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Vergide Gündem
English Translation

Contradiction of additional tax to the

Constitution

In accordance with the regulation entered into force with Law numbered 7440,
corporate taxpayers having exemptions and deductions in corporate tax return of
2022 have declared and paid 10% and 5% additional tax depending upon the type
of such deductions and exemptions. However, amounts which are benefited by
taxpayers as “deductions and exemptions” in their respective corporate tax returns
are the use of right which is granted to them under the laws.

Since taxes are applied and abolished according to laws, such “exemptions and
deductions” are rights granted to taxpayers under the laws. Yet, we may easily state
that certain following “exemptions and deductions” are made as required by the
taxation technique.

• Participation income exemption: Participation income exemption is not an
exemption in principle. It is applied for avoiding double taxation at the enterprise
obtaining an income subject to corporate tax.

• Premium on issued shares exemption: In accordance with both Turkish Code of
Commerce and also Accounting Standards of Türkiye, premium on issued shares
is a capital reserve and arises from issuing of company shares over their nominal
value. Therefore, premium on issued shares is not an income and an element of
capital and should be exempted from corporate tax. Otherwise, capital is taxed.

• Exemption provided to entities under legal proceedings due to their bank
debts and their guarantors and mortgagors: These are assets which are obliged
to be transferred to financial institutions for the liquidation of company debts in
return for the receivables of financial institutions and debited entities transferring
such assets do not gain an income on such transfer. Debt is closed with the cash
collected by the financial institution.

• Reduced Rate Corporate Tax: Collection of additional tax based on reduced
corporate tax turns upside-down all the project plans of investors companies
according to investment incentive practices. Because investor entity trusts
the commitment of jurisdiction on investment incentive certificate and makes
investment. Additional tax breaches such agreement.

Another contradiction to “equality and fairness principle” in terms of additional tax
is exemption of corporate taxpayers at earthquake zones from additional tax due to
earthquake occurred on February 6, 2023. However, corporate taxpayers, whose
registered office is out of earthquake zone but are making investments and gaining
income at this region, are obliged to pay an additional tax of 10% even though
earthquake has caused significant damage in terms of their respective investments
at earthquake zone.

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