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Turkey Introduces 10% Minimum Corporate Tax to Reduce Budget Gap

By Asli Kandemir
Buildings on the skyline of the European side sit on the horizon, framed beneath a Turkish flag flying from the Asian side, in Istanbul, Turkey, on Monday, April 27, 2020. Coming off a brief recession just over a year ago, the urgency is mounting for Turkey to loosen the screws on the economy as its currency and reserves come under pressure more than a month after it introduced social-distancing measures. Photographer: Kerem Uzel/Bloomberg (Kerem Uzel/Bloomberg)

(Bloomberg) -- Turkey will introduce a 10% minimum corporate tax for companies starting from 2025 to help narrow its budget deficit.

The domestic minimum tax rate for corporate earnings won’t be below 10% before deductions and exemptions, according to a decree published on the Official Gazette by the Treasury and Finance Ministry on Saturday.

The changes in the corporate tax code is a step toward fiscal consolidation and is part of a policy shift overseen by Treasury and Finance Minister Mehmet Simsek since he took over the nation’s finances following an election last year. Investors see fiscal measures as key to support monetary policy in the nation’s fight against inflation. 

Since taking over the helm, Simsek emphasized that tax laws will be simplified and the scope of tax deductions and exemptions will be reduced. 

The government revised down its budget deficit forecast for next year to 3.1% of GDP from 3.4% previously. For this year, it expects a deficit of 4.9%.

Here are some highlights from the new tax code:

  • Tax rate for earnings from projects built by build-operate-transfer and public-private-partnership models will be 30%.
  • Funds’ corporate tax exemption will be contingent upon their distribution of at least 50% of their real estate revenues as dividends.
  • Tax exemption on corporates’ real estate sales has been removed.

 

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