What is Corporate Tax & How is it Calculated?

Corporate tax is a type of tax levied on the profits earned by companies with legal personality (such as limited companies and joint-stock companies) during a calendar year. In other words, it is a share deducted by the state from these companies' profits.

Who is Subject to Corporate Tax?

Joint-stock companies, limited companies, capital companies with divided shares, cooperatives, and the economic enterprises of associations and foundations are liable for corporate tax.

However, associations and foundations themselves are not directly subject to corporate tax; their economic enterprises are. For example, the Red Crescent is not subject to corporate tax, but if its enterprises generate income, those enterprises become taxpayers.

Another group of taxpayers includes joint ventures. Joint ventures are partnerships formed by two or more companies, at least one of which is subject to corporate tax, to carry out a specific business.

What are Full & Limited Tax Liabilities?

‍In corporate tax, the concepts of full and limited tax liability are applicable. If a company's legal or business center is in Turkey, it is fully liable and must pay tax on all worldwide profits. Companies with legal or business centers outside Turkey are considered limited taxpayers and only pay taxes on their profits earned in Turkey.

Deductible Expenses in Corporate Tax

‍Certain expenses and other deductions can be claimed in corporate tax. For instance, the company's formation and organization expenses, costs of issuing securities, and other allowable deductions include donations and aid, R&D expenses related to the company's activity, and sponsorship expenses for sports clubs (the rate differs between amateur and professional sports clubs).

Non-Deductible Expenses in Corporate Tax

‍There are also non-deductible expenses. Fines, expenses for luxury vehicles, and interest paid on equity are not deductible. Earnings derived from hidden equity cannot be deducted either. Debts exceeding three times the company's capital are considered hidden equity, and interest paid on these debts is non-deductible.

How is Corporate Tax Calculated?

The corporate tax rate is set at 20% in the law. However, this rate can be changed by presidential decrees. For example, in 2024, the corporate tax rate is applied at 25%.

For a company with a profit (after deducting expenses) of 250,000 TL in 2024, the tax amount payable would be calculated as follows: 250,000 TL x 0.25 = 62,500 TL.

If you have any questions about corporate tax, feel free to contact us for detailed information or call us for accurate guidance.

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