Minimum Corporate Income Tax in Türkiye: What Is Deductible and What Is Not

🇹🇷 Minimum Corporate Income Tax in Türkiye: What Is Deductible and What Is Not

Starting in 2025, Türkiye has introduced a new instrument: the domestic minimum corporate tax (Yurt içi asgari kurumlar vergisi).

In our assessment, this is one of the most significant changes to the country's tax landscape in recent years. For foreign companies operating in Türkiye, understanding precisely how it is calculated is critically important—because legacy tax incentives now operate differently.

🎯 Why Was This Tax Introduced in the First Place?

The state's rationale is straightforward:

Over the years, dozens of incentives, exemptions, and deductions have accumulated in Turkish tax legislation. Many of them created scenarios where profitable companies paid minimal or zero corporate income tax—entirely legally, simply by combining available tax relief mechanisms.

Law No. 7524 introduced a mechanism that puts a ceiling on this practice:

• Even with the maximum utilization of tax incentives, a company is required to pay a minimum amount of tax
• It applies to earnings generated from 2025 onward
• The objective is to broaden the tax base and ensure tax fairness

This is the Turkish counterpart to the global minimum corporate tax (GloBE / Pillar Two), adapted with domestic specificities.

✅ What CAN Be Deducted When Calculating Minimum Tax

Three key categories of deductions retain their effect:

1. Venture capital fund (Girişim sermayesi fonu)
   Amounts set aside as a venture capital fund pursuant to Article 325/A of the Tax Procedure Law.
2. Protected workplaces (Korumalı işyeri)
   Deductions under Law No. 5378 on the Rights of Persons with Disabilities—for companies establishing protected workplaces.
3. R&D and design deductions
   Deductions under Law No. 5746—for research, development, and design activities.

The following are also excluded from the minimum tax base:

• Exchange rate differences between TFRS (Turkish Financial Reporting Standards) and the Turkish Tax Procedure Law
• Income derived from transactions governed by Double Taxation Avoidance Agreements (DTAAs)
• Income exempted under bilateral or multilateral international agreements

❌ What CANNOT Be Deducted (Incentives That Expire for Minimum Tax Purposes)

A long list of incentives no longer provide any tax shield when calculating the minimum tax:

• Sponsorship expenditures
• Donations and charitable contributions
• Contributions toward the construction of educational facilities, healthcare institutions, and student dormitories
• Cultural and tourism donations
• Contributions to campaigns initiated by the President
• Cash donations to the Turkish Red Crescent (Kızılay) and the Green Crescent Society (Yeşilay)
• Incentives for the export of software, engineering, educational, and healthcare services
• Interest deduction for cash capital increases
• Incentives under the Istanbul Financial Center (İFM) regime
• Investment allowances (Article 19, Temporary Articles 61 and 69 of the Corporate Income Tax Law)
• Deductions for technology-based venture capital (teknogirişim)
• Deductions for technology development zone capital (Teknokent)
• Carried-forward tax losses from prior years

⚠️ This is the key change. Even if a company utilizes all these incentives in full compliance with the law, the minimum tax will still have to be paid.

💡 What This Means for Foreign Businesses

Three essential practical takeaways:

1. Legacy tax planning strategies must be revisited
   If your Turkish entity relied on a combination of tax incentives (in particular service export exemptions, İFM incentives, and investment allowances), your effective tax rate will now be higher than before. Financial models require updating.
2. R&D and technoparks preserve maximum value
   While the Teknokent regime loses one specific deduction (related to technopark capital contributions), its core incentives remain intact:
   
   • ✅ Corporate income tax exemption on software development and R&D activities
   • ✅ R&D deductions allowable within the minimum tax base
   Consequently, technoparks remain the most effective vehicle for IT businesses, even under this new framework.
3. DTAAs remain fully effective
   Double Taxation Avoidance Agreements continue to protect foreign capital in full. Income for which the right to tax has been allocated to another contracting state is excluded from the minimum tax base.
   This underscores the critical importance of properly structuring international contracts and selecting the appropriate corporate jurisdiction.