valuing at 100.000 TL would be subjected to tax in Turkey.
However, by 2016 he resided in Turkey more than 6 months, so he will be regarded as legally obligated.
Total amount of income is 800.000 TL (300.000+500.000), which he gained both in USA and in Turkey, and income tax would be calculated through that amount.
If a taxpayer is subjected to tax in the ratio of income that he gained in America, it can be deducted from the tax calculated in Turkey.
Legal Basis-2:
Article related to “Legally Obligated” of the Income Tax Law is stated below;
Persons listed below are regarded as domiciled in Turkey and they are considered as legally obligated:
1- Person whose residence is in Turkey. (Residence is a place stated in article 19 and its consecutive articles of the Civil Law.)
2- Person who persistently resides in Turkey more than 6 months in a calendar year. (Provisional leaving does not affect time of settlement in Turkey.)

[1] Registered Office: It is an office stated in law of establishment, regulations, main status or agreements of institutions being subjected to tax.
[2] Business Center: It is a center where all businesses are gathered virtually and managed.

Source: Corporate Tax Law Numbered 5520 (Article 3)

If You Build a Building in a Foreign Country, You Will Not Pay Taxes!!!

MuhasebeNews — Mon, 27 Mar 2017 14:20:33 +0000

1- IF YOU BUILD A BUILDING IN A FOREIGN COUNTRY, YOU WILL NOT PAY TAXES!
Yes. It is true. If you do construction and repair work in a foreign country, you will not pay even 1 Lira as a tax.

2- WHAT IS THE LEGAL FOUNDATION OF THIS?
First of all, a fully responsible company should pay taxes in Turkey for the earning that it makes throughout the World.

In accordance with article 3 of the Corporate Tax Law; “Companies (listed in article 1 of the law) whose legal center or business center is in Turkey should pay taxes either they make profit in Turkey or in a foreign country.

HOWEVER, in sub clause (h) of the first clause of article 5 titled “Exceptions” of the law, there is a provision that the earnings provided by construction, repair and fitter’s work done in a foreign country and then transferred to the general nominal accounts in Turkey are not subject to Corporation tax.

In the portion titled “5.9 Exception in profits made through construction, repair, fitting works and technical services done in a foreign country” of Communiqué on Corporation Tax;
“in sub clause (h) of the first clause of article 5 titled “Exceptions” of the law, there is a provision that the earnings provided by construction, repair and fitter’s work done in a foreign country and then submitted to the general nominal accounts in Turkey are not subject to Corporation tax.”

3- BESIDES, YOU DO NOT HAVE TO BRING YOUR PROFIT INTO TURKEY!
In order to practice this exception, you do not have to bring your profit into Turkey if you make money through;
-Construction,
–Repair,
–Fitting works and
-Technical services.

It is enough to transfer abovementioned profits to the general nominal accounts in Turkey in order to take advantage of the exception.

You do not have to bring these amounts into Turkey and you may use them abroad. Additionally, you have to include this amount into profit and loss statement amount of your company accounts in Turkey.

4- YOU SHOULD INCLUDE THIS AMOUNT IN YOUR INCOME STATEMENT (PROFIT-LOSS STATEMENT) AS PROFIT.
The profit made within the scope of the exception should be included in company’s income statement (profit-loss statement), and then it should be deducted from the tax assessment while making corporate tax return.

Thus, finance and credit rating institutions will evaluate your company’s credibility, foreign-based profit will affect your conditions positively.