Minimum Capital Amount, Omnibus Law, Mobile Phone Discount for Youth, and Current Developments

- Minimum capital amounts for companies have increased 5-fold. The minimum capital amounts for companies to be established after January 1, 2024 are:

* Joint Stock Company (A.Ş.) … 250,000 TRY (Mandatory employment of an in-house lawyer threshold is 1,250,000 TRY)

* Limited Liability Company (Ltd. Şti.) … 50,000 TRY

Although there is no explicit obligation specified for active companies whose capital is below the aforementioned amounts to increase their capital to these levels, we expect new announcements in the upcoming periods.

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- Omnibus law bill, there are many regulations, the ones I consider important:

* The earnings exemption obtained from certain services such as software, engineering, and medical reporting provided to clients abroad is being increased from 50% to 80%. The sole condition is that the revenue must be brought to Turkey by the tax return filing period

* Half of the dividend income obtained by real and legal persons from companies abroad in which they hold at least a 50% participation is exempt. The sole condition is that the income must be brought to Turkey by the tax return filing period

* The scope of exemption is being expanded for revenues commonly referred to as YouTube earnings. Earnings derived from content sharing other than social networks by publishing videos on the internet such as education, cooking recipes, and product promotions are being included in the scope of the exemption

* The 0.5% lump-sum expense deduction application applied in exports is being abolished

* A 5-point corporate tax reduction for earnings derived from manufacturing activities

* The payment date for VAT-2 tax returns is being brought forward (declaration on the 19th, payment on the 21st day). The paid VAT-2 amounts can be deducted from the VAT-1 tax return, while unpaid amounts cannot be deducted

* Interest withholding on foreign currency deposits can be increased up to 40%

* The earnings exemption regarding FX-protected accounts (KKM) will be extended until June 30, 2024

* The Banking and Insurance Transactions Tax (BSMV) exemption on housing loans will apply only to the acquisition of the first residence

* The seizure record for public receivables can be drawn up electronically

* Fees applied at ports are being increased

* In sectors where corporate tax payable will decrease due to inflation accounting (banks, insurance, electronic money institutions, authorized foreign exchange businesses, etc.), inflation adjustment differences will not be taken into account in tax calculations

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Mobile phone and computer support for youth

* Being a university student (must be formal education – open education is not included)

* Not having reached the age of 26

* The device sales price must be below 9,500 TRY

* An invoice must be issued to the student in a way that includes the student's Turkish ID number (TCKN), and if the product is a mobile phone, the IMEI number must be shown on the invoice

* The device must not be second-hand, it must be brand new

* The mobile phone line and IBAN must belong to the student

* Applications will be made via the information system of the Ministry of Youth and Sports, and up to a maximum of 5,500 TRY of the paid amount will be refunded

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- Those who wish to rent out their residences for periods shorter than one hundred days (AirBNB) will be required to obtain a "Tourism Operation License"

* Applications must be submitted within 3 months at the latest, and the license must be obtained within 6 months at the latest

* Those without a Tourism Operation License and permit document will not be able to operate. If they operate without these documents, the administrative fine is 1 million TRY

* The plaque to be obtained from the Ministry (nature of the business, number of stars, etc.) will be hung at the entrance. If not hung, the penalty is 100 thousand TRY

* In these places, whether paid or free, day or night, the identity and arrival-departure records of every domestic or foreign person to whom lodging is provided will be kept day-to-day in accordance with the standard format and procedure, and will be kept ready for inspection by general law enforcement agencies at any time

* The application will start after January 1, 2024

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- A draft VAT communiqué has been published regarding the VAT application on cards, passwords, pins, and codes. There are 3 main headings

* VAT Application on Cards, Passwords, and Codes Corresponding to a Specific Product or Service

* VAT Application on Cards, Passwords, and Codes Not Corresponding to a Specific Product or Service

* VAT Application on Fees Received for Mediation Services for Card, Password, and Code Sales and Other Sales

There were many uncertainties regarding this issue, and companies were establishing companies abroad (Cyprus) and making sales to Turkey to avoid taking VAT risks. I view the Revenue Administration taking a hand in this matter positively

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- The right to deduct VAT regarding the application of import surveillance and safeguard measures has been abolished. VAT is paid on both the value of the goods and other expenses in imports. The VAT calculated for the cost of goods can be deducted as before, but the VAT paid for expenses related to surveillance will no longer be deductible and will be taken into account as an expense or cost.

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- Based on the newly published private ruling (specitic ruling); during the transformation from a limited liability company to a joint stock company, the acquisition date of shares will be considered as the date of transformation into a joint stock company, not the establishment date of the Ltd. This decision was of great importance in terms of the tax exemption regarding holding shares for 2 years in joint stock companies.

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The Investment Commitment Advance Loans (YTAK) communiqué has been published

* Total loan limit allocation is 300 billion TRY

* This loan limit will be utilized over a period of 3 years

* Loans are in the interest rate range of 15%-30% with maturities up to 10 years

* Investment amount is at least 1 billion TRY

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- The inflation accounting (all companies will apply it for the year 2023) communiqué draft had been published, and criticisms and requests had been collected. The communiqué draft has been updated, and criticisms and requests are being received once again. No binding legislation regarding the implementation has been published yet. We expect the draft to be published in the Official Gazette and enter into force in the coming days. There are many transactions to be made regarding inflation adjustment at the end of the year, and there is not much time left to catch up. This application will bring an additional burden for certified public accountants and an additional cost for companies

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In Brief

- The interest applied to tax debts was increased from 2.5% per month to 3.5% per month. Many companies were postponing their tax payments because they could not find funds from banks. The cost of unpaid taxes has thus increased further

- The rediscount interest rate was increased to 36.75%. We calculate current account interest (ADAT) for debts of shareholders to the company. The interest rate in the ADAT calculation will be 36.5%

- For electric vehicles whose engine power does not exceed 160 kW, the 10% Special Consumption Tax (SCT) base was increased from 1,250,000 TRY to 1,450,000 TRY

- The revaluation rate has been finalized at 58.46%. Tax increases in 2024 will occur at this rate

- Summary foreign exchange position reporting has been abolished (only for companies with cash and non-cash loan balances of 10 million TRY and above in banks). The obligation continues for those with a loan balance of 100 million TRY and above, or whose previous year's net sales revenue or asset size was 500 million TRY

- Calculation of insolvency (debt distress). The application stating that the entirety of foreign exchange loss in 2020 and 2021 and half of the rent, depreciation, and personnel expenses may not be taken into account has been extended until January 1, 2025

- Regulations regarding electronic notifications have been made. Real and legal persons will be able to obtain an e-notification address via the National Electronic Notification System (UETS) through e-government

- Companies with a gross sales revenue of 3 million TRY for the year 2022 will transition to e-Ledger in 2025

- The certification of statutory books for the year 2024 will be carried out within the month of December

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