Law No. 7194 on Digital Service Tax and Amending Some Laws and Decree-Law No. 375 introduced many new taxes.
Dear Fortune readers,
I would like to hereby share with you my assessments regarding the recent regulations introduced by the Law No. 7194. In an attempt to increase budget revenues, the new Law creates 3 new taxes. These are the Digital Service Tax, Accommodation Tax and Valuable Housing Tax. The Digital Service Tax is about taxing the digital advertising revenues of Internet companies. The Accommodation Tax is a tax payable by the service provider regarding services delivered in relation to accommodation in hotels and similar places. It is inevitable that these two recent taxes will have indirect repercussions on consumers as they will increase service costs. The Valuable Housing Tax, on the other hand, is a tax that will be paid for houses with a value of over five million Turkish Liras. Valuable housing tax payers will also continue to pay Real Estate Tax. Similarly, those having dividends, rental income, income from securities and appreciation income over a total of TL 500,000 starting from 2019 will be paying 40% income tax for their income above TL 500,000 instead of the previous 35%. Moreover, starting from 2020, those earning a gross wage income of more than TL 500,000 from multiple employers will be paying an income tax of 40% instead of 35% for their wage income above the aforementioned amount. In addition, starting from 2020, if the gross amount of wages which are earned from a single employer no matter what the amount is and are not subject to compulsory declaration exceeds TL 500,000, they will have to be declared via an annual income tax return.
Another important regulation is the restriction of expenses pertaining to passenger car expenses imposed on those who lease or operate in various ways passenger cars as part of or the entirety of their operations on the condition that such restriction does not apply to passenger cars used for the aforementioned purposes. Accordingly, starting from January 1, 2020, the portion that exceeds TL 5,500 on a monthly basis in the lease fee to be paid for each passenger car in terms of leasing passenger cars will not be considered as an expense. For purchases, a maximum amount of TL 115,000 of the total of the excise duty (aka Special Consumption Tax - ÖTV) and VAT paid for passenger cars may be considered as expenses. Similarly, it will be possible to depreciate only a maximum portion of TL 135,000 of the fee paid to acquire an automobile excluding ÖTV and VAT or a maximum portion of TL 250,000 in cases when ÖTV and VAT are not written off as an expense but added to the prime cost of the passenger car or when the passenger car acquired is a second hand car. A 30% portion of certain expenses of both rental and purchased passenger cars such as fuel, maintenance, repair, spare parts and parking will not be considered as expenses. For passenger cars purchased before December 7, 2019, it is not clear how depreciation will apply in 2020 since the legal articles on passenger cars entered into force on December 7, 2019 to be applied to the earnings of 2020.
In addition, it will not be possible to deduct VAT, which corresponds to the portion of expenses for passenger cars that are not considered eligible for deduction.
It is again the responsibility of accountants to calculate 30% nondeductible expense on each document, separately calculate the VAT eligible for deduction and the VAT ineligible for deduction and organize their records accordingly.