Law No. 7394 ("New Law"), published in the Official Gazette on April 15, 2022, introduces various amendments to the Turkish tax legislation that may significantly impact taxpayers, including resident aliens, Turkish resident MNEs, and non-resident companies doing business in Turkey. In brief, the key amendments are as follows:


  1. Advertisement Expense Disallowance

An expense disallowance is brought for the advertisement expenses incurred by taxpayers for their purchase of advertisement services from non-resident social network providers that have been banned from providing advertisement services in Turkey due to their failure to fulfill the obligation provided under Law No. 5651 (a.k.a. the Internet Law) to appoint and declare legal representatives.

As a side note, as of today, there are no social network providers banned from providing services under the Internet Law, but of course, this does not mean there will not be any in the future.

  1. Tax Hike for Financial Institutions

Starting with tax-year 2022, a higher statutory CIT rate of 25% shall apply (as opposed to the standard rate of 23% for 2022 and 20% for upcoming years) for financial institutions such as banks, financial leasing and factoring companies, electronic payment and currency institutions, asset management companies, insurance and reinsurance companies and pension companies.

  1. Mandatory Capital Injections Explicitly Excluded from the CIT Base by Law

Article 6 of the CIT Code has been amended to exclude capital injections by shareholders that are implemented to replenish negative equity balances as part of the capital threshold rules imposed under Article 376 of the Turkish Commercial Code.

Prior to this amendment, the Turkish Revenue Administration considered these capital injections as corporate income at the level of the recipient company, which had been a controversial matter until the publishing of the New Law, where the lawmakers explicitly stated their intent to leave these payments out of the CIT base calculation.

  1. Tax Exemption for the Income Generated by Certain Investment Funds

The New Law expands the scope of the CIT exemption for corporations that invest in mutual funds. Under the amended provision, income from the redemption of investment fund participation shares and the income from the year-end valuation of these investment fund participation shares shall be exempt from CIT. Prior to the New Law, only the periodic returns (i.e., dividends) from Investment Funds were exempt from CIT.

  1. Certain REITs Shall No Longer Benefit from the CIT Exemption

Under the CIT Code , the income of Real Estate Investment Trusts ("REITs") is exempted from CIT, and the withholding rate is determined under Cabinet Decree No. 2009/14594 as 0%. However, Infrastructure REITs had been excluded from the mentioned exemption under General Communique on CIT No. 13 ("Communique"). There was a pending case on the unconstitutionality of the Communique, and the Council of State was expected to cancel the exclusion based on the principle of legality.

The New Law amends the CIT Code to align the Code with the Communique. Under the New Law, REITs which do not have "portfolio management of real estates" among their area of activities (e.g., Infrastructure REITs) will no longer be able to benefit from the CIT exemption.


  1. Extended Holding Period for the VAT Exemption for Residential and Commercial Building Purchases by Non-residents

The VAT Code provided a VAT exemption for purchasing new residential and commercial buildings by non-resident taxpayers (both individuals and legal persons) subject to certain requirements. Among these requirements, there was a holding requirement of 1 year for this exemption to apply. Accordingly, if the non-resident taxpayer benefited from this exemption while purchasing a building and then disposed of it within one year, the non-resident would be required to pay the VAT that would have been paid but for the exemption plus the late fees/interest accrued to the date of disposal. With the New Law, this holding period is extended from 1-year to 3-years.

  1. VAT Exemption for Manufacturing and Tourism Facility Constructions

The New Law replaces the refund mechanism in place for the input VAT on construction expenditures incurred within the scope of investment incentive certificates regarding the manufacturing industry and includes the tourism industry in this scope as well. Accordingly, these construction expenditures shall be exempt from VAT until 31.12.2025.

Under the New Law, engineering services provided for the development of electric motor-operated vehicles within the scope of investment incentive certificates to those who manufacture vehicles they have developed in Turkey by carrying out their R&D activities exclusively in Turkey shall be exempt from VAT until 31.12.2023.


The New Law introduces certain amendments to the Tax Procedural Code ("TPC"), directly impacting the punishment of offenses listed under Article 359. These are:

  • An increase in the upper limit of imprisonment sentences,
  • Introduction of the concept of "effective remorse" during the investigation and prosecution phases,
  • Introduction of a single amplified penalty (increased by ¼ - ¾ of the original sentence) for successive offenses, in line with Article 43 of the Turkish Penal Code.

Refresher: What are the offenses listed under Article 359 of the TPC?

The offenses listed under Article 359 can be categorized as below (with the updated imprisonment sentences):

Crimes with a sentence of 1 to 5 (formerly 3) years in prison;

Regarding the books and documents that are required by the tax laws to be prepared, maintained, retained, and presented: 

  • committing collusion in accounting practices,
  • setting up accounts under the names of fictitious persons or under the name of persons who are irrelevant to the transaction shown in the records,
  • recording the accounts and transactions that should be recorded in the legal entries wholly or in part to other books, documents, or in other accounting media in a manner that results in the reduction of the tax base,
  • falsifying orconcealing books, records or documents,
  • preparing documents that contain false and misleading information or using such documents

Crimes with a sentence of 3 to 8 (formerly 5) years in prison;

  • destroying the pages of the books, records, or documents which are required to be maintained according to tax laws and replacing the pages of the books with other pages or with no pages at all
  • forging originals and copies of the mentioned documents or using such forged documents,

Crimes with a sentence of 2 to 8 (formerly 5) years in prison;

  • Printing documents that can only be printed by persons who have an agreement with the Ministry of Finance without the required authorization,
  • Knowingly using documents printed by unauthorized persons.
    1. Introduction of the Concept of "Effective Remorse"

The concept of "effective remorse" from the Turkish Penal Code is introduced for the offenses stipulated under Article 359 of the TPC during the investigation and prosecution phase. Accordingly, a deduction of;

  • half of the sentence if the delay and default interest of the levied tax and half of the tax penalties and default interest with regards to the fine is paid during the investigation phase,
  • one-third of the sentence if the delay and default interest of the levied tax, and half of the tax penalties and default interest with regards to the fine is paid during the prosecution phase until the verdict is rendered,

is introduced with the New Law. To benefit from the effective remorse provision, the taxpayer should not initiate litigation or withdraw their cases, if any.

  1. Single Penalty for Successive Offences

Under the New Law, Article 43 of the Turkish Penal Code regarding successive offenses shall apply to the offenses listed under Article 359 of TPL. Accordingly, those who commit the same act more than once, even at different tax years, shall be given a single, amplified penalty (increased by ¼ - ¾ of the original sentence).

What does Article 43 of the Turkish Penal Code entail?

Article 43 of the Turkish Penal Code provides that, where a person commits the same act, more than once, against the same person, at different times in carrying out a single decision to commit a crime, a single penalty shall be given. However, this punishment may be increased by one-fourth to three-fourths of the crime. 

How was the prior treatment of successive crimes?

Priorly, the courts considered successive crimes committed within a single tax period as a single offense, while it considered them as separate offenses when committed in different tax periods.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.