Important Information Regarding Technopark Earnings Exemption

The Tax Administration has adopted the view that certain invoices issued within the scope of the Technopark earnings exemption (incentivized income) cannot be evaluated within the scope of the exemption.

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Accordingly;

- In cases where the project output is not custom-made for the client and the same software or service is invoiced to multiple clients, the derived earnings are evaluated as “mass production activity”.

- In this case, a portion of the project revenues must be subjected to taxation and the 25% corporate income tax must be paid.

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According to the Tax Administration's approach;

- It is expected that revenues be segregated on a per-invoice basis,

- Elements such as R&D, logistics, marketing, and management within the revenue are calculated separately.

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Although there is no universally accepted fixed rate, taxable rates ranging between 10% and 50% are used in practice. For certain projects, the Administration has stated that the entirety (100%) of the earnings should remain outside the scope of the incentive.

The project-owning company must determine this rate and be able to submit the working papers regarding the performed calculations to the Administration upon request.

It is important to act in compliance with transfer pricing provisions when determining the rate.

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Neura's assessment:

Our view is that the invoices issued within the scope of Technopark projects are in the nature of “leasing of intangible rights” and therefore no taxable share needs to be separated.

However, as a result of the recent artificial intelligence-supported audits by the Tax Administration (KURGAN), “invitation to explanation” letters are being sent to companies applying the Technopark earnings exemption, and it is requested that tax returns be amended due to the evaluation of incentivized invoices under the scope of “mass production”.

In this context, in order to avoid any risks, we recommend that, in line with the current approach of the Tax Administration, a portion of the revenue invoices within the scope of the project be excluded from the incentive scope and subjected to taxation.

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