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Amendments to the Tax Exemption for Immovable Properties in terms of Corporate Income Tax

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The Law No. 7456 on the Issuance of Additional Motor Vehicles Tax for the Compensation of Economic Losses Caused by the Earthquakes Occurred on February 6, 2023 and Amendments to Certain Laws and Decree Law No. 375 ("Omnibus Bill") entered into force upon its publication in the Official Gazette dated July 15, 2023 and numbered 32249.

The Scope of the Amendment

The Omnibus Bill has amended the Corporate Tax Law No. 5520 ("Law") to exempt the gains arising from the sale of immovable properties held in assets for at least 2 full years. In this regard, pursuant to Article 5/1-e. of the Law amended by the Omnibus Law, the exemption for 50% of the gains arising from the sale of immovable properties that have been held in assets for at least 2 full years as of July 15, 2023 ("Effective Date") has been abrogated.

However, according to the provisional Article 16 added to the Law, the Corporate Income Tax exemption will continue for the immovables held in the assets of the corporations prior to the Effective Date and the sales gain exemption will be applied as 25% instead of 50%.

Based on the definition of corporations in the Law, the corporations that will be affected by these amendments to the Law are (i) capital companies, (ii) cooperatives, (iii) public economic enterprises, (iv) economic enterprises owned by associations or foundations, and (v) joint ventures.

By Cerensu Cetin Yenigun, Senior Associate, and Mehmet Oguz Koc, Trainee Lawyer, Moral, Kinikoglu, Pamukkale, Kokenek