On July 15, 2023, a significant legislative development was witnessed with the publication of Tax Law No. 7456 in the Official Gazette No. 32249 in Turkey.
This new Tax law aims to address and compensate for the economic losses caused by the devastating earthquakes that occurred on February 6, 2023 in Turkey. Among the changes introduced, adjustments to various tax laws in Turkey have been implemented, signifying a significant shift in the country’s taxation landscape.
One of the key provisions of Law No. 7456 is the granting of new authority to the President. This authority allows the President to increase the rates and amounts of Recycling Contribution Fees (GEKAP). The introduction of this power aims to encourage businesses and individuals to take more substantial measures towards environmental preservation and sustainable practices, thereby contributing to the overall well-being of the nation.
Another notable change brought about by the new law is the increase in the ratio of the corporate income tax (CIT) by 5%. This rise in the CIT rate signals the government’s focus on bolstering its revenue collection efforts from corporations, with the intention of financing projects and initiatives aimed at the country’s growth and development.
Tax law in Turkey : additional motor vehicles tax
In addition to the changes in corporate taxation, the law has introduced an additional motor vehicles tax. This new tax measure seeks to address environmental concerns and encourage the use of more sustainable transportation alternatives. By implementing a tax on motor vehicles, the government aims to mitigate the impact of vehicular emissions on the environment and motivate individuals to explore eco-friendly options.
Furthermore, Law No. 7456 entails the removal of CIT and VAT exceptions that were previously applied to the sale of immovables. This change represents a significant shift in the tax treatment of immovable property transactions, potentially influencing the real estate market and investment dynamics within the country.
Another crucial aspect of the tax law readjustment in Turkey is the increase in the discount applied to earnings from exports. The discount has been raised from 1 point to 5 points, signaling the government’s efforts to boost the export-oriented industries and foster economic growth through international trade. This incentive aims to make locally produced goods and services more competitive in the global market, thus stimulating export activities.
The termination of the subject for partial division of immovables is yet another notable modification introduced by Law No. 7456. This change is likely to have implications on the real estate sector and property development projects, as it addresses the division of immovable properties for various purposes.
Lastly, the new law has brought about the readjustment of the President’s authority to determine the amounts of the Special Consumption Tax Law (SCT) in Turkey. This change grants the President the flexibility to review and set SCT amounts as per the prevailing economic conditions and national priorities. This move is aimed at promoting fiscal responsibility and optimizing the utilization of SCT revenue for essential projects and initiatives.
In addition to these alterations, the law extends the 25% rate applied in residential rent increases until July 1, 2024. This measure offers stability and predictability to both tenants and landlords in the residential rental market during a period of economic recovery and reconstruction following the earthquakes.
In conclusion, the enactment of Law No. 7456 marks a significant milestone in the country’s tax legislation. Through the readjustment of certain tax laws, the government aims to address the economic losses caused by the earthquakes and implement measures that promote environmental sustainability, economic growth, and fiscal responsibility. As these new provisions come into effect, it is crucial for businesses, individuals, and other stakeholders to remain abreast of these changes and adapt their financial strategies accordingly to ensure compliance and seize any opportunities that may arise.