What is Corporate Tax?
What is the Corporate Tax Rate for 2024?
The corporate tax rate was increased from 23% to 25% with the amendment made by Law No. 7456 on July 14, 2023. This rate will be valid in 2024.
Why is Corporate Tax Levied?
Corporate tax is levied to provide the necessary resources for the government to finance public services, maintain public infrastructure, and support economic development. Companies benefit from various services provided by the state, such as public infrastructure and security. Therefore, corporate tax represents the companies' contribution to society and helps finance these services. Additionally, ensuring fair collection of tax revenues and financing public expenditures are also important purposes of corporate tax.
Which Institutions are Subject to Corporate Tax?
According to the Corporate Tax Law, the following institutions are subject to corporate tax on their earnings:
- Capital companies
- Limited liability companies
- Joint stock companies
- Limited partnerships divided into shares
- Cooperatives
- Public economic enterprises
- Economic enterprises owned by associations and foundations
- Joint ventures
What is Limited Tax Liability?
Institutions whose legal center and business center are not within the borders of Turkey are taxed only on the income they earn in Turkey and are subject to corporate tax in this way. This is referred to as limited tax liability.
What is Full Tax Liability?
Institutions whose legal center and business center are within the borders of Turkey are taxed on the income they earn both in Turkey and abroad. This is referred to as full tax liability.
Do Sole Proprietorships Pay Corporate Tax?
Sole proprietorships are not obliged to pay corporate tax.
What Income is Subject to Corporate Tax?
The following incomes are subject to corporate tax:
- Commercial income
- Agricultural income
- Wages
- Income from independent professional activities
- Income from movable capital
- Income from immovable capital
- Other income and gains
How is Corporate Tax Calculated?
Corporate tax, which is a type of tax levied on a corporation's earnings, is calculated on the net corporate income earned by taxpayers during the relevant accounting period.
How is Corporate Tax Declared?
The corporate tax return is submitted and paid after the relevant accounting period has ended. The corporate tax calculated for 2023 will be paid between April 1-30, 2024. The taxpayer submits the return to the tax office where the company's legal or business center is located. Each taxpayer must file a return for all taxable income. Separate returns are not required for branches, stores, purchasing and selling offices, agencies, or other workplaces and production sites.
How is Corporate Tax Assessed?
Corporate tax is assessed by the tax office on behalf of the legal entity of the taxpayers; for public economic enterprises and economic enterprises of associations and foundations without legal personality, on behalf of the relevant public legal entities or associations or foundations; for funds, on behalf of the founder of the fund; and for joint ventures, on behalf of any managing partner or partners jointly responsible for the payment of the tax. Assessment means "imposing tax". The declaration is made with the Corporate Tax Return.
When and How Should Corporate Tax be Paid?
Corporate tax should be paid by the end of the month in which the return is submitted. For the normal accounting period, it should be paid by the evening of April 30, and for special accounting periods, by the end of the month in which the return is submitted. Payment can be made through banks contracted with the tax office, including internet banking.
What to Consider When Preparing for the Corporate Tax Period?
Here are some details that may be useful to know during the period when you will make corporate tax payments:
- It is important to keep income-expense documents organized and accounting records up to date.
- Changes in tax legislation should be followed, and the business should comply with these changes.
- It is necessary to be knowledgeable about tax deductions and exemptions and evaluate whether the business can benefit from these opportunities.
- Previous period tax debts should be regularly monitored and paid.
- Accurate and complete accounting records will ensure the tax return is properly prepared.
- Businesses should be prepared for tax audits by keeping necessary documents and records organized.
What is Provisional Tax?
Provisional tax is a prepayment made on the income for the current taxation period by commercial income earners, self-employed individuals, and corporate taxpayers, calculated and paid on their quarterly earnings, which is later offset against the Income and Corporate Tax.
What is Loss Carryforward?
Loss carryforward allows a company to offset losses from its commercial activities against profits made in subsequent periods. Losses shown separately for each year in the corporate tax return can be carried forward to subsequent years under certain conditions and deducted from the profits made in those years. However, these losses cannot be carried forward for more than five years and must be indicated separately in the returns. This regulation aims to balance the tax burden of companies and provide flexibility against long-term fluctuations in activities.
Can Expenses be Deducted for Corporate Tax?
Certain types of payments can be shown as expenses to reduce the tax base within the scope of corporate tax. Examples include:
- Business expenses directly related to the company's commercial activities and compliant with legal regulations
- Employee salaries
- Rental expenses
- Depreciation expenses
When showing an expense, it should be checked whether it complies with the legislation and is properly documented.
Are There Any Exemptions in Corporate Tax?
There are certain exemptions in corporate tax payments. You can review these exemptions in our article on Corporate Tax Exemptions.
Changes in Corporate Tax for the 2024 Period
As you know, inflation accounting adjustments were applied in the 2023 taxation period. The corporate tax return, which will be submitted between April 1-30, 2024, will include both inflation-adjusted and non-adjusted periods. The results of the inflation adjustment for 2023 do not affect the profit/loss. However, this adjustment will affect the profit/loss for the 2024 provisional tax periods (the first provisional tax period of 2024, January 1 - March 31, with the return being filed between May 1-17, 2024).
