- Definition and Scope
Joint ventures in the seventh paragraph of article 2 of the Turkish Corporate Tax Law, is defined as those who demand the establishment of an obligation in this way from the partnerships they have established in order to jointly undertake a certain work together and to share their earnings, between the institutions mentioned in the other paragraphs of the same article, or with personal partnerships or real persons.
Joint ventures are partnerships established for the purpose of sharing profits and the partners undertake to do a certain job together.
About sole proprietorships or ordinary partnerships formed by real persons with those listed in Article 2 of the Law or among those listed in Article 2 of the Law, if desired, corporate tax liability can be established as a joint venture. In this case, joint ventures can become corporate taxpayers, regardless of whether they have legal personality or not, if requested by taxpayers.
In order for the joint venture to be established to be considered as a corporate taxpayer, it must have at least the following components.
– At least one of the partners is a corporate taxpayer,
– Establishment of the partnership with a written contract to conclude a certain business,
– The subject of the joint venture is a certain business,
– Predicting that the work to be done together will be carried out within a certain period of time,
– The existence of an underwriting contract between the joint venture and the employer,
– The parties are responsible to the employer for the whole of the jointly undertaken work, not for a certain or more than one part,
– Sharing the profit at the end of the work,
– Completion of the jointly undertaken and jointly undertaken work and the completion of all obligations related to the liability specified in the Tax Procedure Law.
Considering the above-mentioned general components, consortia in which each partner undertakes the construction of a certain part of the business are excluded from the definition of joint venture. In such partnerships (consortium), the work of each partner must be clearly stated in the underwriting contract. However, although it is not specified in the contract of undertaking, if the work to be undertaken by each partner is determined by the contract to be made among the partners and this contract is accepted by the employer administration, such partnerships will also be considered as “consortium”.
The joint ventures will be established for a business that will be completed within a certain period of time and will be subject to full liability, not for a business or business that is continuous and of the same nature.
Joint ventures can be established for any kind of business, provided that they carry the above-mentioned components.
Having more than one employer in a joint venture established for a particular business does not necessitate more than one joint ventures. However, if more than one job is undertaken against an employer within the framework of the joint ventures described above, each business will require the establishment of separate joint ventures.
For example, a single joint venture can be established for a hydroelectric power plant construction business. If a separate tender is held by the same employer for the establishment of the electricity transmission system in connection with the said power plant, a separate joint venture must be established for this work.
The tax office to which the joint venture is affiliated in terms of corporate tax is the tax office where the headquarters of the partnership indicated in the establishment agreement is located. If the partnership center is not specified in the contract, the tax office where the business center is located will be the tax office to which it is affiliated.
In the joint venture to be established for a certain business, the end date of the business will be determined according to the principles determined in the contract of commitment. However, the end of the business does not indicate the end of the joint venture. Due to this job, all the duties related to the obligation must be fulfilled (For example, full payment of accrued taxes). After the completion of all tax obligations, the joint venture is deemed to be terminated.
On the other hand, the liquidation of joint ventures will be carried out in accordance with the provisions regarding the dissolution of ordinary partnerships in the Code of Obligations.
- Status of losses at the end of the work
Corporations can operate by forming partnerships in the form of ordinary partnerships according to the Code of Obligations or joint venture according to the Corporate Tax Law.
Although ordinary partnerships are not corporate tax payers, they can keep separate books because they are value added tax payers. Partners share the profit or loss at the end of the period in proportion to their shares in the partnership and include them in their own accounts.
Joint ventures are considered as separate corporation in the Corporate Tax Law and are considered as corporate taxpayers. Income arising from the activities of joint ventures is subject to corporate tax and after-tax earnings are distributed to the partners according to the shares of the partners.
The losses of corporate taxpayers cannot be deducted by the partners of these taxpayers, and the same applies to the losses of corporate taxpayer joint ventures.
Source: Revenue Administration of Republic of Turkey – Translated by Karen Audit – The rights of this translation belong to KarenAudit and unauthorized use is prohibited.
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