Final touches on the new reform package: Here are the details of the regulation...

The Ministry of Treasury and Finance has included important topics in the reform package it prepared, aimed at strengthening tax justice and implementing tax regulations for capital.

The new reform package, which has been under development by the Ministry for some time, has been finalized in line with the goals set out in the Medium-Term Program.

The package was prepared in accordance with the message frequently voiced by Minister of Treasury and Finance Mehmet Şimşek: "Our goal is to leave no area untaxed in order to ensure justice and efficiency in taxation."

The package, which is planned to be submitted to the Grand National Assembly of Turkey (TBMM), contains regulatory proposals to strengthen tax justice, introduce tax practices for capital, and increase the share of direct taxes.

The Ministry, which will implement a minimum corporate tax for multinational companies, will also introduce a local minimum corporate tax and a minimum income tax model to increase the share of direct taxes.

Some of the topics included in the package are as follows:

A new section will be opened in the Corporate Tax Law, and a minimum corporate tax (global minimum corporate tax) will be collected from multinational companies.

In the global minimum corporate tax, which has been enacted in more than 30 countries, primarily EU countries, branches, subsidiaries, and workplaces of multinational companies with annual consolidated revenues exceeding the 750 million euro threshold in countries with low taxation are subject to a minimum corporate tax of 15 percent.

If the corporate tax burden paid in the country where these companies operate is below 15 percent, countries that have enacted the practice will be able to collect the tax difference not collected by the relevant country. Countries that do not transition to the minimum corporate tax practice effectively transfer their taxing rights to another country.

While there are 1,024 groups in Turkey whose ultimate parent entity is located abroad, they have 2,134 businesses in the country.

DOMESTIC MINIMUM CORPORATE TAX

It has been determined that approximately half of corporate tax taxpayers declare losses or report no tax base while continuing their operations with high turnovers. The Ministry, which also examined EU and OECD practices on this matter, has prepared a hybrid model in which taxpayers' declarations are compared with their revenues and payment capacities.

The corporate tax to be paid will be determined by taking the higher of two amounts: a certain percentage of the declared profit before deductions and exemptions, or a certain percentage of the profit in the income statement.

The minimum corporate tax paid will be deducted from the tax to be paid in the following 5 accounting periods when businesses are required to pay higher taxes than this amount.

Some exemptions (such as participation earnings, emission premium earnings) will be deducted from the profit in the minimum tax calculation.

The rights of taxpayers who make investment expenditures within the scope of an investment incentive certificate will be protected. Taxpayers who are newly starting a business will be exempt from the minimum tax for 3 years.

MINIMUM INCOME TAX IS ALSO COMING

A minimum income tax application is also being introduced for commercial, agricultural, and self-employed earnings taxed under the real method. It has been observed that a significant portion of income tax payers declare losses or have significant discrepancies between their declarations and their revenues. A new model will also be established for this issue.

Accordingly, the profit to be declared by taxpayers cannot be less than a determined percentage of their returns in the income and earnings statement table.

An additional anchor is planned for those who earn self-employed income. The profit to be declared by these taxpayers cannot be below the annual amount of the gross minimum wage.

The difference in minimum tax paid over revenue will be allowed to be deducted in the following 5 accounting periods. Those who are newly starting a business will be exempt from the minimum tax for 3 years.

30 PERCENT CORPORATE TAX FOR BOT AND PPP PROJECTS

An increased corporate tax will also be applied to earnings obtained from Turkey's major investments.

The corporate tax rate is currently applied at 25 percent for the real sector, 30 percent for banks and financial institutions, 20 percent for exporting firms, 23 percent for publicly traded companies, and 24 percent for manufacturers.

As is the case with banks and financial institutions, it is proposed that the corporate tax rate be 30 percent instead of 25 percent for the earnings of institutions operating within the scope of Build-Operate-Transfer (BOT) and Public-Private Partnership (PPP) projects.

This regulation is also aimed at contributing to the strengthening of tax justice and increasing the share of direct taxes.