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14March2022

Fund Allocation Obligation in R&D Centers and Technology Development Zones

Fund Allocation Obligation in R&D Centers and Technology Development Zones

With the Law numbered 7263 published on the Official Gazette dated 03.02.2021, companies in R&D region and technology development zones are obliged to allocate funds at the rate of 2% of their earnings, as of 01.01.2022.

The regulations on Technology Development Law no: 4691 are as below:

  • As of 01/01/2022, if the exempt earning on the annual tax return of the income taxpayers and corporate taxpayers is 1,000,000 TRY or more, the 2% of this amount would be transferred to a temporary passive account.
  • The amount to be transferred is limited to 20,000,000 TRY on annual basis.
  • Until the end of the year in which the temporary passive account is created, the taxpayers are obliged to purchase the shares of venture capital investment funds established to invest in entrepreneur resident in Türkiye, or to invest in venture capital investment trusts or other entrepreneurs operating as business incubator centers within the scope of this Law.
  • If the abovementioned amount is not transferred until the end of the relevant year, twenty percent of the earnings exempted on the annual tax return within the scope of this Law, would not be subject to the income and corporate tax exemptions benefited in the relevant year.
  • The taxes that are not received on time due to this amount are received from the taxpayers without applying a tax penalty.
  • The President is authorized to reduce the amounts and rates together or separately to zero, and to increase them up to five times.

The regulations on the R&D and Design Activities Law no: 5746 are as below:

  • As of 01/01/2022, if the discount amount on the annual tax return of the corporate taxpayers is 1,000,000 TRY or more, the 2% of this amount would be transferred to a temporary passive account.
  • The amount to be transferred is limited to 20,000,000 TRY on annual basis.
  • Until the end of the year in which the temporary passive account is created, the taxpayers are obliged to purchase the shares of venture capital investment funds established to invest in entrepreneur resident in Türkiye, or to invest in venture capital investment trusts or other entrepreneurs operating as business incubator centers within the scope of Lat no: 4691
  • If the abovementioned amount is not transferred until the end of the relevant year, twenty percent of the amount discounted on the annual tax return within the scope of this Law, would not be subject to the R&D discount.
  • The taxes that are not received on time due to this amount are received from the taxpayers without applying a tax penalty.
  • The President is authorized to reduce the amounts and rates together or separately to zero, and to increase them up to five times.

The differences between two regulations can be summarized as below:

  • In the Law numbered 4691, it is stated that earnings exempted from the annual declaration and in the Law numbered 5746, it is stated that the discount amount benefited on the annual declaration would need to be 1,000,000 TRY or more.
  • The regulation on Law numbered 4691 covers the income taxpayers and corporate taxpayers. The regulation on Law no: 5746 covers only the corporate taxpayers.

You can review the Law numbered: 7263 via the link. (In Turkish)

You can review the Law numbered: 4691 via the link. (In Turkish).

You can review the Law numbered: 5746 via the link. (In Turkish).

You can review the other regulations with regards to the technology zones and R&D regions via the link.

Should you have any queries or need further details, please contact your customer representative.

Written by Erdoğdu Onur Erol, Posted in Taxation Law

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