The Law No. 7420 Amending the Income Tax Law and Certain Laws and Statutory Decrees was published in the Official Gazette dated 9 November 2022 and numbered 32008 (the “Law”).
The highlights of the Law, which amends various laws in addition to the Income Tax Law such as Unemployment Insurance Law and Corporate Tax Law are as follows:
Income Tax Exemptions for Employees’ Salaries
With the recent amendments to the Income Tax Law No. 193, in case the employees are not provided with lunch in the workplaces, the portion of the daily meal payment provided to the employees by the employer that does not exceed fifty-one (51) Turkish Lira is exempted from the income tax. In case the daily meal payment exceeds such amount, the exceeding portion and other benefits provided to the employees will be taxed as salaries.
Additionally, salaries to be paid for the construction, maintenance and repair works as well as technical services carried out abroad are also exempted from the income tax, in case such salaries are paid from the foreign earnings of the employers.
Rules Regarding Taxation of the Capital Decreases
Provided that the equity items included in the capital of the companies that are corporate taxpayers are subject to a capital decrease within five (5) years as of their injection to the company’s capital, the equity items included in the decreased amount will be determined by proportioning the capital in cash or capital in kind and other equity items, to the total capital of the company and the taxation will be carried out accordingly.
On the other hand, provided that the equity items included in the share capital of the taxpayer companies are subject to a capital decrease sooner than five (5) years as of their addition to the capital, the capital decrease will be deemed to be made from; (i) the equity items that are subject to corporate tax due to transfer to another account or withdrawal form the company or transfer to another account other than the capital account, rather than including in the capital of the company and the equity items that are subject to taxation depending on the dividend distribution amounts or the amounts transferred to the headquarters, (ii) the equity items that are subject to taxation depending only on the dividend distribution amounts or the amounts transferred to the headquarters and (iii) capital items in cash or in-kind that will not be subject to taxation in case withdrawn from the company or transferred to another account, respectively.
In case of a capital decrease by means of setting off the retained losses, there will be no tax cuts.
Regulations on Short Time Working Allowances Paid During the Covid-19 Pandemic
It was regulated that, during the Covid 19 pandemic (i) the extra payments arising out of faulty payments of short time working allowances and cash wage supports and (ii) the administrative fines imposed on the employers upon determination that the employee benefiting from the cash wage support has been brought to work by the employer, that are not collected as of the entry into force of this provision on 9 November 2022 are cancelled with the new amendments. On the other hand, the additional payments and administrative fines that are already collected prior to this date will not be offsetted.
During the short time working period, the additional payments arising out of termination of the employment relations of the employees (except for lawful termination grounds), short time working allowances and cash wage support payments that are subject to a criminal investigation or a prosecution are excluded from the scope of this amendment and cancellation is only possible upon acquittal of the employer.
You can access the full version of the Law from
here.
MORAL I KINIKOĞLU I PAMUKKALE I KÖKENEK
Serkan Pamukkale, Senior Partner
Cerensu Çetin Yenigün, Senior Associate
Selin İvit, Associate