tax legislation and incentives in turkey presented by : haluk kaptanoĞlu bdo denet

BDO Member Firm Name

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TAX LEGISLATION AND INCENTIVES IN TURKEY

PRESENTED BY : HALUK KAPTANOĞLU

BDO DENET

DENET Yönetim Danışmanlığı Y.M.M. A.Ş.


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TURKISH TAX SYSTEM



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Basic Classification

• Taxes on Income

• Taxes on Expenditure

• Taxes on Wealth

TURKISH TAX SYSTEM



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Taxes on Income

• Corporate Income Tax (CIT)

• Individual Income Tax (IIT)


TURKISH TAX SYSTEM


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Taxes on Income (cont.)

Lower rates at present as compared toyears prior to 2006

• CIT from 33% to 20%• IIT from 45% to 35% (highest rates)


TURKISH TAX SYSTEM


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Taxes on Expenditure

• Value Added Tax (VAT)• Special Consumption Tax• Banking and Insurance Transaction Tax• Stamp Duty• Special Communication Tax• Customs Duty


TURKISH TAX SYSTEM


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Taxes on Wealth

• Inheritance and Gift Taxes

• Real Estate Tax

• Motor Vehicles Tax


TURKISH TAX SYSTEM


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Corporate Income Tax

Earnings and profits of companies

• Limited company• Joint stock company, and• Branch of foreign companies

Are taxed at 20% CIT rate as of each quarterand finally the year end.


TURKISH TAX SYSTEM


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Corporate Income Tax (cont.)

Filing of CIT return:

Between the 1st and the 25th day of the fourth month following the fiscal year end which is the calendar year.


TURKISH TAX SYSTEM


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Corporate Income Tax (cont.)

Withholding tax on:

Dividend of companies profits of branches paid abroad

Rate: 15%

Lower rates are available under Double Tax Treaties


TURKISH TAX SYSTEM


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Individual Income Tax

• Income on commercial activities• Income on agriculture• Income from professional services• Wages and salaries• Income from capital investment (interest and dividend)• Income from immovable assets and rights• Other income and earnings

• Capital gains• Incidental income


TURKISH TAX SYSTEM


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Individual Income Tax (cont.)

Capital Gains

Exemptions on

• The sale of shares• The sale of real estate


TURKISH TAX SYSTEM


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• On progressive basis (15% - 35%)

• Employer withholds income tax on salaries


TURKISH TAX SYSTEM


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• Filing of annual tax return: March 15

• Employees are not required to file income tax return if salary is the only income.


TURKISH TAX SYSTEM


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Social Security

• Not a tax. But a payroll cost to the employer.

• Employer and the employee contributes for social security which comprises of items like sickness, work related accidents pension, etc.


TURKISH TAX SYSTEM


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Social Security

• Base is the salary with a cap which is TRY 3650 currently

• Employer’s contribution : 19,5 %Employee’s contribution : 14 %


TURKISH TAX SYSTEM


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Value Added Tax (VAT)

• On the supply and importation of goods and services at the rate of 18%

• Reduced rates are available 1% and 8%


TURKISH TAX SYSTEM


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Value Added Tax (VAT) (cont.)

Input VAT is carried forward until offset against output VAT.

Recovery of input VAT is also possible.

VAT return is filed on monthly basis.


TURKISH TAX SYSTEM


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Special Consumption Tax (SCT)

Applicable on luxury items, vehicles of all sorts, oil products, tobacco products, alcoholic beverages and some soft drinks


TURKISH TAX SYSTEM


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Special Consumption Tax (SCT) (cont.)

Charged only once

• upon importation• ex-factory sales


TURKISH TAX SYSTEM


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Banking and Insurance Transaction Tax

Applied on the above transactions where VAT is not applicable.

Rates vary between 1% - 5%.


TURKISH TAX SYSTEM


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Stamp Tax

Applicable on a wide range of documents including contracts, receipts, …etc.

• On varying lump sum amounts, or• Varying rates


TURKISH TAX SYSTEM


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Customs Duty

Upon importation of goods at varying rates.

Not applicable on imports from EU.


TURKISH TAX SYSTEM


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Inheritance and Gift Tax

Transition of goods possessed by Turkish nationals or the goods located in Turkey to others.Taxpayer is the acquirer.Rates vary in accordance with • Inheritance or gift• Values• Relation


TURKISH TAX SYSTEM


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Real Estate Tax

• Charged on land and buildings at rates varying between 0.1% - 0.3%

• The rate is applied twice if the property is in greater metropolitan area


TURKISH TAX SYSTEM


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Motor Vehicles Tax

Applied on all motor vehicles including yachts, helicopters, airplanes, etc.

Taxes on lump sum amounts varying in accordance with engine, age capacity, etc.


TURKISH TAX SYSTEM


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Double Tax Treaties (DTT)

As of today Turkey has DTTs with 64 countries.

• The aim of the DTT is the avoidance of double taxation.

• They also allow and require exchange of information between the countries.


TURKISH TAX SYSTEM


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INCENTIVES



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PAST

• 1980’S AND 1990’S

Heaven of incentives

• Tourism• Exports• Free Zones before 2004


INCENTIVES


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PURPOSE

• To create a stronger and competitive economy with special emphasis on certain industries

Examples:• Tourism• Textiles / Ready made garments


INCENTIVES


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PRESENT

• Initial purposes were achieved to an extent• End results of the economic crisis in 2001

helped:

Businesses :Increase in efficiency

Governments :Better governance in economy

INCENTIVES



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PRESENT

• Inner and outer forces shaped incentives again :

Governments: Why should we give more?

Turkey’s bid for EU

as examples

Created a new era

INCENTIVES



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PRESENT

Incentives focused on

Technological advancements / R&D / Education• Employment in less developed provinces• Whereas tourism, investment incentives in

general and export incentives still continue but in a more rational, realistic and reasonable manner.

INCENTIVES



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• R&D

• Technology Development Zones

• Industrial Zones

• Free Zones

• Private Education Establishments

• Investment Incentives

• Tourism Incentives

• Export Incentives, and

• Shipping Incentives

INCENTIVES

Current Incentives



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In the form of

- Supports/ grants / aids

- Tax benefits / cuts

INCENTIVES


Current Incentives (cont.)


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A tax incentive

40% of the expenditures made for

• Software developments• Technological improvements• Cost saving technologies

are deducted from tax base.

INCENTIVES


R&D


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• Tax incentive available in a number of designated areas until 2013

• R&D sourced income is fully exempt from income tax and CIT

• Salaries of employees are tax exempt

INCENTIVES


Technology Development Zones


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• R&D Development Centers and• R&D Development Companies• Tax Incentives

- On Income- On Salaries

• Grants

INCENTIVES


The New Draft Bill


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Currently in 49 relatively less developed provinces

Available incentives: Tax and grants

• Tax cuts on employment (up to 80%)

• Social security grants (up to 80% on employers share

• Allocation of land free of charge

• Energy support

INCENTIVES


Industrial Zones


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Free Zones

Free of all taxes and duties for those established prior to February 2004 – Available for trading and industrial activities

• No CIT• No income tax on salaries• No VAT, etc.



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Free Zones (cont.)

For those established after February 2004

Tax exempt (income tax & CIT) earnings on

manufacturing income only.



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Private Education Establishments

Five year tax exemption (income tax and CIT) on earnings

Pre-school education

Primary and secondary schools



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Investment Incentives in General

• Import duty exemption• VAT exemption on capital goods (local and imports)• Interest grants in less developed regions• Subsidized energy for qualifying touristic

establishments



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Export Incentives

Tax incentives and grants

• Customs duty exemption on importation of raw materials• Exemptions on stamp duty, Banking and Insurance

Transaction Tax



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Export Incentives (cont.)

Grants• Environment related costs

• Market research

• Setting up of offices sales points abroad

• Branding

• Participation in fairs

• Employment

• R&D

• TrainingDENET Yönetim Danışmanlığı Y.M.M. A.Ş.


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Shipping Incentives

Tax incentives

• Exemption on shipping income and capital gains (income tax and CIT)

• Income tax exemption on the salaries of crew



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Shipping Incentives (cont.)

Condition

Registration with International Ship Registry in Turkey which is subject to fees.



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THANK YOU


tax legislation and incentives in turkey presented by : haluk kaptanoĞlu bdo denet

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