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 should be calculated accordingly.
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
For 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;
- And the services should be actually provided (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 services.
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.