29.06.2021
Reduced corporate tax can be applied to the income obtained from investments within the scope of investment incentive certificate, starting from the accounting period in which the investment is started to be operated partially or completely, until the investment contribution amount is reached, by taking into account the investment contribution and tax reduction rates within the relevant incentive certificate.
The amount of contribution to the investment refers to the amount to be covered by the Government for the investments by way of tax, the collection of which is waived by applying reduced corporate tax. The ratio to be found by dividing this amount by the total investment amount refers to the investment contribution ratio.
Example 1: The total amount of the investment of (A) A.Ş. within the scope of the investment incentive certificate is 5,000,000 TL and the investment contribution rate is 25%. In this case, the contribution amount to the total investment will be calculated as follows.
Contribution to the total investment = Total investment expenditure x Investment contribution rate
= 5.000.000 TL x 25%
= 1.250.000 TL
The contribution amount to the total investment in question refers to the corporate tax amount that the Government will refuse to collect by applying reduced corporate tax to the income obtained from the investment.
On the other hand, the Council of Ministers is authorized to limit the proportions of expenditures such as land, buildings, used machinery, spare parts, software, patents, licenses and know-how costs separately or collectively in investment expenditures, in accordance with the Council of Ministers Decisions on State Aids in Investments dated 14/7/2009 and numbered 2009/15199 and dated 15/6/2012 and numbered 2012/3305 issued within the framework of this authority, land, plot, royalty, spare parts and other expenses that are not subject to depreciation cannot be subject to reduced corporate tax. Therefore, in the calculation of the investment contribution amount, land, plot, royalties and spare parts expenses and other expenses that are not subject to depreciation will not be taken into account.
The reduced corporate tax application regarding the earnings obtained from the investments within the scope of the investment incentive certificate is started as of the temporary tax period when the investment is partially or fully operated, from the ad hoc tax period when the investment is started to be operated, corporate tax is applied at a reduced rate until the amount of contribution to the investment that is entitled due to the investment expenditure made on the income from the investment is reached, by not exceeding the investment amount included in the incentive certificate and including tax deduction.
Example 2: The total amount of the completely new investment of the newly established (B) A.Ş., which was started in the 2014 accounting period and within the scope of the investment incentive certificate, is 8,000,000 TL. 1,000,000 TL of this investment, which started to be partially operated in the 2015 accounting period, has been realized.
(B) A.Ş. has gained 300.000 TL from the said investment in this accounting period. (Investment contribution rate: 40%, tax reduction rate: 60%)
Contribution to the total investment = Total investment expenditure x Investment contribution rate
= 8.000.000 TL x 40%
= 3.200.000 TL
Contribution to the investment earned in the 2015 accounting period = Investment expenditure incurred x Contribution rate to investment
= 1.000.000 TL x 40%
= 400.000 TL
Accordingly, the reduced corporate tax rate to be applied to the income obtained from this investment of (B) A.Ş. within the scope of investment incentive certificate in the 2015 accounting period and the amount of contribution to the investment will be as follows.
Reduced Corporate Tax rate = [Corporate Tax rate – (Corporate Tax rate x Tax reduction rate)]
= [20% – (20% x 60%)] = [20% – 12%] = 8%
– Income from investment ………………………………………………………… : 300.000 TL
– Corporate Tax to be paid if there was no reduced CT (300.000 TL x 20%)………. : 60.000 TL
– CT calculated according to the reduced rate (300.000 TL x 8%)…………….….. : 24.000 TL
– Contribution amount to the benefited investment (60.000 TL – 24.000 TL)……… : 36.000 TL
By applying reduced corporate tax to the income of 300.000 TL earned in the 2015 accounting period from the partial operation of the investment of the (B) A.Ş. within the scope of investment incentive certificate, the amount of contribution to the investment benefited from is 36.000 TL, so, 364,000 TL of the 400,000 TL investment contribution amount earned in the 2015 accounting period due to the investment expenditures, which could not be used in this period (400,000 TL – 36.000 TL), will be able to be used in the following accounting periods by applying reduced tax rate to the earnings from this investment.
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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