Turkey: 2024 TAX REGULATIONS INTRODUCED BY THE OMNIBUS LAW

2024 TAX REGULATIONS INTRODUCED BY THE OMNIBUS LAW

The amendments made to the Income Tax Law with the Law No. 7491 on the Amendment of Certain Laws and Decree Laws published in the Official Gazette dated 28.12.2023 and numbered 32413 constitute the subject of the circular.

• The title and the first paragraph of the repeated Article 20/B of the Income Tax Law No. 193 have been amended as follows:

"Exemption of earnings in social content production, services provided over the internet and similar electronic media and application development for mobile devices”. 

"Earnings from these activities of social content producers who share content such as text, image, audio, video over the Internet and similar electronic media, and earnings from services such as individual courses, training, data processing and development, product promotion provided through these media, and earnings from electronic application sharing and sales platforms of those who develop applications for mobile devices such as smartphones or tablets are exempt from income tax."

With the amendment, as of 01.01.2024, services such as individual courses, training, data processing and development, product promotion obtained from electronic media are exempt from income tax.

Before the Amendment;

Repeated Article 20/B: "Earnings from these activities of social content producers who share content such as text, images, audio, video, etc. through social network providers on the internet and earnings from electronic application sharing and sales platforms of those who develop applications for mobile devices such as smartphones or tablets are exempt from income tax".

• The following paragraphs have been added tot he Provisional Article 22 of the Income Tax Law No. 193:

Half of the dividends received from joint stock companies and limited liability companies whose legal and business headquarters are not located in Turkey, as specified in subparagraphs (1), (2) and (3) of the second paragraph of Article 75, are exempt from income tax, provided that at least 50% of the paid-in capital of these institutions is owned and transferred to Turkey until the date when the annual income tax return for the calendar year in which the dividend is obtained."

"The President of the Republic is authorized to reduce the exemption rate to be applied to the dividends in the third and fourth paragraphs and the 50% rate in the fourth paragraph to zero or increase it up to 100%, separately or together."

With the amendment made, to be applied to the income and gains obtained as of 01.01.2023, half of the dividends obtained by real persons are exempt from income tax, provided that they own at least 50% of the paid-in capital of joint stock and limited liability companies whose legal and business headquarters are not located in Turkey and that the dividend is brought to Turkey until the date when the annual income tax return for the calendar year in which the dividend is obtained must be submitted.

The President of the Republic is authorised to reduce or increase the tax exemptions applied to half of the dividend income and to decrease or increase the exemption rate with regard to the requirement of holding at least 50% of the paid-in capital of foreign entities.

• Income Tax Law No. 193, Article 40, paragraph one, subparagraph (1) of the first paragraph, the first parenthetical provision has been repealed.

With the amendment made, the lump-sum expense application for the expenses of taxpayers engaged in export, construction, repair, assembly and transportation activities abroad, for which they cannot obtain a certificate, is abolished as of 01/01/2024.

Before the amendment;

(The form prior to the repeal by Article 7491/9) (Provision added by Article 19 of Law No. 4108 Effective: 1.1.1995 Effective: 2.6.1995) (Taxpayers engaged in export, construction, repair, assembly and transportation activities abroad may deduct, in addition to the expenses written in this subparagraph, the expenses calculated on a lump sum basis to cover the expenses related to these works abroad, provided that they do not exceed five per thousand of the revenue obtained in foreign currency from these activities).

• The phrase "50% of the earnings" in subparagraph (13) of the first paragraph of Article 89 of the Income Tax Law No. 193 shall be changed to "80% of the earnings, provided that all of the earnings are transferred to Turkey until the date on which the annual income tax return for the calendar year in which the earnings are obtained must be submitted.", and the phrase "to increase up to 100 per cent" in the third sentence has been amended as "to increase up to 100 per cent and to reduce the amount of income to be remitted to Turkey to zero or to increase it up to the legal amount".

With the amendment made, the exemption rate of the earnings arising from services such as architecture, engineering, software, health provided to non-resident individuals and institutions with limited tax liability in Turkey and sourced from abroad has been increased from "50%" to "80%" to be applied to the earnings obtained from 01.01.2023. However, in order for the exemption to be applied, the earnings related to these services must be transferred to Turkey until the date of filing the income/corporate income tax return.

In addition, the President of the Republic has been authorized to determine the amount of earnings that must be transferred to Turkey in order for taxpayers to benefit from the exemption.

• In Article 94, paragraph eight of the Income Tax Law No. 193, the following paragraph has been added after the paragraph "- For full and limited taxpayers and real and legal persons,"

"- From the rents paid under paragraph 3, separately or together, depending on whether the work is undertaken to public institutions and organisations and their affiliated, related and associated entities, and whether they are under general or specific budget management, according to duration, type and whether the contractor is a main contractor, subcontractor or unlimited or limited taxpayer."

The amendment expands the authorization to determine the rate of withholding tax to be withheld on rents paid to those who carry out multi-year construction and repair works.

• In the sixth paragraph of the provisional Article 67 of the Income Tax Law No. 193, the phrase "up to one times for interest income separately or together" was amended as "to 40% for dividend and interest income separately or together ", the phrase "to 15%" in the seventeenth paragraph was amended as "to 40%" and the phrase "issuers, date of issue or acquisition, account type, account opening date," was added to the same paragraph after the phrase "any capital market instrument,".

With this amendment, the rate of tax withholding to be to be applied under the provisional Article 67 of the Income Tax Law on income from securities issued in foreign currency and on interest income and dividends from accounts denominated in foreign currency is increased up to 40% separately or collectively, and the rate in the provisional Article 67 and for each capital market instrument, The President of the Republic is authorized to increase the amount by up to 40% for the issuers, date of issuance or acquisition, account type, account opening date, type of earnings and revenues, their maturity, holding period and the persons who receive them, and for the earnings obtained from the return of the participation certificates of the investment funds to the fund or from their disposal in other ways, separately according to the portfolio structure of the fund.

• The phrase "31/12/2023" in the first paragraph of the provisional Article 72 of the Income Tax Law No. 193 has been amended as "31/12/2028", and the fourth paragraph has been amended as follows:

"The President of the Republic is authorized to reduce the rates in the first paragraph to zero or increase them up to one times; the Ministry of Treasury and Finance is authorized to determine the procedures and principles regarding the implementation of this article."

The amendment extends the application period of the article until 31 December 2028 since the period of the application regarding the taxation of athletes' wages by withholding at fixed rates and the declaration of the wage income with the annual income tax declaration, in case the wage income exceeds the amount in the fourth income bracket of the income tax tariff, ends on 31 December 2023.

• The phrase "31/12/2023" in the first paragraph of the provisional Article 76 of the Law No. 193 has been amended as "31/12/2028" and the fourth paragraph has been amended as follows.

"The Ministry of Treasury and Finance is authorized to determine the procedures and principles regarding the implementation of this article".

With the amendment, the application period of the exemption for income and corporate tax for the gains arising from the disposal of warehouse receipts issued within the scope of the Agricultural Products Licensed Warehousing Law dated 10/2/2005 and numbered 5300, which will expire as of 31/12/2023, is extended until 31/12/2028, and the Ministry of Treasury and Finance is authorized to determine the procedures and principles regarding the implementation of this article.

Autor: Serkan Yılmaz