What’s in Şimşek’s New Tax Package?

The final shape of the new reform package, which has been in the works for some time, aligns with the goals outlined in the Medium-Term Program.

The package, expected to be submitted to the Turkish Grand National Assembly, includes proposals to strengthen tax justice, implement tax practices targeting capital, and increase the share of direct taxes.

The Ministry will implement a minimum corporate tax for multinational companies and introduce local minimum corporate and income tax models to boost the share of direct taxes.

Some key points in the package include:

Minimum 15% Corporate Tax

A new section will be added to the Corporate Tax Law to levy a minimum corporate tax (global minimum corporate tax) on multinational companies.

In more than 30 countries, including EU nations, a global minimum corporate tax law has been enacted, applying a minimum 15% corporate tax on branches, subsidiaries, and workplaces of multinational companies with annual consolidated revenues exceeding 750 million euros in low-tax jurisdictions.

If the corporate tax burden in the country where these companies operate is below 15%, countries that have enacted the law can collect the tax difference that the relevant country does not. Countries that do not adopt the minimum corporate tax application effectively transfer their taxation rights to another country.

In Turkey, there are 1,024 groups with their ultimate parent companies abroad, and these groups have 2,134 businesses in the country.

It was determined that approximately half of the corporate tax payers either reported losses or did not declare a tax base at all, despite operating with high revenues.

Examining EU and OECD practices, the Ministry prepared a hybrid model comparing taxpayers' declarations with their revenues and payment capabilities.

The payable corporate tax will be based on the higher of two figures: a specific percentage of the reported earnings before deductions and exemptions or a percentage of the income statement profit.

The minimum corporate tax paid will be deductible from the taxes owed in the next five fiscal periods when the businesses are required to pay higher taxes.

Certain exemptions (such as participation earnings, emission premium earnings) will be considered by deducting them from the profit in calculating the minimum tax.

Taxpayers making investment expenditures under an investment incentive certificate will retain their rights. New taxpayers will be exempt from the minimum tax for three years.

Introduction of Minimum Income Tax

A minimum income tax application will be introduced for commercial, agricultural, and professional earnings taxed on a real basis. It was found that a significant portion of income tax payers reported losses or showed major discrepancies between their declarations and revenues. A new model will be established for this purpose.

Accordingly, the declared earnings of taxpayers cannot be less than a determined percentage of their income and profit reporting table returns.

For those earning professional income, an additional benchmark is planned. Their declared earnings cannot be less than the annual amount of the gross minimum wage.

The difference in minimum tax paid on revenue will be deductible from the taxes owed in the next five fiscal periods. New businesses will be exempt from the minimum tax for three years.

30% Corporate Tax for PPP and BOT Projects

Increased corporate tax will also be applied to earnings from Turkey’s major investments.

The corporate tax rate is currently 25% for the real sector, 30% for banks and financial institutions, 20% for exporting firms, 23% for publicly traded companies, and 24% for manufacturers.

Similar to banks and financial institutions, a 30% corporate tax rate is proposed for institutions operating under the build-operate-transfer (BOT) model and public-private partnership (PPP) projects, instead of 25%. This regulation aims to contribute to strengthening tax justice and increasing the share of direct taxes.