International Tax Review is part of the Delinian Group, Delinian Limited, 8 Bouverie Street, London, EC4Y 8AX, Registered in England & Wales, Company number 00954730
Copyright © Delinian Limited and its affiliated companies 2023

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Turkey: New taxes on the table

intl-updates-small.jpg

On September 27, Turkish Finance Minister Naci Ağbal announced a comprehensive package including tax increases in a meeting held for the medium-term programme of 2018-2020. Draft legislation including the tax issues that have already been sent to the Turkish Grand National Assembly for the enactment process.

One of the notable changes includes increasing the corporate tax rate on companies operating in the field of financial services (e.g. commercial banks, insurance companies). Accordingly, corporate income taxes of such companies will increase from 20% to 22%. However, no changes will be applicable for other corporate income taxpayers.

Another important amendment is that a 1% withholding tax will be applicable on the retained earnings of corporate taxpayers. Thus, a 1% withholding tax will be payable even if the retained earnings are not allocated by corporate taxpayers.

Currently, an exemption of 75% is applicable for the disposal of company assets if they are held by the corporate taxpayers for more than two years. In the draft law, it is expected that the rate of the tax exemption will be decreased from 75% to 50% in case the companies dispose of their estates that are retained for more than two years.

Turkish individual income tax rates are based on a progressive tax schedule. Through the draft legislation, tax rates for the third tax bracket of the income tax schedule (including wages) will be increased from 27% to 30%. This clearly indicates that the tax burden of individual income taxpayers will be higher in 2017 as the amendments in the Individual Income Tax Law will be retroactively applicable from January 1 2017. However, this change will be applied for wages as of January 1 2018.

A considerable increase is expected for the motor vehicles tax. Within the framework of tax overhaul, the motor vehicle tax for passenger cars would be increased by 40%. However, due to public reaction to this increase, we expect increase in the motor vehicles tax will be lesser than 40%.

Besides, as of January 1 2018, a new motor vehicle tax variable will be introduced to the tax calculation. The value of newly purchased passenger cars will be determinative as the motor vehicle tax is computed. There will be an increase from 10% to 20% in the taxable amount as the car's value falls.

The draft legislation also contains a VAT new mechanism for the electronic services provided to individual buyers in Turkey by non-resident taxpayers. Under the current legislation, VAT registration is not permitted without a corporate income tax registration. However, new legislation allows non-resident taxpayers providing electronic services to Turkish individual residents register only for VAT purposes. Such service providers will be responsible to collect and pay VAT on their electronic services, accordingly.

Some of the other expected tax provisions also include:

  • Withholding tax rate over lottery winnings will be increased from 10% to 20%; and

  • A special consumption tax for rolling papers used by tobacco production will be applied.

As a final remark, it is obvious that new taxes are on the table for Turkish corporate and individual taxpayers.

gozluklu.jpg

Burçin Gözlüklü

 

bicer.jpg

Ramazan Biçer

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

more across site & bottom lb ros

More from across our site

12th annual awards announces winners
The Fair Tax Foundation published the annual UK public sentiment barometer on tax justice ahead of its flagship event, which ITR attended.
The UK public broadcaster acknowledges paying a low tax rate in India, while the ICAEW appoints a new president for 2023/24.
The Canadian proprietor of Canary Wharf and Manhattan West faces accusations of avoiding tax through subsidiaries in Bermuda and beyond.
The Department of Finance Canada has put forward a package of transfer pricing reforms to clarify existing provisions and address what it says is a disproportionate loss of tax revenue.
Developments included the end of Saudi Arabia’s tax amnesty, Poland’s VAT battle with the EU, the Indirect Tax Forum, India’s WTO complaint, and more.
Charlotte Sallabank and Christy Wilson of Katten UK look at the Premier League's use of 'dual representation' contracts for tax matters.
Shareholders are set to vote on whether the asset management firm will adopt public CbCR, amid claims of tax avoidance.
US lawmakers averted a default on debt by approving the Fiscal Responsibility Act, but this deal may consolidate the Biden tax reforms rather than undermine them.
In a letter to the Australian Senate, the firm has provided the names of all 67 staff who received confidential emails but has not released them publicly.