Republic of Türkiye
REVENUE ADMINISTRATION
İZMİR TAX OFFICE DIRECTORATE
Taxpayer Services, Income Taxes Group Directorate
Date: 12/05/2016
Reference No: 84098128-125[08-2015/11]-275
Subject: Inclusion of Losses from Sale of a Ship Registered in the Turkish International Ship Registry in Foreign Markets into Other Operational Gains
In your request, you seek the opinion of our Directorate regarding whether losses incurred from the sale of a ship registered in the Turkish International Ship Registry (TISR), upon its deregistration and subsequent registration abroad in a registry other than TISR, may be offset against gains from other business activities.
According to Article 6 of the Corporate Tax Law No. 5520, corporate tax is calculated on the net corporate profit earned by taxpayers over an accounting period, and the calculation of net corporate profit is to be made in line with the provisions related to commercial income in the Income Tax Law.
Article 38 of the Income Tax Law No. 193 provides that commercial profit under the balance sheet method is the positive difference between the net equity value of the business at the end and the beginning of the accounting period, with specific additions and deductions specified within the law.
Further, under Law No. 4490 on the Turkish International Ship Registry:
- Article 1 states that the purpose of the law is to facilitate the development of Turkish maritime by supporting the operation and provision of vessels registered with the TISR and increasing their contribution to the economy.
- Article 2 defines vessels as all types of cargo, passenger, and offshore fishing vessels used for commercial purposes.
- Article 5 provides that ships and yachts owned by Turkish and foreign nationals residing in Türkiye, and companies established under Turkish law, may be registered with the TISR.
- Article 12 exempts income generated from the operation and transfer of ships and yachts registered in the TISR from income and corporate taxes as well as funds.
The explanatory note for Article 12 further clarifies that the income generated from the operation and transfer of ships and yachts registered with the TISR, for the purpose of re-registration in the same registry, is exempt from income and corporate taxes.
According to Section 5.12.1 of the Corporate Tax General Communiqué No. 1, titled “Exemption for Profits from Operation and Transfer of Ships Registered in the Turkish International Ship Registry,” the income derived from the operation of ships and yachts registered in the TISR is exempt from income and corporate taxes, whether the taxpayer is a resident or non-resident. The exemption is applicable only to income derived from the operation and transfer of ships and yachts registered in the TISR. Furthermore, gains from the transfer of ships and yachts built in Türkiye that are registered with the TISR are also exempt, regardless of whether they were in operation.
In conclusion, to qualify for the tax exemption, ships and yachts must be registered with the TISR, and to benefit from the exemption in the case of a transfer, the vessel must continue to remain in the TISR post-transfer.
Accordingly, if your company’s ship is deregistered from the TISR and subsequently registered in a registry other than the TISR for the purpose of sale, any resulting income cannot be exempted from tax. Therefore, any gains or losses from such a transaction must be considered in determining taxable corporate income from other business activities.
However, if a fraudulent transaction is identified, necessary penal assessments will be conducted as required.
Source: Revenue Administration
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