Under Law No. 7524, for income earned from 1 January 2025, funds and trusts investing in real estate may benefit from the corporate income tax exemption only if they distribute at least 50% of the income earned from their properties.
Under Law No. 7524, applicable to income earned from 1 January 2025, the ability of funds and trusts investing in immovable property to benefit from the corporate income tax exemption was made conditional on their distributing to their shareholders at least 50% of the income earned from the properties they own, by the end of the second month following the month in which the corporate income tax return for the relevant accounting period must be filed.
General Communiqué No. 25 provides detailed explanations on this application.
- Calculation of the property income forming the basis of the profit distribution
Under the Communiqué, in calculating the property income forming the basis of the profit distribution, the income found by deducting from the revenue derived from the properties the expense and cost items incurred in respect of that activity will be taken into account.
Where the property activity, or all activities taken together, result in a loss, the profit distribution condition will not be sought for the purposes of the exemption.
On the other hand, where the property activities are profitable but the other activities result in a loss and total income is lower than the income derived from the properties, distributing half of the total income will be regarded as sufficient for the purposes of the exemption.
Example:
- income of TRY 1,000,000 from property activities,
- a loss of TRY 600,000 from other activities.
In this case total income is TRY 400,000, and the Communiqué explains that distributing half of that amount, TRY 200,000, will be sufficient for the purposes of the exemption.
1.2. Allocation of joint general expenses and depreciation
Under the Communiqué, where property activities are carried out together with activities outside that scope, joint general expenses must be allocated on the basis of the ratio of the current year costs of the respective activities to one another.
The example given in the Communiqué explains that the share of joint general expenses attributable to property activities is to be calculated by reference to the ratio of the costs of property activities to total costs.
It is further stated that depreciation on installations, machinery and transport vehicles used jointly in property activities and other activities must be allocated according to the number of days of use, and that where the period of use cannot be determined, that depreciation is to be allocated together with the joint general expenses.
1.3. Net distributable profit and the profit distribution condition
The Communiqué also explains that:
- the profit distribution condition will not be sought for funds and trusts that, by the nature of their field of activity, cannot include immovable property in their portfolio or assets and cannot carry out construction projects,
- advance dividends will be taken into account in calculating the profit distribution,
- the addition of profit to capital will not be regarded as a profit distribution.
In determining the income that must be distributed, the statutory reserves that must be set aside under the Turkish Commercial Code may be taken into account, and 50% of the income remaining after deducting the statutory reserve attributable to property income will be subject to distribution.
In determining the amount forming the basis of the profit distribution, the net distributable profit determined under capital markets legislation will be taken as the basis; however, that amount may not exceed the profit determined according to the records kept under the Tax Procedure Law.
The example given in the Communiqué explains that where the net distributable profit determined under capital markets legislation is higher than the profit determined under the Tax Procedure Law, the amount determined under the Tax Procedure Law will be taken as the basis.