Communiqué No. 24 sets out how reduced corporate income tax will be applied under the new investment incentive certificates, including the ten-year limit and the four-period rule for income from other activities.
The “Communiqué (No: 24) Amending the Corporate Income Tax General Communiqué (No: 1)”, concerning the reduced corporate income tax to be applied under the new investment incentive certificates, was published in the Official Gazette of 4 September 2025.
Under the amendment made to Article 32/A of the Corporate Income Tax Law by Law No. 7555, published on 24 July 2025:
- the application of reduced corporate income tax has been limited to a maximum of 10 accounting periods, including the first accounting period in which the right of deduction may be used,
- the corporate income tax reduction rate has been set at 60% (giving a reduced corporate income tax rate of 10%),
- it has been clarified that investment contribution amounts not used in a period despite the existence of income cannot be carried forward to subsequent periods,
- the application of reduced corporate income tax to income from other activities has been limited to the first 4 accounting periods,
- the President has been empowered to increase the periods and rates for project-based investments within the scope of Law No. 6745,
- it has been stated that the provisions will apply to investment incentive certificates obtained from the date of publication of the Law, excluding certificates applied for before 16 June 2025 and not rejected.
The Communiqué provides detailed explanations of these provisions.
Some of the key points from the explanations in the Communiqué are summarised below.
Investment incentive certificates to which the changes apply:
The amendments made by Article 18 of Law No. 7555 apply to investment incentive certificates obtained from 24 July 2025 onwards, excluding those applied for before 16 June 2025 and not rejected. The Communiqué provides examples covering various situations.
Start of the ten-year period:
The ten-year limit on reduced corporate income tax begins to run from the first accounting period in which the right of deduction may be used. Example 4 in section “32.2. Reduced corporate income tax” of the Communiqué states that this first period may be treated as the first accounting period in which the investment has commenced and a tax base allowing the deduction to be used has arisen.
Tracking on a certificate basis:
The ten-year limit is applied and monitored separately for each investment incentive certificate.
Investment contribution amounts not used despite the existence of income:
Investment contribution amounts not used in the relevant accounting period despite the existence of income cannot be taken into account in subsequent periods. In other words, contribution amounts that could have been used in the period are not carried forward.
Application to income from other activities:
In addition to income derived from investments covered by the investment incentive certificate, reduced corporate income tax may also be applied to income from other activities, in respect of the portion of the total investment contribution amount determined by Presidential Decree; this option is limited to the first four accounting periods.
Under investment incentive certificates obtained from 24 July 2025 onwards, the reduced rate may be applied to income from other activities from the date on which the investment actually commences, set against the investment contribution amount to be calculated, until the end of the fourth accounting period including the first accounting period in which the right of deduction may be used. This is subject to the conditions that the proportion of the total investment contribution amount determined by Presidential Decree is not exceeded and that the investment contribution amount earned is not exceeded.
The Communiqué expressly defines two limits:
- The first limit is that the investment contribution amount available for income from other activities is found by multiplying the product of total investment expenditure and the investment contribution rate by the rate determined by Presidential Decree (50%).
LIMIT 1: Investment contribution amount available for income from other activities:
[(Total investment expenditure x Investment contribution rate) x Determined rate]
- The second limit is that the investment contribution amount earned is calculated as the product of the investment expenditure made during the period and the investment contribution rate.
LIMIT 2: Investment contribution amount earned:
Investment expenditure x investment contribution rate
The contribution amount that may be applied is limited to the lower of these two limits.
Determining the four-period term:
As a rule, the four-accounting-period term including the first accounting period in which the right of deduction may be used covers the period from the beginning of the accounting period containing the date on which the investment actually commenced to the end of the fourth accounting period. Example 1 in the section entitled “32.2.5. Application of reduced corporate income tax to income from other activities” states that where no tax base arises in the accounting period of actual commencement, the accounting period in which the tax base first arises may be taken as the start of the term.
Portion not applied to income from other activities in the first four accounting periods:
The portion that cannot be applied to income from other activities in the first four accounting periods may, provided the investment contribution amount earned is not exceeded, be used by applying reduced corporate income tax to income derived from the operation of the investment within ten accounting periods, including the first four.
Scope of income from other activities:
For the purposes of the reduced tax rate, all income other than income derived from the operation of investments covered by the investment incentive certificate is regarded as income from “other activities”. The principle is that reduced tax is applied to income derived from investments covered by the investment incentive certificate by reference to the tax reduction rate stated in the certificate; income derived from those investments is not treated as income from other activities.
Character of income after completed investments:
Where the investments covered by the investment incentive certificate are completed and the investment contribution amounts are fully used by applying the reduced tax rate, or where the ten-year period expires, income derived from that investment after that date may be treated as income from other activities for the purposes of the reduced tax rate.
Multiple certificates and order of priority:
Where a taxpayer holds more than one investment incentive certificate and income from other activities is insufficient up to the end of the first four accounting periods, the taxpayer may freely determine which certificate takes priority. The reduced rate may be applied to income from other activities within the tax reduction rate stated in the chosen certificate and the limits set out in the legislation.
Time limit on transfers:
For certificates obtained from 24 July 2025 onwards, a total ten-year limit applies jointly to the transferor and the transferee on the transfer of the investment; reduced corporate income tax may be applied until the investment contribution amount earned is reached.
Prohibition on use by way of remission (after ten years):
For certificates obtained from 24 July 2025 onwards, the application of reduced corporate income tax is limited to ten years. Consequently, after the accounting period in which the ten-year term expires, it is not possible to use the investment contribution amount by way of remission against other tax debts.