Pursuant to the first paragraph of Article 30 of the Corporate Tax Law, the progress payments made to the limited taxpayer companies for the construction and repair works spread over more than one calendar year and the tax deductions of the mentioned institutions will be made on the following, according to the principles specified in the Income Tax Law:
- Self-employment earnings,
- Real estate capital gains,
- Security income, excluding those listed in subparagraphs (1), (2), (3) and (4) of the second paragraph of Article 75 of the Income Tax Law
In the first paragraph of Article 22 of the Law, it is stated that the provisions applicable to full taxpayer corporations will be applied in determining the earnings of limited taxpayer corporations through workplace or permanent representative, unless otherwise stated.
According to Article 15 of the aforementioned Law, tax deductions are made from the progress payments of full taxpayer corporations regarding construction and repair works spread over more than one calendar year, from all kinds of bonds and Treasury bill interests, income from securities issued by the Mass Housing Administration and Privatization Administration, from deposit interests, from dividends paid by participation banks in return for participation accounts, dividends paid in return for profit and loss sharing certificate, repo earnings and from the rent payments made to the immovables belonging to the cooperatives in return for the lease.
Therefore, if the tax deducted earnings and revenues of full taxpayer corporations are obtained by limited taxpayer corporations engaged in commercial activities by having a workplace or permanent representative in Turkey, tax deduction will be made on the said earnings and revenues in accordance with Article 30 of the Corporate Tax Law, in any case.
On the other hand, within the scope of commercial and agricultural activities carried out by corporations subject to limited liability by having a workplace or permanent representative in Turkey, according to Article 30 of the aforementioned Law, no tax deduction will be made on self-employment earnings, real estate capital gains (except for rent payments made to limited taxpayer corporations in return for renting immovable) and security capital gains (excluding dividends and income from securities subject to withholding tax in the first paragraph of Article 15 of the Law) obtained through these workplaces or their permanent representatives.
However, even if the corporations subject to limited liability do not have a workplace or permanent representative in Turkey or vice versa, tax deductions will be made in accordance with Article 30 of the Law from self-employment earnings, real estate capital gains and movable capital revenues excluding dividends, which are not related to the commercial activities they carry out in these workplaces.
For example, according to the first paragraph of Article 30 of the Corporate Tax Law, tax deductions will not be made on the earnings and revenues obtained by the branches of foreign banks in Turkey within the framework of their banking activities. However, tax deductions will be made in accordance with the aforementioned article on the earnings and revenues obtained by these banks outside the branches and not included in the banking activities.
If it is not known whether the limited taxpayer has workplaces or permanent representatives in Turkey, during the payment of limited taxpayers in cash or on account by those who are responsible for withholding tax, it will be required to withhold tax in accordance with the aforementioned article.
On the other hand, regardless of whether these earnings and revenues are included in commercial or agricultural income or not, corporate tax deductions will be made by the responsible persons over the payments made in return for the sale, transfer and assignment of royalties, privileges, passions, businesses, trade names, brands and similar intangible rights. In tax deductions to be made in accordance with the other paragraphs of Article 30 of the Corporate Tax Law, the provisions of the relevant paragraphs will be taken into account.
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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