Tax provisions of law number 7456

In detail

Key tax changes are as follows:

1. Corporate income tax rate

• The corporate income tax rate for companies other than those in the financial sector is increased to 25 percent from 20 percent.
• For financial sector companies (such as banks, financial leasing companies, electronic payment and money institutions, asset management companies, capital market institutions, insurance companies, private pension companies) the corporate tax rate rises to 30 percent from 25 percent.
• The new corporate tax rates will apply from 2023 (starting from the advance tax returns to be filed after 1 October 2023).
• On the other hand, companies engaged in export activities will benefit from a reduction of 5 percent points in their corporate tax rate, instead of the previous 1 percent.

2. Sale of immovable property by corporate taxpayers

a. Corporate tax exemption

• Article 5 of the Corporate Tax Law has been amended to eliminate the partial tax exemption available for capital gains from sale of immovable property that have been held for at least 2 years.
• Previously, corporate taxpayers were allowed to exclude 50% of such capital gains from their corporate tax base, subject to certain conditions. With the new law, capital gains from sale of immovables will be fully taxable. A grandfathering regime will apply to immovables which have been acquired before the effective date of the new law (15 July 2023), however the exemption rate for capital gains from such immovables will be 25% (instead of the 50% under the previous law).
• The partial corporate tax exemption provided under the same article for capital gains from sale of shares that have been held for at least 2 years continue to apply.

b.Value added tax exemption

• The VAT exemption related to sale of immovable property held for at least 2 years is also abolished.
• Immovable property acquired before the effective date of the law (15 July 2023) will be grandfathered.

3. Partial spin-offs

• The new law narrows the scope of assets that can be transferred to an existing or to a newly established company under the tax-free spin-off provisions (i.e. without paying taxes).
• Previously, immovable property held by a company could be transferred to an existing or a newly established company under tax-free spin-off provisions (i.e. without paying taxes) after two years holding period. The new law repeals this provision with effect from 1 January 2024.
  

4. Additional motor vehicle tax

• The new law includes payment of a one-time additional motor vehicle tax which will be equal to the motor vehicle tax accrued for the year 2023.

5. Investment funds

• The new law abolishes the corporate income tax exemption for income derived from “other investment funds”, excluding the exemption for income from venture capital investment fund participation shares and venture capital investment partnership shares.