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)

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.

Furthermore, in order to tax income resulting from commercial and industrial activities there has to be continuity in performing these activities. In other words, incidental activities in that nature are not treated as commercial or industrial activities and therefore, the PIT Law regulates these activities as the other income and earnings. The PIT Law does not list each commercial and industrial activity and only refers to the Turkish Commercial Law for the scope of these terms. However, several activities are listed namely for clarification in Article 37.

These are as follows:
– Operating mines, stone and lime quarries, extraction of sand and pebbles, operations of brick and tile kilns,
– Stock brokerage,
– Operating private schools, hospitals and similar places,
– Regular operations of sale, purchase and construction of real estate,
– Purchase and sale of securities on someone’s behalf and on a continued basis,
– Fully or partly sale of land which has been obtained by purchase or barter and subdivided within 5 years of its date of purchase and sold during this period or in subsequent years,
– Earnings from dental prosthesis.

Basically, the taxable income of a business enterprise is the difference between its net assets at the beginning and at the end of a calendar year.

Two methods are used to compute business profits: Lump-sum basis and actual basis.
In the former method, the PIT Law specifies estimated business profits for taxpayers who are qualified for such treatment according to the relevant provisions of the Law. The main assumption is that those taxpayers specified by the Law have difficulty to keep accounting books and to determine the income on the actual basis. Therefore, their income taxes are assessed on their estimated profits determined by the Law.

In the latter method business profits is determined on the actual basis: Taxpayers are required to keep accounting books to record their actual revenues and expenses which occur within the calendar year. In general, business related expenses paid or accrued related to business are deducted from revenues.

Expenses to be deducted:
In order to determine net amount of business profits on the actual basis, the following expenses may be deducted from revenues:
– General expenses made for earning and maintaining business profit,
– Food and boarding expenses provided for employees at the place of business or in its annexes,
– Expenses for medical treatment and medicine,
– Insurance and pension premiums,
– Clothing expenses paid for employees,
– Losses, damages, and indemnities paid based upon written agreements, juridical decrees, or by the order of law,
– Expenses for travel and lodging relevant to the business,
– Expenses for vehicles which are part of the enterprise and used in the business,
– Taxes in kind such as building, and consumption, stamp and municipal taxes and fees and charges, related to the business,
– Depreciations set aside according to the provisions of the Tax Procedure Law,
– Payments to the unions,
– The contribution payments paid by the employers to the retirement system on behalf of the wage earners. (Total contribution payments paid to the individual retirement system by the employers and the wage earners and considered in the determination of tax base, shall not exceed the rate and limits indicated in paragraph (3) of first subsection of Article 63 of the PIT Law),
– The production cost of foodstuff, cleaning, clothing and heating supplies donated to the charity and foundations operating to help the poor, within the procedures and principles set out by the Ministry of Finance.

Payments which are not accepted as expenses:
Those payments listed below are not considered as deductible expenses;
– Funds withdrawn from the enterprise by the owner or by his spouse or children, or other assets in kind acquired by them,
– Monthly salaries, wages, bonuses, commissions and compensation paid to the owner of the enterprise, to his spouse, or his minor children,
– Interest on the capital invested by the owner of the enterprise,
– Interest based on the current account of the owner of the enterprise, his spouse, his minor children including interests on all form of receivables,
– Excluding the transactions mentioned in paragraphs 1 and 4, in case the entrepreneur purchases or sells commodities or services based on the charges or prices he determines with the associated bodies contrary to the principle of conformity with the market rates, the differences between the charges or prices in conformity with the market rates and those applied by the entrepreneur that materialize to the disadvantage of the enterprise are considered to have been withdrawn from the enterprise,
– All fines and tax penalties as well as indemnities arising from unlawful actions. Indemnities incurred as penalty clauses of contracts shall not be considered indemnities of a punitive nature,
– 50% of the advertising expenses for all kind of alcohol and alcoholic beverages, tobacco and tobacco products (current rate has been reduced to 0% by a Governmental Decree. The Council of Ministers shall be authorized to raise this rate up to 100% and reduce it to 0%),
– Depreciation and expenses of motor-driven sea crafts such as yachts, cutters, boats, speed boats and aircrafts such as airplanes and helicopters acquired by renting or registered in the establishment not related to the main field of operations of the enterprise,
– Expenditures related to indemnities paid against material and moral damages arising from acts through press or radio and television broadcasts.

Source: Revenue Administration

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.

If abovementioned activities are
1- Overseas marketing research,
2- Advertising of the products,
3- Marketing and management services
and they exceed the limits of pure brokerage services, these services will be regarded as professional services and there will be tax cut in the ratio of 20% in line with article 30/1-b of Corporate Tax Law and Cabinet Decision numbered 2009/14593.

On the other hand, provisions of double taxation agreement related to professional services will be taken into consideration.

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.