CORPORATE TAX:

Taxable Income:
The corporate tax is levied on the income and earning derived by corporations and corporate bodies. The income elements by Corporate Tax Law are the same as those covered in the Income Tax Law. In other words, the Corporate Tax Law sets provisions and rules applicable to the income resulted from the activities of corporations and corporate bodies, whereas the income Tax Law deals with the income derived by individuals. Corporations and corporate bodies specified by the Law as taxpayers in respect to the corporate tax are as follows:

- Capital companies and similar foreign companies;
- Cooperatives;
- Public enterprises;
- Enterprises owned by foundations societies and associations;
- Joint ventures.

Tax Liabilities:
According to the Corporate Tax Law, those legal entities covered by the law, which their legal head office situated in Turkey, or the place of effective management in Turkey are taxed on their world-wide income (unlimited liability). By specifying two criteria the law intends to prevent any problem, which may arises in determining tax liability. The term legal head office, as used in the context of the Corporate Tax Law, means the office specified in the written agreements of the mentioned entities. Therefore, it is not difficult to as certain where the legal head office of a company is located. However, the place of effective management, which is defined as the place in which the business activities are concentrated and supervised, is not easy to determine in some cases.
As may be expected, the Law defines the term limited tax liability quite parallel to term unlimited tax liability, as the liability requiring to tax only the income derived in Turkey, provided that both legal head office and the place of effective management are abroad.

Determination of Net Taxable Income:
In essence, the provisions of the income Tax Law concerning the determination of business profit also applies to the procedure required in determining corporate income. Basically, net corporate income is defined as the difference between the net worth of assets owned at the beginning and at the end of the fiscal year. In addition to the expenses mentioned in article 40 of Income Tax Code allowed to be deducted from revenues, the followings may also be deducted regarding to the determination of business profit, by corporations:

- expenses related to the issuance of stocks and shares;
- initial organization and establishment expenses;
- expenses incurred for general board meeting as well as expenses made for mergers dissolutions, and liquidations;
- in case of insurance companies, technical reserves required for the insurance contracts still valid at date of inventory;
- profits shares accrued to active partners of partnerships in commendams limited by shares;
- profit shares accrued to partners by participation banks for participation accounts;
- research and development deductions calculated as %40 of new technology and know-how research expenses realized within business.

In determining net corporate income, the following deductions are not allowed:

- interests paid or accrued on the basis of equity;
- interest, exchange difference and other costs paid or accrued on the basis of disguised capital;
- disguised earning distributed by transfer pricing;
- any kind of reserves;
- the corporate tax, fines, tax penalties and late payment penalties and interest.;
- leased or registered motor vehicles’ depreciation and other expenses not related with business activities;

Corporate Tax Return:
Like income tax, the corporate tax is also assessed on the base declared through tax returns filled annually by taxpayers. Tax returns contain the results of related taxation period. In principle, every taxpayer is required to file only one single tax return, even if he has derived the income through different business places or branches and those places and branches have their own accounting and allocated capital.
The corporate tax return is filled until the 25th day evening of the fourth month of the year following the month in which the fiscal year ends and the assessed taxes are paid until the end of that month. However, if a limited liable taxpayer leaves the country for sure the corporate tax return has to be submitted to the authorized tax office in the 15 days preceding. In such case, taxes are paid in the same period of time as forth for the declaration.
            If the income earned by the foreign companies which are subject to the limited liability in respect to the corporate tax, consists of capital gains and non-recurring income discussed in the preceding sections (except for income earned from sale and transfer of intangible rights like license, know-how, and royalty), then the income is declared to the authorized tax offices those taxpayers (or the persons acting on behalf of them) in the fifteen days after the income has been earned. This procedure is called "special declaration".
            If there is no presence in Turkey, withholding tax will generally be charged on income earned; for example income earned from sale and transfer of intangible rights like license, know-how, and royalty, income from movable and immovable property and income from independent professional services provided in Turkey. However, if there is an avoidance of double taxation treaty, reduced rates of withholding tax may apply.

Tax Rates:

            Corporate income tax is applied at 20 % rate on the corporate earnings.

            Taxpayers (only for income from commercial activities and agriculture in  limited tax liability cases) pay provisional tax at the rate of corporate tax, these payments are deducted from corporate tax of current period.