Furthermore, in sub clause (h) of the first clause of article 5 titled “Exemptions” of the Corporate Tax Law, it was given a verdict that the incomes reverted to general operating accounts by gaining from overseas construction, maintenance, and fitter’s works are exempted from corporate tax.

On the other hand, in article 9 of the aforementioned law, “(1) in the determination of Corporate tax base, on condition that each amount related to each year in Corporate Tax Return should be presented separately, the losses stated below are subject to discount:
 …
b) In Turkey, except the ones related to incomes exempted from Corporate Tax, on condition that they should remain in the same account more than 5 years, the losses resulted from overseas activities will be subject to discount;
1) if they are reported by the institutions given the authority to audit every year according to that country’s regulations, including the losses of tax bases declared according to the laws of country where the institution is active,
2) If that report is submitted to a tax office in Turkey with its translated copy.
It is a statutory obligation to confirm the tax returns attached to report prepared by audit firms, balance sheet and income statement by fiscal authorities. If there is no audit firm where the institution is active, tax returns belonging to each year and its translated copy should be submitted to Turkish Embassy and Turkish Consulate in that country. If there is no Turkish Embassy and Turkish Consulate in that country, those documents should be submitted to Turkish representations (ejustem generis) protecting Turkish benefits.

If overseas losses being subject to discount in Turkey are set off in related country or recorded as expense, the overseas income, which will be included in the declaration in Turkey, should be the amount before it is recorded as setoff or expense.”

Moreover, necessary explanations can be found in clause titled “9.3 setoff of overseas losses” of General Communique on Corporate Tax (serial number 1).

CONCLUSION:
According to provisions and explanations, the losses made from the activities of overseas branches can be subject to discount;
1- if they are not generated from overseas construction works,
2- if it is related to commercial earning and maintained and within the scope of sub clause (b) of the first clause of article 9 of the Corporate Tax Law. (Article 9/1b is indicated above)

Source: Revenue Administration

Legal Notice: The information in this article is intended for information purposes only. It is not intended for professional information purposes specific to a person or an institution. Every institution has different requirements because of its own circumstances even though they bear a resemblance to each other. Consequently, it is your interest to consult on an expert before taking a decision based on information stated in this article and putting into practice. Neither MuhasebeNews nor related person or institutions are not responsible for any damages or losses that might occur in consequence of the use of the information in this article by private or formal, real or legal person and institutions.

• If the agreement is made before the delivery date of workplace in construction works, which date will be the starting date of employment?
• Which date will be taken into consideration whether aforementioned work is extending to years’ work or not?

1- Which works are regarded as extending to years works?
Profit or loss should be calculated very definitely at the end of the work in construction and repair works which are extending to years. Furthermore, the whole amount (profit and loss) should be counted as current year revenue and indicated in declaration made in aforesaid year. (article 42 of the Income Tax Law No 193.)

2- Starting Date of Employment in Construction Works
The conditions for extending to years construction and repair works;
     2.1- It should be construction and repair work.
     2.2- That construction and repair works should be extended over more than one calendar year.
     2.3- That construction and repair works should be private or official contract works.
Starting date of employment for construction and repair works:
     2.4- construction site delivery date will be based on, if the construction site delivery date is not specified in the agreement.
     2.5- starting date of the work will be based on, if the construction site delivery date is not specified in the agreement.
     2.6- the effective date of contract will be based on, if none of them is mentioned in the agreement.

3- What is the withholding rate in extending to years construction and repair works?
If the construction and repair works will be completed the next year(s) after the work is started, it is compulsory to make a deduction in the ratio of 3% through progress payment. (In line with the Cabinet Decision numbered 2009/14592)

4- Who will make the deduction of withholding?
The principal should make the deduction on behalf of the contractor (builder) and pay that amount into the tax office.

5- Can the contractor (builder) deduct that amount from his/her tax?
That contractor (builder) can deduct that amount from calculated tax (if any), If there is no tax or the amount of tax is less than the amount of deduction, he/she may claim the difference back from the tax Office.

Source: Revenue Administration

Legal Notice: The information in this article is intended for information purposes only. It is not intended for professional information purposes specific to a person or an institution. Every institution has different requirements because of its own circumstances even though they bear a resemblance to each other. Consequently, it is your interest to consult on an expert before taking a decision based on information stated in this article and putting into practice. Neither MuhasebeNews nor related person or institutions are not responsible for any damages or losses that might occur in consequence of the use of the information in this article by private or formal, real or legal person and institutions.