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
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