corporation tax – Muhasebe News

Exception on Earnings Received from Construction, Repair, Fitter’s Work and Technical Services Done in a Foreign Country According to Turkish Laws

MuhasebeNews — Sun, 02 Dec 2018 13:00:28 +0000

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

There is no need to bring the earnings, which are received from construction, repair, fitter’s work and technical services done abroad, into Turkey in order to apply this exception.

It will be sufficient to transfer abovementioned earnings into the general nominal accounts in Turkey in order to take advantage of this exception.

Source: Act of Fees

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 Is Advance Tax?

MuhasebeNews — Wed, 24 Oct 2018 07:22:44 +0000

1-What is advance tax?
It is a prepaid direct tax that is calculated on the basis of quarterly earnings against the income and corporate tax of the current taxation period of the taxpayers who are in the real taxation system and the taxpayers of the self-employed.

2-Which earnings are included in the scope of advance tax?
2.1-In real taxation system, taxpayers who are
2.1.1-The owners of commercial earning
2.1.2-Self-employed
2.1.3-Corporate Taxpayers
have to pay advance tax to be offset against income and corporate tax of the current taxation period.

2.2- Due to the fact that they are not taxpayers of income and corporate tax,
2.2.1- Ordinary partnerships
2.1.2- Self-employed
2.2.3- Limited partnerships are not provisional taxpayers.

***However, the earnings of the partners in ordinary partnerships and in copartner ships and the partners in limited partnerships are subject to advance tax.

3-Who are not subject to advance tax?
3.1- Corporate taxpayer in liquidation in liquidation period
3.2- Income taxpayers being subject to simple basis of assessment
3.3- People who work in construction and repair
3.4- Wage earners
3.5- People earning on movable assets
3.6- Real property income earner
3.7- Income earner from agriculture
3.8- The other earners
3.9- Self-employed whose earnings are exempted from tax
3.10- People who fulfil notary-ship are not subject to advance tax.

*** On the other hand, people who are not subject to advance tax are supposed to pay advance tax when they earn due to commercial and professional incomes except the earnings from some business stated above.

4-How can a profit be made through advance tax?
4.1- First of all, the taxpayers will determine the advance tax profit of the period by basing on 3, 6, 9 and 12-month financial statement of the related financial year according to the provision of the reiterated article 120 of Income Tax Law.
4.2- It is highly essential to take note of provisions about assessing the Tax Procedure Law and to observe the periodicity concept while determining the gain on taxation.

5- What is the ratio of advance tax for the income taxpayers and the corporate taxpayers?
Advance tax is applied as follows;
5.1- 15 % stated in the first percentile of the income tax tariff for income taxpayers
5.2- 20% for the corporate taxpayers

6- How can advance tax be calculated?
6.1- For income taxpayers,
6.1.1- Advance tax is calculated by applying the ratio of 15 % stated in the first percentile of the income tax tariff to the financial year (related to the advance tax) of the quarterly income.

6.2- For corporate taxpayers,
6.2.1- Advance tax is applied as 20 % through net corporation profit.

*** The taxes that are paid by means of deduction in terms of the incomes being subject to advance tax and the advance tax that has been paid previously in terms of the same financial period must be offset against the calculated advance tax and then the balance after the offset should be declared as current advance tax.

7- Which exceptions and rebates are taken into consideration when making out a provisional tax return?
The taxpayers may take advantage of all exceptions and rebates which they take into consideration in corporate tax return during the determination of taxes being subject to advance tax.

8-What if the advance tax was under declared?
In case that more than 10 % of the advance tax related to the previous period is under declared, tax penalty for loss of tax and delay penalty will be applied to ex officio tax calculation and additional assessment that are made for that under declared part. The margin of error (10 %) should be calculated through the advance tax base that should have been declared (not through the advance tax base that has been declared already).

9- In case of not paying the advance tax, should the late fee be imposed?
The amount of advance tax that cannot be set-off through the tax calculated over annual return will be cancelled, because it is accrued but not paid. There will be imposed a late fee from the due date to the starting date (when it is supposed to be cancelled) of legal period when the annual return is submitted for the cancelled advance tax.

10- Can the delinquent advance tax be set-off against income tax calculated through annual return?
The advance tax, which is accrued but not paid, cannot be set-off against income taxes or corporate taxes calculated through annual return. It is obligatory to pay the accrued advance tax for offsetting.

11- Can the delinquent advance tax be set-off against the declaration submitted in the next period?
The delinquent advance tax may be set-off against the declaration submitted in the next period within the year and it is not obligatory to pay. Nevertheless, it is obligatory to pay when the advance tax is set-off against annual return. The advance tax (paid in due date) in respect of related accounting period can be set-off against income or corporate taxes calculated through annual return.

12- What should be done with the advance tax accrued but not paid?
The advance tax accrued through three months’ income (but it is not possible to set off against the tax calculated through annual return because it is not paid) will be cancelled. However, a late fee is imposed on cancelled advance tax from the due date to the date of cancellation (1 March for the income taxpayers, 1 April for the corporate taxpayers).

13- Can the social security organization for artisans and the self-employed primes be deducted in provisional tax return?
The social security organization for artisans and the self-employed primes can be deducted as limited to earnings. In case that the earnings submitted in the declaration are inadequate or not submitted, the part of the amount of input deduction deducted in the period of advance tax and primes from which can be benefited according to the annual return can be reduced from the income submitted by the income tax payers and the rest will not be subject to discount. The social security organization for artisans and the self-employed primes are presented in the column called ‘’Other Discounts’’ in the declaration.

14- What are the periods of advance tax? When are they submitted and paid?Source: Revenue Administration
Date: 31 January 2017

How Much of Donations and Charities Can Be Deducted From Tax?

MuhasebeNews — Sat, 13 Oct 2018 07:00:45 +0000

Donations and Charities that can be deducted from tax providing that they are stated in Corporate Tax Return;

– 5 % of the net profit of the company donated against a receipt to general and special budgeted public administrations, provincial special administrations, municipalities, villages, foundations exempted from tax by Council of Ministers, nonprofit voluntary organizations, state institutions and organizations that carry out scientific research and development.

– All donations and charities in kind and in cash granted in order to construct or cover the expenses of general and special budgeted public administrations, provincial special administrations, school and health facility donated to municipalities and villages, dormitory whose bed space should not be less than 100 (bed space should be 50 in priority regions for development) and nursery school, orphanage, eventide home, nursing and rehabilitation center, sanctuaries that will be subject to local authority’s permission and supervision, facilities that provide religious education under the control of Religious Affairs Administration, youth centers and scout camp belonging to the Ministry of Youth and Sports.

– 100 % of donations and charities granted against a receipt and the expenses supported by the Ministry of Culture and Tourism done by general and special budgeted public administrations, provincial special administrations, municipalities and villages, foundations exempted from tax by Council of Ministers, nonprofit voluntary organizations and organizations that carry out scientific research and development and the expenses supported by the Ministry of Culture and Tourism.

– All donations and charities in kind and in cash done against a receipt for aid campaigns launched by the Prime Ministry and Council of Ministers.

– All donations and charities in kind and in cash granted against a receipt for Turkish Red Crescent and Turkish Green Crescent Society, except their commercial enterprises.

Date: 8 February 2017

If You Have a Ship, You Will Not Subject to VAT!

MuhasebeNews — Sat, 28 Apr 2018 10:00:55 +0000

There are a lot of tax exemptions and exceptions in order to develop Turkish Maritime Sector and Fleet.
Income tax, corporation tax, stamp tax, fees and other tax piles applied to Turkish flagged ships and yachts according to Turkish International Ship Registry Law are stated below.

1- THERE IS NO NEED TO PAY TAXES FOR EARNINGS RECEIVED FROM SHIPS REGISTERED IN TURKISH INTERNATIONAL SHIP REGISTRY.
The earnings received from 1-the management and
2-transfer of “ships” and “yachts” registered in Turkish International Ship Registry are exempted from Income tax, Corporate tax and funds.

2- PURCHASE AND SELLING OF SHIPS REGISTERED IN TURKISH INTERNATIONAL SHIP REGISTRY ARE EXEMPTED FROM STAMP TAX.
1- Purchase
2- Selling
3- Hypothec
4- Registry
5- Credit
6- Charter
7- Time Charter
8- All of the freight contracts related to ships and yachts registered in Turkish International Ship Registry are not subject to stamp tax and fees. In addition to that, fees taken because of these transactions are not subject to banking and insurance transaction tax and funds.

3- SELLING AND TRANSFER OF SHIPS REGISTERED IN TURKISH INTERNATIONAL SHIP REGISTRY ARE EXEMPTED FROM TAXES.
The transfer of ships from Turkish International Ship Registry to another registry (by cancelling) or transfer by another way is exempted from tax.
However, according to sub clause (c) of the first clause of article 4 of Turkish International Ship Registry Law, if a ship is transferred from Turkish International Ship Registry to another registry (by cancelling) or transfer by another way , these ships have to be operated at least 6 months as registered in Turkish International Ship Registry.

Source: Turkish International Ship Registry Law
(Article 12 – (Amendment: 2.12.2004 – article 5266/3), (Amendment of the second clause: 18.1.2017-article 6770/14), (additional paragraph: 18.1.2017-article 6770/14)

Is It Possible For A Firm To Deduct The Loss From The Following Year’s Profit?

MuhasebeNews — Fri, 24 Mar 2017 10:30:02 +0000

Yes. The firms can deduct their losses from their profit for the next 5 years.

In line with the provisions of article 9 titled ‘’Loss deduction’’of the Corporate Tax Law no.5520,

LOSSES OF PREVIOUS PERIODS SHOULD BE INDICATED SEPARATELY IN THE DECLARATION…
While establishing corporate tax base, losses can be deducted from relevant year’s tax base on condition that the amount of losses related to previous years should be indicated separately in the corporate tax return.

5 YEAR REQUIREMENT
a) The losses taking place in previous years’ declarations providing that they should not be transferred more than five years.

1- THE REQUIREMENT OF THE DEDUCTION OF ACQUIRED FIRMS’ LOSSES
As of the transfer date of the firms acquired within the scope of the first paragraph of article 20 of the law, qualifications stated below are required when deducting the loss in direct proportion to aquired assets and not exceeding the acquired amount of the capital stock in divided institution (that institution should be divided by means of dividing procedure carried out within the scope of the first paragraph of article 20 of the law) with the loss not exceeding the amount of capital stock:

1.1- CORPORATE TAX RETURN SHOULD BE SUBMITTED IN TIME!
Corporate tax returns related to the last five years should be submitted within legal period.

1.2- THE ACTIVITIES OF AQUIRED INSTITUTION SHOULD BE CARRIED OUT FOR FIVE YEARS!
The activities of an aquired institution should be carried out for five years after the transfer or the division of the acquired institution takes place. In the event of breach of these conditions, there will be loss of tax for the taxes that are not accrued in time, because of loss deduction.

1.3- OVERSEAS LOSS (WITHOUT PREJUDICE TO THE EXCEPTIONS) CAN BE DEDUCTED DURING 5 YEARS
b) The losses generated from overseas activies on condition that these losses will not be transferred more than 5 years (with the exception of the losses related to the earnings exempted from Corporation tax in Turkey;

1.4- OVERSEAS LOSSES SHOULD BE OBLIGED TO THE ENTITLEMENT CONTROL REPORT
1) Tax bases submitted according to the tax laws of country in which they remain active (including loss) should be obliged to report by institutions given authority to control in line with that country.
2) If the original report is submitted with its copy and translation to the related tax office in Turkey, it will become entitled to discount.
Tax returns in the appendix of the report prepared by audit institutions, balance sheets and income statements are compulsory to be confirmed by financial institutions.
If there is no audit institution in that country, a copy of tax returns related to each year and taken from the competent authorities should be confirmed in Turkish embassies and consulates (if not, it can be confirmed in the representatives of the country (ejustem generis) which protects Turkish benefits)and then the original document with its translated copy should be submitted to the related tax office.
If the overseas losses being subject to discount in Turkey are regarded as expense, the amount before the offset should be written in the declaration in Turkey.

Source: Corporate Tax Law