The new ‘omnibus’ law drafted by the Ministry of Finance, was forwarded to the Turkish Great National Assembly. If the bill is approved without any amendment, what will change in our life in 2018? Here is the answer:

CORPORATE TAX TO REMAIN AT 22 PER CENT FOR THREE YEARS

¬ For all corporations, the Corporate Tax is increased from 20 per cent to 22 per cent for the years 2018, 2019 and 2020. Minister of Finance Ağbal stated that the arrangement is temporary and not permanent; “we will give up this tax increase as soon as we have a financial space” he said. With the amendment planned to be added as a temporary clause to the law, it’s anticipated to authorize the Minister Council to make discount.

1 PER CENT TAX TO THE UNDISTRIBUTED PROFIT

¬ Corporate tax cut is not applied currently to the profit share that the companies don’t distribute to their partners. The arrangement foresees 1 per cent income tax deduction form the undistributed profits, except of the profit shares added to the capital.

THE EXEMPTION RATE WILL BE REDUCED TO 50 PER CENT

¬ In case the companies sell off the real estate that they hold in their assets for more than 2 years, 75 per cent of the earning is exempt from the corporate tax. With the arrangement, the exemption rate is reduced to 50 per cent.

LUMP SUM EXPENSE RATE FOR RENT INCOME IS 15 PER CENT

¬ When declaring their income, those getting rent income can benefit from lump sum expense rate discount up to 25 per cent of their earning to offset their spendings within the year. The new amendment cuts this rate to 15 per cent. If the real spending of those getting rent income is higher, they are allowed to continue to make discounts in any case.

MOTOR VEHICLES TAX RISES BY 25 PER CENT

¬ The increase rate for the Motor Vehicles Tax is 25 per cent for the existing vehicles and with an engine cylinder volume over 1300 cm3 and it’s 15 per cent for the engine cylinder volume lower than 1300 cm3.

¬ For the new cars to be bought as of 1st January 2018, the motor vehicle tax rate will rise to 50 per cent.

¬ According to the new omnibus law, the taxes will be respectively: 743 liras for 1-3 year old cars and 1300 cc, 1293.75 liras for 1300 cc-1600 cc , 2283.75 liras for 1601-1800 cc and 3 thousand 597 liras for 1801-2000 cc.

NEW TAX TO THE LOTTERY

¬ Concerning the taxation of earnings from lotteries and draws, the inheritance tax and transfer tax rate is increased to 20 per cent.

 25 PER CENT SPECIAL CONSUMPTION TAX TO THE BEVERAGES AND ENERGY DRINKS

¬ The special consumption tax of 25 per cent applied on cola will also be collected for the beverages and energy drinks as of the new year. This arrangement is foreseen to generate a revenue of 500 million liras for the budget.

CIGARETTE PAPER TOO IS WITHIN THE SCOPE OF SPECIAL CONSUMPTION TAX

¬ The cigarette paper is included within the scope of the special consumption tax and a special consumption tax of 2,12 liras will be applied for 20 papers.

THE MINIMUM WAGE WILL NOT BE LOWER THAN 1,404 LIRAS

¬ The bill also clarifies the claims that the minimum wage will decrease because of the tax share increase, something debated in the bill since long. The bill states that “ a legal arrangement will be made so that the basic income doesn’t fall below the level of 1.404 liras because of the tax shares increase in 2017” and adds: “The borrowing authorization, given to the Undersecretary of Treasury with the Central Administration Budget Law for the year 2017, will be increased by 37 billion liras within the framework of Budget-Treasury cash balance revised by the New Medium Term Programme.”

“CEILING” TO THE REAL ESTATE TAX

¬ In 2017, all municipalities revised the values of their lands subject to the real estate tax through the commissions. These values set will be valid for the real estate taxes to be paid by the citizens next year. In order to avoid the excessive, astronomic values, a legal arrangement will be made for the year 2018 to limit the value increase with 50 per cent of the land value set for the year 2017.

A COMMON RATE OF 7.5 PER CENT IN TELECOMMUNICATION

¬ Radical changes are on the agenda about the obligations of the telecommunication for the public sector. The special communication taxes being respectively 25 per cent for the mobile phone communications, 15 per cent for the fixed line phone and 5 per cent for data and internet services, is readjusted at a common rate of 7,5 per cent covering all.

¬ Currently the Telecommunication Operators pay wireless fee to the Information and Communication Technologies Authority depending on the number of TrX devices they establish. The new amendment foresees to collect a wireless fee of 5 per cent from the monthly net income of the operators instead of charging fee per device.

¬ For the phone calls made abroad and data services, VAT and the Special Communication Tax will not be collected from the payments made to the operator in the foreign country.

¬ The authorization to follow and to collect the Treasury share collected from the phone operators is removed from the Undersecretary of Treasury and given to the Information Technologies and Communication Authority. The three-fold fine calculated from the Treasury share paid not fully will be reduced to one fold.

¬ Exemption is offered for the wireless fee at Telekom subscription asked for providing inter machines communication.

EXEMPTIONS ARE REMOVED AT THE CUSTOMS DUTY

The exemptions are removed for the goods exempt from the customs duty and instead, the tax limits and rates are set to zero. Within the framework of the obligations of the foreign trade policy, the Council of Ministers is allowed to apply taxes for these goods too.

‘Tax’ obligation to e-commerce from abroad

The draft omnibus law sent by the Ministry of Finance to the Turkish Great National Assembly includes also arrangements for struggle against black economy and to improve tax collection:

¬The scope of public corporations dealing with the applications of tax clearance is widened.

¬In order to strengthen tax security in e-commerce, those engaged in commercial operations on the web will be under obligation to report to the Revenue Administration.

¬Those offering service from abroad to the end users in Turkey are requested to be tax payers in Turkey in terms of VAT.

 ¬In order to reinforce the struggle of the Revenue Administration against the black economy and their ability of tax collection, they are offered the opportunity of collecting data from various sources and making risk analysis.

¬Concerning the tax returns by the Revenue Administration and the Social Security to the tax payers, if money is owed to the other administration, it will be deducted from the tax return to be made.

According to the arrangements:

¬The authorization is arranged to allow to do each kind of transaction between the Tax offices and the tax payer in online medium. The tax payers will be allowed to do all transactions in the electronic medium without going to the tax offices. Thus, the Ministry of Finance launches an application which can be considered as the pioneer of a new era in e-state implementations.

¬In case the bank cards issued in foreign countries are used for the tax payments, the banks allowed to charge commissions on these payments.

¬The real persons will be allowed to use MERNIS (The Central Census Bureau Systems) address as the domicile address for notification.

¬The payment order notifications sent to the tax payers who don’t pay their tax debts in time, extend the 7-day period allowed for payment or declaration of property to 15 days. In case of provisional seizure or provisional legal arrangements, the period allowed for filing counter claim is extended from 7 days to 15 days.

The growth fixed at 5.5 Per cent

The Medium Term Programme 2018-2020 foresees 5.5 per cent growth during three years. Per capita income will apparently rise to 13 thousand dollars in 2020 in the new Medium Term Programme which “will upgrade Turkey” according to the Deputy Prime Minister Mehmet Şimşek. This figure is above the high income limit set by the World Bank. As for unemployment, the Medium Term Programme is more cautious. The one digit unemployment rate will be possible after 2019.