Under subparagraph (i) added to Article 10 of the Corporate Income Tax Law by Law No. 7421, 50% of certain income derived by entities operating in the Istanbul Finance Centre may be deducted from declared corporate income.
Under subparagraph (i) added to the first paragraph of Article 10 of the Corporate Income Tax Law by Law No. 7421 of 26 November 2022, entities operating in the Istanbul Finance Centre with a participant certificate obtained under Istanbul Finance Centre Law No. 7412 of 22 June 2022 may deduct from their declared corporate income 50% of the income they derive, exclusively within that activity, from selling abroad goods purchased abroad without bringing them into Türkiye, or from acting as intermediary in purchases and sales of goods taking place abroad.
The main points of the explanations given in the Communiqué on this provision are as follows.
For entities to benefit from the deduction:
- they must operate in the Istanbul Finance Centre with a participant certificate,
- the income must be derived from selling abroad goods purchased abroad without bringing them into Türkiye, or from acting as intermediary in purchases and sales of goods taking place abroad,
- the income must be transferred to Türkiye by the date on which the annual corporate income tax return for the accounting period in which it was derived must be filed,
- the seller and the buyer of the goods subject to the intermediation activity must not be in Türkiye.
In addition:
- The deduction will be applied to the income that companies or branches operating in the Centre with a participant certificate obtained under the Istanbul Finance Centre Law derive from selling abroad goods purchased abroad without bringing them into Türkiye, or from acting as intermediary in purchases and sales of goods taking place abroad; the deduction will not apply to income from those activities carried out outside the Centre, or to income from other activities in the Centre.
- Income derived from selling abroad goods purchased abroad without bringing them into Türkiye, or from acting as intermediary in purchases and sales of goods taking place abroad, must be included in corporate income in the period in which it is derived, and the deduction will not be available for any part of that income not transferred to Türkiye by the end of the period for filing the corporate income tax return. Income not transferred to Türkiye within that period cannot benefit from the deduction even if it is transferred to Türkiye in later years.
- For the purposes of determining the income subject to the deduction and, accordingly, the corporate income tax base, revenue, cost and expense items within and outside the scope of the deduction must be recorded in separate books, revenue, cost and expense items relating to activities within the scope of the deduction must not be associated with other activities, and the records must be kept in a way that ensures that separation.
- Other income of companies benefiting from the deduction that is unrelated to the activities subject to it (such as interest income arising from the use of cash held, exchange differences arising from the valuation of foreign currency and income from the disposal of assets), and their extraordinary income, cannot be treated as within the scope of the deduction.