Türkiye introduces 10% minimum corporate tax starting 2025

Türkiye is set to introduce a 10% minimum corporate tax starting in 2025 as part of broader efforts to reduce the budget deficit.

According to a decree published by the Treasury and Finance Ministry in the Official Gazette, the new corporate tax rules aim to ensure that corporate earnings are taxed at a minimum rate of 10% before deductions and exemptions.

Move toward fiscal consolidation

This reform aligns with Türkiye’s ongoing fiscal consolidation strategy under Treasury and Finance Minister Mehmet Simsek, who has been overseeing the country’s finances since taking office after last year’s election.

Simsek has stressed the importance of simplifying tax laws and limiting tax deductions and exemptions as part of a policy shift to stabilize the economy.

Revised budget deficit forecast

The Turkish government revised its budget deficit forecast for 2024, lowering it to 3.1% of gross domestic product (GDP) from the previous forecast of 3.4%.

For 2023, the deficit is expected to be 4.9%. Investors view these fiscal measures as critical to supporting monetary policy in Türkiye’s ongoing battle against inflation.

Key changes in corporate tax code

The newly introduced changes in Türkiye’s corporate tax code include the following provisions:

• Minimum corporate tax: Corporate earnings will be taxed at a minimum rate of 10% before any deductions or exemptions.
• Build-operate-transfer projects: Earnings from projects developed under build-operate-transfer and public-private-partnership models will face a 30% tax rate.
• Funds’ corporate tax exemption: Funds’ exemption from corporate tax will now depend on distributing at least 50% of their real estate revenue as dividends.
• Real estate sales exemption removed: The tax exemption on corporate real estate sales has been abolished.

These changes are seen as a significant step toward addressing Türkiye’s fiscal challenges.

Focus on reducing the deficit

Finance Minister Mehmet Simsek’s reforms are expected to help Türkiye narrow its budget gap and improve investor confidence. “We are focusing on simplifying tax laws and narrowing the scope of exemptions to strengthen the fiscal framework,” Simsek said in a previous statement.