taxation

Question 1

History of Taxation.

Answer 1

!! Magna Carta = Excessive taxes
Early modern = Petition of parliament to king of England
Recognition of 4 principles

Late Modern = Boston Tea Party, Path to American Revolution
French revolution

Contemporary= Democracy
Elected party can impose tax

Question 2

Who pay corporate tax

Answer 2

Foundation and associations(commercial enterprises)
Cooperatives
Corporations
Joint ventures (if desired)
Public enterprises

Question 3

which are paid

Answer 3

Salaries and Wages
!! Business profits !!
Immovable property
Capital investments
Agricultural profits

Question 4

When can business profits taxed?

Answer 4

-Profit making aim
-Capital
-Continuity
-Independence
-Organization

Question 5

Which type of business income can be taxed in Turkey?

Answer 5

Full liability : Registered head office in TR
Worl-wide income

Limited Liability: Registered head office NOT in TR
ONLY the income obtained in TR

Question 6

Associated enterprises

Answer 6

Shareholders of the corporation
§ Individuals or legal entities related to the corporation or its shareholders
§ Individuals or legal entities which control the corporation directly or indirectly in terms of management, supervision or capital
§ Individuals or legal entities which are controlled by the corporation directly or indirectly in terms of management, supervision or capital
§ Note that: there must be a minimum 10 % shareholding ratio in the existence of a direct or indirect shareholder relationship. (In cases where there is at least 10% voting or dividend rights directly or indirectly without any shareholding relation, parties shall still be treated as related parties.)

Question 7

Ex: B pays A 70TL
But Y pays X 120 TL
Tax base 100TL

Answer 7

• Dividend received by Company A: participation exemption (will not be taxed)
• If the dividend receiver (shareholder) is a natural person: NO exemption.
• Denial of the expenditures (From the perspective of Company B-Seller)
• Profits deemed to be distributed disguisedly through transfer pricing shall be considered as add-back (K.K.E.G.) and shall be added to the tax base accordingly.
  $50 (120-70): Disguised profit distribution
  § Should be added to tax base
  § Corporate tax should be paid (20% for 2023)
  Add back: 50TL
  New tax base: 150TL
• Dividend recieved by A will not be taxed (participation exemption)
• If the dividend receiver (shareholder) is a natural person: partial exemption. 10 % Withholding tax (paid by Co. B at the distribution)

Question 8

Arm’s Length

Answer 8

: The price charged for the purchase or sale of goods or services between related parties should be in line with the prices as if the transactions are occurred between unassociated parties.
§ Condition: If NOT in line with the arm’s length principle
§ Result: Deemed to be distributed disguisedly

) Profits deemed to be distributed disguisedly through transfer pricing shall be considered as add-back (K.K.E.G.) and shall be added to the tax base accordingly.

Question 9

Economic double taxation

Answer 9

If more than one taxpayer (person, company etc.) is taxed on the same income.

Question 9

International Tax Law

Answer 9

No centralized system of the rules or enforcement mechanisms:
§ Countries’ unilateral tax measures
§ International tax treaties
§ Guidelines of international organizations

§ Facilitate cross-border transactions:
§ Prevention of double taxation
§ Prevention of double NON-taxation
§ Eliminate the base erosion and profit shifting
§ Eliminate the harmful tax competition

Question 10

Juridical double taxation

Answer 10

If the same taxpayer (person, company etc.) is taxed twice in more than one jurisdiction.

Question 11

OECD Model:

Answer 11

Taxed in permenant establishment: Fixed place of business:
§ Place of management
§ A branch
§ An office
§ A factory
§ A mine

Not permenant examples:
§ Storage unit
§ Display purposes
§ Delivery of goods
§ Collecting information

Question 11

Prevention of double taxation

Answer 11

The OECD Model
The UN Model

Question 12

Profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on business in other Contracting State through a permanent establishment situated therein. If the enterprise carries on business as aforesaid, the profits that are attributable to the permanent establishment may be taxed in that other State.

Question 13

Ex: Company A incorpprates in country R but it has business profits from county S which country does have the taxing right?

Answer 13

R

Question 14

Ex: Company A incorporates in country R.Company A has an office in country S.Company A has business profits of $100 in country S and $50 in country R.$50 of the total profits are attributable to the office in country S.Which country does have the taxing rights?

Answer 14

R taxes 100, S taxes 50