80% TAX EXEMPTION ON SERVICE EXPORTS IN TURKEY

80% TAX EXEMPTION ON SERVICE EXPORTS IN TURKEY

50% of the service revenues given by companies in Turkey to individuals and organizations residing outside Turkey and benefited from outside of Turkey were exempted from tax. With the amendment, this exception rate has been increased from 50% to 80%.

In other words, 80% of the revenues obtained in case of exporting the services specified in the law are exempted from income/corporate tax.

The text of the amendment in the Official Gazette No. 32413 is as follows; "Article 59 of Law No. 7491. With the article, the discount rate of 50 percent applied to earnings from services provided outside Turkey within the scope of Article 10/1 (ğ) of the Corporate Tax Law has been increased to 80 percent depending on the conditions."

WHICH TYPES OF SERVICES WILL 80% TAX EXEMPTION BE VALID IN TURKEY

The services for which 80% tax exemption will apply in service exports are stated in the law as follows;

-        Services that are used exclusively outside of Turkey, 

-        Architectural services

-        Engineering services

-        Design

-        Software Informatics services

-        Medical reporting

-        Accounting record keeping

-        Call Center

-        Product Testing

-        Certification

-        Data storage, data processing, and data analysis

-        It is called the services provided by the enterprises operating in the specified vocational training areas.

WHAT ARE THE CONDITIONS FOR BENEFITING FROM THE 80% TAX EXEMPTION IN SERVICE EXPORTS IN TURKEY?

There are some conditions determined by law in order to benefit from tax exemption on service export revenues. Companies exporting services must meet these conditions in order to benefit from the exemption. The conditions specified in the law are as follows;

1- CONDITION OF BENEFITING OUTSIDE TURKEY; The exported service, that is, the services provided, must be used outside of Turkey. The services should not be related to the activities of companies operating outside of Turkey in Turkey.

2- CONDITION OF TRANSFER OF THE SERVICE FEE TO TURKEY; The service income must be transferred to accounts in Turkey until the corporate tax return of the period in which it was obtained is filed. Corporate tax returns are filed in April of the following year. Accordingly, the price for a service export made in the period of September 2024 must be transferred to the accounts of the service provider company in Turkey by April 2025 at the latest.

3-DOCUMENT REQUIREMENT; In order to benefit from the service export tax deduction, the service invoice must be issued in the name of the customer outside Turkey during the relevant period.

 FREQUENTLY ASKED QUESTIONS ABOUT 80% TAX EXEMPTION IN SERVICE EXPORTS

1- Is there a tax exemption for software services provided abroad?

 Yes. Software service revenues given abroad are considered as service exports. If the necessary conditions are met, 80% of the income obtained is exempt from corporate/income tax.

2- Is there VAT on the services provided to individuals and companies abroad?

 Services provided to individuals and companies outside of Turkey are exempt from VAT, provided that the services are used outside of Turkey. So there is no VAT.

3- Is there VAT on the car rental service rented to a company registered abroad for a trip to Turkey?

 There is VAT on the services used in Turkey. Since the service is used in Turkey, the invoice must be issued with VAT.

4- Is there a tax exemption for architectural services provided abroad?

         Architectural services provided to a customer registered abroad and used outside of Turkey are considered as service exports. 80% of the income generated is exempt from tax.

In architectural services, the important criterion for evaluating the transaction as an export of services and benefiting from the discount is where the architectural services are used. For example, architectural services provided for the real estate of a customer registered abroad within the borders of Turkey are not considered as service exports. Because the services provided are used in Turkey.

5- Are there any tax advantages in services such as software, informatics, web design, data analysis, architecture and engineering provided outside of Turkey with the remote work model?

In order to provide services to the remote working model outside of Turkey, the best alternative is to establish a company within the scope of your agreement with the company to be served and to invoice your service revenues within the scope of service exports.

This way of working is very advantageous in terms of tax in Turkey. The advantages of such a working model are as follows;

1- All your income and business will be legal. You will not encounter any surprises such as tax obligations, financial penalties and financial sanctions.

2-As a company, you can expand your activities and offer services to different customers.

3- You do not pay VAT for your service export revenues.

4- 80% of your service export accidents are exempt from corporate / income tax. Since the remaining taxable income will be deducted from your company expenses, corporate tax liabilities will be very low-scale.

6- Is the company establishment process easy for the remote working model, how many days can I establish the company?

It receives service from the right address, which is important for the establishment of the company and the subsequent accounting processes. An experienced and dynamic team will quickly establish your company and carry out all accounting processes on your behalf. At this point, getting service from an inadequate address because it is a little cheaper causes you to incur many hidden costs, but it does more harm than good to your business.

You can always contact us for support in this regard. We help with all issues such as turnkey establishment of the company, accounting processes, tax processes, etc.

7- Is the company establishment process easy for the remote working model, how many days can I establish the company?

The incorporation procedures of the company vary from one to four days, depending on the type of company. While sole proprietorships can be established within one day, the establishment procedures of limited liability or joint stock companies are completed in three to four days.

8- Which company will be more advantageous in terms of tax if I establish a company for the remote working model?

When assessing whether a company is tax-advantageous, the most important criterion to consider is the size of the business and the amount of revenue planned to be achieved. When a general evaluation is made, sole proprietorships can be considered advantageous for small-scale companies due to their low establishment costs and lower monthly accounting fees.

As the company's activities grow, as the amount of earnings planned to be obtained increases, limited liability and joint stock companies, which are capital companies, are more advantageous due to the fixed tax rates. In other words, it can be considered that sole proprietorships are more advantageous for small-scale businesses and capital companies for medium and large-scale businesses.

According to the data of 2024, you can consider the jobs that earn less than 100,000 TL in a year as small-scale, the jobs that earn between 100,000 TL and 500,000 TL as medium-scale, and the jobs that earn more than 500,000 TL as large-scale.

According to these distinctions, we recommend that you establish a sole proprietorship for small-scale works in terms of costs, and establish a limited liability company or joint stock company for medium and large-scale businesses. On the other hand, establishing a capital company is much more prestigious from a commercial point of view. For this reason, the most preferred type of company in Turkey is the limited liability company.

9- I want to establish a company for the remote work model. Where should I get it?

When you decide to establish a company, you can visit our office during working hours to start the process and meet.

If you are in a different city or do not have enough time to visit our office, you can submit your request by phone, whatsapp application or email. With a power of attorney to be given by a notary public, we follow and take care of the whole process. We set up your company on a turnkey basis.

10- Is it necessary to bring the income obtained to Turkey in order to benefit from the 80% tax deduction for service exports?

 Yes. The service income obtained must be transferred to Turkey until the date of submission of the annual income tax or corporate tax return for the relevant period. The annual income tax return is filed in March of the following year, and the annual corporate tax return is filed in April of the following year.

11- Is there an 80% tax exemption on earnings from services provided to the free zone?

 Free zones are not considered abroad. Therefore, it is not possible to benefit from the 80% tax exemption for revenues obtained due to services provided to companies operating in free zones.

12- How will the corporate tax with a 5-point discount be applied to the institutions exporting services?

32 of the Corporate Tax Law. As stated in the article, the corporate tax rate is applied to the revenues of exporting companies from exports with a discount of 5 points.

Since 80% of the revenues obtained by companies exporting services are exempt, this amount is primarily deducted from the corporate tax base. After deducting the exemption fee from the tax base, corporate tax with a 5 percentage point reduction can only be applied to the remaining taxable income.

ERSAN ERYILMAZ

Certified Public Accountant

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