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.

The law on the amendment of some laws on the purpose of improvement of the investment environment numbered 6728 and article 3/A have been added to the law on the support of research, development and design activities numbered 5746. R&D discount institution related to the R&D and innovation activities existing within the structure of income and corporate taxpayers’ corporations has been specified in article 3/A of the law numbered 5746.

Accordingly, 100% of research and development expenses related to searching new technology and information developed within the structure of income and corporate taxpayers’ corporations will be a subject for discount on the determination of profit in line with article 10 of the Corporate Tax Law numbered 5520 and article 89 of the law numbered 193; providing that these projects are regarded as R&D and innovation projects by the Ministry of Science, Industry and Technology.

Herewith, R&D discount will be applied to the applications done within the scope of article 3/A of the law numbered 5746 as of the date of 09.08.2016 as long as the law numbered 5746 and the related legislations are taken into consideration about the discounts related to research and development projects on searching new technology and information. On the other hand, R&D discount will be applied to the projects being subject to the applications done before 09.08.2016 within the scope of General Communiqué on Corporate Tax with serial number 1 according to the provisions (the provisions before the sub clause (a) of the first clause of article 10 of the Corporate Tax Law was amended with the Law numbered 6728).

Source: Corporate Tax Law

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.