Turkey Provides Corporate Income Tax Exemption On Certain Services
12 November 2013
Posted by: Author: OECD
According to a circular that supplemented the Turkish Commercial
Income Code on 1 January 2013, the Code provides for the possibility of
exempting 50% of the profit obtained by Turkish taxpayers from certain
types of services provided to nonresidents for corporate income tax
purposes. Companies who may benefit from the 50% exemption should review
now whether they qualify as the exemption may be claimed for the entire
fiscal year and the respective annual tax liability – as well as the
next quarterly tax advance payment due 14 November 2013 – should be
The exemption applies to both Turkish
companies and to Turkish branches of nonresident entities. This
provision – which basically decreases the Turkish corporate income tax
rate from 20% to 10% on certain activities – has generated substantial
interest and multiple requests have been filed with the Turkish Tax
Authorities to obtain interpretative clarifications.
The areas eligible for the 50% exemption under the Code are as follows:
- Architectural, engineering and design services
- Accounting and bookkeeping services
- Call center services
- Data storage and software services
- Health services
- Education/training services
the exemption to apply, the services should be provided to nonresident
entities or individuals and the invoices should be issued in the name of
those nonresident entities or individuals.
In addition, the
services should be actually provided, in other words activities such as
assistance or consulting in these fields would not be regarded as the
actual provision of services.
The law provides for the
exemption of the net profits only, i.e., the profit that may be exempted
should be determined as the difference between the gross revenue
(excluding VAT) and all costs associated with the procurement of these
In case the company incurs a loss as a result of
rendering the services listed above, it is not possible to use such
losses to offset profits from other (non-exempted) activities. In
addition, it is not possible to carry forward the exempted amount of
loss to following years.
This article first appeared in ey.com.