5% Reduction in The Income And Corporate Tax
The details of the tax reduction to be applied to taxpayers who are compliant with their tax duty have been clarified by virtue of the Income Tax General Communique Numbered 301 published in the Official Gazette No 30279 dated December 23, 2017.
The stipulated arrangement allows the taxpayers of annual income tax as well as the taxpayers of corporate tax, except for those operating in finance and banking sectors, insurance and reinsurance companies, pension companies and pension investment funds, to deduct 5% of the taxes calculated on the basis of their income or corporate tax returns, from their income or corporate taxes required to be paid.
If the reduction amount exceeds the tax amount to be paid, the remaining amount may be set-off against the taxpayer’s other taxes accrued upon the declaration of the taxpayer within the one full year following the date that the annual income or corporate tax returns should be submitted. The amounts that are not set-off within this period cannot be rejected or refunded.
The reduction will be applicable to the annual income and corporate tax returns to be submitted as from January 1, 2018.
Eligibility for the reduction in question
- The following requirements are sought: Submission, within their prescribed legal term, of the tax returns (Income Tax, Corporate Tax, VAT, Withholding Tax Return etc.) that belong to the relevant year to which the return for which the reduction is to be calculated pertains to, as well as those that belong to the last two years preceding the said year, and the payment of the taxes accrued on the basis of these returns, also within their prescribed legal term,
- absence of any assessments concerning them made additionally, ex-officio or by the administration in terms of the tax types subject to declaration, within the relevant year to which the return for which the reduction is to be calculated pertains to, and within the last two years preceding the said year
- absence of overdue debt of principal tax amount (including tax penalties) exceeding TL 1,000 as of the submission date of the tax return for which the tax reduction will be calculated
- non-performance of the acts listed in Article 359 of the Tax Procedure Law, during the relevant year to which the return for which the tax reduction is to be calculated pertains to, as well as the four calendar years preceding the same.
Let us explain how the calculation will be made by way of the following example:
(I) For A.Ş., 100,000 TL corporate tax has been calculated based on the tax assessment it declared in the corporate tax return submitted within the prescribed legal term, pertaining to the 2017 fiscal period. Meeting all the eligibility conditions for benefiting from the tax reduction, (I) A.Ş.’s advance tax amount it paid for 2017 fiscal period is 98,000 TL.
|Tax Reduction amount||=||Calculated corporate tax amount X Reduction rate|
|=||100.000 TL x 0,05|
Accordingly, (I) A.Ş. will benefit from the tax reduction in the way demonstrated below.
|A.||Calculated Corporate Tax||100.000 TL|
|B.||Calculated Tax Reduction Amount||5.000 TL|
|C.||Total Amount of Taxes to be Set-Off Paid Advance Tax TL 98,000||98.000 TL|
|D.||Corporate Tax to be Paid (A-C)||2.000 TL|
|E.||Tax Reduction Amount that is Set-Off||2.000 TL|
|F.||Corporate Tax to be Paid (D-E)||0 TL|
|G.||Tax Reduction Amount to be Carried Over (B-E)||3.000 TL|
It will be possible to set-off the tax reduction amount of 3,000 TL, which cannot be reduced from the corporate tax return, against the taxpayer's other taxes accrued, upon the declaration of the taxpayer, within the one full year following the date on which corporate tax return for 2017 fiscal period should be submitted (by 25/4/2019). The tax reduction amounts which could not be set-off by (I) A.Ş. within this term will not be rejected or refunded.
Please click here to view the Communique that includes the relevant provisions. Please contact your customer representative or an expert for further information.