Significant Tax Amendments Introduced Through the Law No. 7456
Law No. 7456 on Additional Motor Vehicle Tax for Compensation of Economic Losses Caused by the Earthquake on 6/2/2023 and on Amendments to Certain Laws and Decree Law No. 375 (Law No. 7456) was published in the Official Gazette dated 15.07.2023 and No. 32249. The significant tax amendments included in the Law No. 7456 are summarized below:
- Law No. 7456 stipulates a one-time additional motor vehicle tax (MVT) to be levied on vehicles such as cars, minibuses, buses, trucks, motorcycles included in the relevant tariffs of Motor Vehicle Tax Law No. 197 and registered on 15.07.2023 or to be registered for the first time until 31.12.2023. This amount is envisaged to be equal to the amount of MVT accrued in 2023. The additional tax will be collected in two installments. For vehicles registered on 15.07.2023, it is foreseen that the first installment of the additional tax will be paid until 31.08.2023 and the second installment until 30.11.2023. For vehicles to be registered for the first time between 15.07.2023 and 31.12.2023, it is regulated that the additional tax will be paid in advance together with the MVT of such vehicles. Taxes to be collected will be registered as revenue in the general budget. Pursuant to Article 2, 10 and 73 of the Constitution, the additional MVT must be examined in terms of the principle of legality of taxation and the principle of certainty within the scope of the non-retroactivity of tax laws and the principles of taxation according to financial power. Indeed, the Constitutional Court had annulled the additional MVT regulation introduced after the 1999 earthquake by examining that tax in light of the said principles. In terms of the taxpayers who plan to initiate a tax litigation case, it should be highlighted that the additional MTV will be accepted to be accrued and notifies as of the promulgation date of the Law and the term of litigation should be calculated accordingly.
- The general corporate income tax (CIT) rate increased from 20% to 25%. For banks and financial institutions, CIT rate has been raised to 30%. In addition, it is envisaged that the CIT rate, which is applied with a 1% discount for exporting corporations, will be applied with a 5% discount. This regulation applies to the income of the corporations obtained during the Fiscal Year of 2023 and the following taxation periods, starting from the declarations to be submitted as of 01.10.2023.
- The value added tax (VAT) exemption applicable to transfers and deliveries realized through the sale of immovable properties registered in the assets of the company for at least two full years is abolished. On the other hand, pursuant to the provisional article added to the Value Added Tax Law No. 3065 (VAT Law), VAT exemption will continue to be applied to the transfer and delivery of immovable properties registered in the assets of the company before 15.07.2023.
- The CIT exemption at the rate of 50% envisaged for the sale of immovable properties that have been registered in the company’s assets for more than two years is terminated. Pursuant to the provisional article added to the Corporate Income Tax Law No. 5520 (CTL), the CIT exemption will continue to apply to the sale of immovable properties registered in the assets of the company before 15.07.2023. However, the CIT rate to be applied to the income from the sale of immovable properties after 15.07.2023 will be considered as 25%, not 50%.
- It is envisaged that immovables are excluded from the scope of tax-free partial spin-off regulated under Article 19/3-b of the CTL. This amendment will enter into force on 01.01.2024. Therefore, it is of utmost importance for corporations considering to transfer their immovable assets through a partial spin-off to take this amendment into consideration. Apart from this, it should be also noted that the previous criticism points of the Revenue Administration regarding the transfer of immovables through partial spin-off should be considered for the tax-free partial spin-off transactions planned to be terminated until 31.12.2023.
- It is regulated to abolish the CIT exemption for incomes derived from other investment funds and partnerships other than venture capital funds and partnerships. The exemptions in this scope are abolished for investment fund participation shares acquired as of 15.07.2023.
- It is foreseen to amend the authority granted to the President in order to tax goods included in the tariffs numbered (I) and (III) attached to the Special Consumption Tax Law No. 4760 (SCT Law) in accordance with possible price fluctuations. In addition, there are various regulations regarding the lump-sum tax amounts provided for the goods in the tariff numbered (I) annexed to the SCT Law.
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