Summertime and taxation in Türkiye
Throughout the year, accounting records, e-files and tax payments, taxes remain on the agenda of the business world and financial advisors (Certified Public Accountant, Certified Public Accountant, Sworn-in Certified Public Accountant).
The tax agenda usually cools down in July and August as the Turkish Grand National Assembly goes on recess, Finance employees take their annual leave, and there is a non-existent fiscal holiday.
At least the legislative pillar of taxation will get some respite, since there is no law from the Parliament and no sub-legislation from the Revenue Administration.
More precisely, it would be more appropriate to say that it would take a breather.
This is because the two elections Türkiye went through in May this year, followed by the newly formed government, new ministers, additional budget and the need for urgent revenues caused July to become the tax month.
Therefore, the business world, financial advisors and tax offices had a busy July as a result of additional legal regulations.
In this article, we would like to briefly inform TurkishTaxNews.com readers about the tax changes in July.
General direction
Almost all of the regulations introduced were aimed at creating additional sources of revenue for the budget and thereby controlling the budget deficit. Due to our tax system, which is dominated by indirect taxes, these measures had a negative impact on household budgets.
Some of the tax regulations
The first of the tax adjustments was made with the Presidential Decrees published in the Official Gazette on July 7.
Two of the Value Added Tax rates, namely 1%, 8% and 18%, were increased. In this context, the 8% rate was increased to 10% and the 18% rate to 20%.
The fee for mobile phones brought from abroad with passengers and registered in Türkiye was also increased from 6 thousand 91 liras to 20 thousand liras.
Banking and Insurance Transactions Tax on consumer loans was increased from 10% to 15%.
Monetary (lump sum) fees (excluding driver's license fees) were increased by 50%.
In the meantime, it is worth noting that there has been no increase in proportional fees. In this context, let us satisfy a curiosity: There was no increase in Land Registry Fees.
Tax regulations introduced by Law No. 7456
The second tax regulation was made with the "Law on the Amendment of Certain Laws and the Decree Law No. 375 on the Amendment of Certain Laws and the Law on the Amendment of Certain Laws and the Decree Law No. 375 on the Additional Motor Vehicles Tax for the Compensation of the Economic Losses Caused by the Earthquakes Occurring on 6/02/2023" published in the Official Gazette on July 15.
The most important change in this Law was the increase in the corporate tax rate from 25% to 30% for banks and other financial institutions and from 20% to 25% for all other corporate taxpayers.
The corporate tax rate was not only increased.
Increasing the discounted corporate tax rate for exporters from 1 point to 5 points was a welcome increase in the package.
On the other hand, the obligation to pay the Motor Vehicle Tax once again was imposed on vehicle owners who thought that they had removed the MTV from the agenda by paying the second installment in July. Accordingly, those who have a vehicle will pay the 2023 MTV once again in two installments in August and November.
The President of the Republic was authorized to increase the fixed Special Consumption Tax amounts included in the price of fuel products up to five times the highest tax amount or to reduce it to zero.
The authorization granted by the law was used one day later to increase the Special Consumption Tax by 5 TL for gasoline and diesel and by 4 TL for LPG.
Accordingly, the rate of tax increase was 50.5% for 95 octane gasoline, 52.3% for 98 octane gasoline, 41.1% for diesel and 44.5% for LPG.
Exemption for gain on sale of immovable property abolished
The immovable property sales exemption, which has been applied for corporate taxpayers since 1984 and whose content has changed from time to time but whose essence has remained the same, was abolished in its 39th year.
However, the exemption rate, which was previously 50%, will continue to be applied as 25% for the immovable in assets before the amendment entered into force. In this way, it was tried to prevent the loss of rights, albeit partially, for companies that already have real estate in their assets.
On the other hand, immovable was excluded from the scope of the partial spin-off, which is a popular option for companies despite various tax uncertainties.
Other regulations
The exemption provided for the income obtained by corporations from other investment funds (except for the exemption provided for the income obtained from venture capital investment fund participation shares and shares of venture capital investment trusts) was also abolished.
The President of the Republic was authorized to double the amount of the Recycling Participation Fee, popularly referred to as the bag tax, which has been applied as 25 kuruş since the beginning.
Finally, employers were provided with a minimum wage support of 16.66 Turkish Liras per day and 500 Turkish Liras per month from the insurance premium they will pay.
Will tax increases continue?
As we come to the end of this article, I am sure that this question is on the minds of many of our readers. Frankly, as a tax payer, we would also like to be able to say "no". However, when we read between the lines of the figures and the increase targets in the revenue items of the Additional Budget enacted in the Turkish Grand National Assembly in July, we can say that new tax increases are quite likely.