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What are the Meanings of Legally Obligated and Limited Taxpayer in Turkey?

MuhasebeNews — Mon, 19 Mar 2018 16:00:56 +0000

1- WHAT IS THE MEANING OF LEGALLY OBLIGATED?
Companies whose registered office [1] or business center [2] is in Turkey will be subjected to tax through their incomes that they gain both in Turkey and abroad.

If registered office or business center of institutions listed below is in Turkey, they will be subjected to tax as legally obligated.
    1.1- Company with share capital,
    1.2- Cooperatives,
    1.3- State-owned economic enterprise,
    1.4- Commercial enterprise belonging to associations or foundations,
    1.5- Joint ventures,

Sample-1: Fontaine citizen of France,
– He was employed on 20 March 2010 in Turkey and then he went on leave on 15 May 2016. (6 years 1 month 26 days).
– He came back to Turkey on 20 October 2016 and he kept at his job until 31 December 2016. (2 months 2 days).
Liabilities of Fontaine for 2016 are explained below.
Explanation-1:
Fontaine is legally obligated.
Even though he stayed in Turkey less than 6 months separately, the duration of his staying for a calendar year is more than 6 months.
Legal Basis-1:
Article related to “Legally Obligated” of the Income Tax Law is stated below;
Persons listed below are regarded as domiciled in Turkey and they are considered as legally obligated:
1- Person whose residence is in Turkey. (Residence is a place stated in article 19 and its consecutive articles of the Civil Law.)
2- Person who persistently resides in Turkey more than 6 months in a calendar year. (Provisional leaving does not affect time of settlement in Turkey.)

2- WHAT IS THE MEANING OF LIMITED TAXPAYER?
Companies whose registered office and business center are not in Turkey will be subjected to tax through their incomes that they gain only in Turkey.

If registered office and business center of institutions listed below are not in Turkey, they will be subjected to tax as limited taxpayer.
2.1- Company with share capital,
    2.2- Cooperatives,
    2.3- State-owned economic enterprise,
    2.4- Commercial enterprise belonging to associations or foundations,
    2.5- Joint ventures,

3- CORPORATE INCOME CONSISTS OF INCOMES AND REVENUES STATED BELOW IN LIMITED LIABILITY TO TAX;
3.1- Commercial incomes gained through businesses made with foreign institutions whose registered office or business center in Turkey or through these kinds of institutions.
(Even though they carry abovementioned conditions, if they gain incomes through goods purchased in Turkey for export and they send them to abroad without selling them in Turkey, their incomes will not be regarded as obtained in Turkey. Selling in Turkey means that either customer or supplier or both of them should be in Turkey or sales agreement should be made in Turkey.)
(In line with Tax Procedure Law provisions numbered 04.01.1961 – 213)
3.2- Incomes gained in Turkey from agricultural enterprise,
   3.3- Self-employment earnings gained in Turkey ,
   3.4- Revenues gained by renting estate and assets and rights in Turkey,
     3.5- Income from moveable capitals gained in Turkey
3.6- Other incomes and revenues gained in Turkey.

Sample 2: Mr. John citizen of USA,
– He was in Turkey between the dates of 01.10.2015-10.12.2016 and he gained commercial income from commercial activities that he carried out in Turkey and America in that period. (1 year 2 months 10 days)
– By 2015, he gained 100.000 TL in Turkey and 200.000 TL in USA
– By 2016, he gained 300.000 TL in Turkey and 500.000 TL in USA.
The income being subjected to tax is explained below.
Explanation -2:
Mr. John resided in Turkey less than 6 months in calendar year 2015, he was regarded as limited taxpayer.
During that period of time, his income gained in Turkey and valuing at 100.000 TL would be subjected to tax in Turkey.
However, by 2016 he resided in Turkey more than 6 months, so he will be regarded as legally obligated.
Total amount of income is 800.000 TL (300.000+500.000), which he gained both in USA and in Turkey, and income tax would be calculated through that amount.
If a taxpayer is subjected to tax in the ratio of income that he gained in America, it can be deducted from the tax calculated in Turkey.
Legal Basis-2:
Article related to “Legally Obligated” of the Income Tax Law is stated below;
Persons listed below are regarded as domiciled in Turkey and they are considered as legally obligated:
1- Person whose residence is in Turkey. (Residence is a place stated in article 19 and its consecutive articles of the Civil Law.)
2- Person who persistently resides in Turkey more than 6 months in a calendar year. (Provisional leaving does not affect time of settlement in Turkey.)

[1] Registered Office: It is an office stated in law of establishment, regulations, main status or agreements of institutions being subjected to tax.
[2] Business Center: It is a center where all businesses are gathered virtually and managed.

Source: Corporate Tax Law Numbered 5520 (Article 3)

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.

Should Companies Apply to E-Book for Their Branches?

MuhasebeNews — Tue, 04 Jul 2017 07:14:54 +0000

SHOULD COMPANIES APPLY TO E-BOOK FOR THEIR BRANCHES?
No.
Companies apply to E-Book through their tax identification number. After the application, companies are able to form their own books and certificates for their registered offices and branches separately by means of compatible software that they prefer.

Source: Revenue Administration

If You Sell Your Real Estates Within 1 Year, You Will Pay VAT!

MuhasebeNews — Tue, 16 May 2017 15:24:51 +0000

Built offices and real estates will be exempted from VAT,
1- When they are sold to a company which do not gain income in Turkey for the first time,
2- On condition that its sale value should be paid as foreign currency brought from abroad!!!
3- By means of foreign real persons who do not reside in Turkey, an office whose registered office and headquarter are not in Turkey or a permanent representative,

The ones, who bought an office or a real estate by taking advantage of VAT exemption in Turkey previously, will not be able to sell their real estates 1 year.

If they sell their office or real estate within 1 year, the tax (VAT), which was not paid when it was bought, will be received.

The properties, which are transferred to the Treasury ownership because of a suit brought by the Treasury, among the ones zoned for construction and then sold by the municipalities, will be again transferred to persons as free of charge.

Source: General Meeting of TGNA (23.02.2017 Thursday)

Are Losses from Overseas Branch Subject to Discount?

MuhasebeNews — Tue, 16 May 2017 06:49:27 +0000

In article 3 of the Corporate Tax Law numbered 5520, it is clearly stated that “If institutions whose registered office or headquarter is abroad or in Turkey gain income either in Turkey or abroad, that income will be subject to tax in line with article 1 of the Law.”

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