Turkey: New tax incentives introduced
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Turkey: New tax incentives introduced


Burçin Gözlüklü

Ramazan Biçer

Turkey introduced a new law (the law) on March 8 2017 on the restructuring of certain public receivables and amending certain laws and Cabinet Decrees.

The law allows the eligible taxpayers to benefit from a tax relief if they meet certain conditions. The law also provides a VAT exemption for certain real property sales to stimulate the growth in the construction industry and increase sales to foreigners.

Tax relief for eligible individual and corporate income taxpayers

The new tax relief is intended to encourage the compliance level of taxpayers and allows them to benefit from a 5% tax deduction from their annual tax due. The tax relief is applicable to both individual income taxpayers who conduct commercial, agricultural and self-employment activities, and corporate income taxpayers.

However, the law excludes corporate income taxpayers operating in the finance and banking sectors, insurance, reinsurance and retirement companies and retirement investment funds. Accordingly, such companies and funds cannot benefit from a 5% corporate income tax relief when they file their annual corporate income tax returns.

The law also restricts the 5% tax relief to a maximum amount of TRY 1 million ($267,000). In case a deduction amount is higher than the tax due in the declaration year, taxpayers have the right to deduct the remaining amount from the taxes assessed within a one-year period.

To qualify for 5% tax relief, taxpayers must meet the following conditions:

  • A taxpayer must submit their tax return and pay due taxes within the statutory period in the year of a tax declaration and in the two preceding years;

  • A taxpayer must not have been subject to an additional tax assessment by Turkish tax authorities again in the year of the tax declaration and in the two preceding years (tax returns declared for correction or voluntary disclosure purposes are not regarded as violation of this condition); and

  • A taxpayer must not have old tax debt (including tax penalties) exceeding TRY 10.

Moreover, if a taxpayer meets these conditions, they cannot benefit from the 5% tax relief if they are involved in tax fraud in the declaration year and in the four preceding years.

Finally, the new tax relief is applicable for annual individual and corporate income tax returns to be submitted after January 2018.

VAT exemption for certain real property sales

The construction industry plays a key role in Turkey's economic growth and the government continuously support it with different incentives. In this regard, the law introduces a VAT exemption for the first delivery of residential or business real estate properties to below persons:

  • Turkish citizens residing abroad due to work or residency reasons for more than six months (except for those who reside abroad and are government officials or employees of companies headquartered in Turkey);

  • Foreign individuals who are not resident in Turkey and

  • Non-resident entities that do not have their legal or business seat in Turkey and do not generate income in Turkey through a fixed place or permanent representative.

The single condition to benefit from the VAT exemption applicable for the first delivery of residential or business real estate properties is that the price of real estate property is paid in foreign currency. However, if the acquired property is sold within one year following the purchase date, the exempted VAT will be payable along with the deferred interest.

Burçin Gözlüklü (burcin.gozluklu@centrumauditing.com) and Ramazan Biçer (ramazan.bicer@centrumauditing.com)

Centrum Consulting

Tel: +90 216 504 20 66 and +90 216 504 20 66

Website: www.centrumauditing.com

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