Treasury and Finance Minister Mehmet Şimşek stated that the new tax package presented to the Presidency of the Turkish Grand National Assembly was prepared with the principle of “taking more taxes from those who earn more, and less taxes from those who earn less” and that it does not contain provisions targeting low-income citizens.
Minister Şimşek evaluated the bill that included new tax regulations submitted to the Presidency of the Turkish Grand National Assembly today to DHA. Minister Şimşek stated that they have been working on the bill for a long time by taking the opinions of the relevant parties and said, “In line with our principle of ‘Taking more taxes from those who earn more, and less taxes from those who earn less’, the work on our new tax draft that will not burden low-income people has been completed within the ministry. The first package was also discussed in the relevant organs of the government and our party. The issue is now at the discretion of the Grand Assembly.”
Şimşek said that they made arrangements to prevent informality, ensure efficiency, justice and productivity in taxes, prioritized tax security and took steps to remove exceptions. Şimşek stated that they made arrangements in line with the demands of the parties while finalizing the draft and said, “Although our draft does not include provisions for low-income citizens, it was pulled in the directions we were accused of. The package includes regulatory proposals to strengthen tax justice, introduce tax practices targeting capital and increase the share of direct taxes. We will continue to conduct our work to ensure that no untaxed area is left in Turkey. We will take steps to resolutely combat informality and increase voluntary compliance, thus strengthening fiscal discipline.”
MINIMUM CORPORATE TAX FOR MULTINATIONAL COMPANIES
The proposal will create a new taxation system that will subject multinational companies whose annual consolidated revenue exceeds the 750 million euro threshold to a minimum 15 percent corporate tax on their branches, affiliates and workplaces in low-taxation countries. The model, which is prepared in line with OECD rules, aims to ensure that multinational companies’ earnings carry a 15 percent tax burden in all cases. Countries that do not implement the minimum corporate tax are transferring their taxation rights to another country. While there are 1,024 groups in Turkey whose ultimate main business is abroad, there are 2,134 of these businesses in the country.
The proposal also introduces a tax security institution for the determination of the corporate tax to be calculated by corporate taxpayers. The corporate tax to be paid by taxpayers cannot be less than 10 percent of the amount of the income they declare before deductions and exceptions. Minimum tax will not be collected from new employees for 3 years, the rights of taxpayers with existing investment incentive certificates will be protected, and some exceptional earnings will be excluded from the scope. Micro and small enterprises technology development zones earnings exception and R&D and design discounts will be excluded from the scope.
CORPORATE TAX ON BUILD-OPERATE-TRANSFER MODEL
The proposal will also apply increased corporate tax to profits from major investments in Turkey. The corporate tax rate for profits obtained by institutions operating within the scope of public cooperation projects with the build-operate-transfer model will be 30 percent instead of 25 percent. In addition, under the current practice, all profits of investment funds and partnerships are exempted from corporate tax. This exemption is subject to the condition of profit distribution. With the proposal, income and corporate tax will be collected from those who receive the profit shares when 50 percent of the exempt profit is distributed to the partners.
LIMITATION ON TAX EXEMPTIONS IN FREE ZONES
In the current practice, all profits from production activities in free zones are exempt from corporate tax, regardless of whether the products are sold domestically or abroad. However, this exemption will now be limited to export revenues only. Thus, tax will be levied on profits from sales made domestically.
In addition to the domestic minimum corporate tax application, the proposal introduces income and corporate tax deductions for certain payments made to income taxpayers and corporate taxpayers who earn commercial income in order to ensure tax security. The payments to be included will be determined by the Presidential Decree. The difference between the income and the declaration will be a reason for an invitation to explanation. In addition, the income of income taxpayers in terms of freelance income and commercial income will be determined at certain times of the year, and those with discrepancies between their declarations and the determined income will be invited to explanation.
EFFECTIVENESS IN PENALTIES WILL INCREASE
The proposal also includes regulations to increase the effectiveness of penalties. Penalties for irregularities and special irregularities are increasing. Heavy penalties are coming to those who use someone else’s POS device and someone else’s IBAN. Penalties will be imposed on those who accept payments via transfers to someone else’s account and those who allow their accounts to be used by others. In addition, increased tax loss penalties will be applied to unregistered activities. The tax loss penalties to be applied to those who engage in unregistered activities will be 1.5 times for penalties that will be imposed as 1 times the tax, and 4.5 times for penalties that will be imposed as 3 times the tax.
In the current situation, taxpayers can request reconciliation on reports written about them as long as there is no penalty for evasion. The subject of reconciliation is limited to the penalty with the proposal. Reconciliation cannot be requested for the original taxes.
