Regulations published in the Official Gazette dated 21 July 2022 made two important amendments to tax legislation. The first of the amendments is the increase in the monthly delay interest rate to 2.5% per month and the deferral interest rate to 24% per year. Another amendment is related to the income tax withholding incentive provided to employees in Technology Development Zones (TDZ), R&D and design centers. Within the scope of the income tax withholding incentive, the rate determined for the time spent outside the said zones and centers has been increased from 50% to 75% until 31 December 2023.

New developments

Presidential Decree No. 5801, published in Official Gazette No. 31899 dated 21 July 2022, increased the monthly delay interest rate set out in the Article 51/1 of Law No. 6183 on the Collection Procedure of Public Receivables from 1.6% to 2.5% per month. In addition, the annual default interest rate, which was 15%, has been increased to 24% through the General Communiqué on Collection of Revenues (Serial No: 6) (“Collection General Communiqué“).

On the other hand, Presidential Decree No. 5806 increased the rate determined, regarding the income tax withholding incentive, for the period that can be spent outside the TDZ, R&D or design centers as per the number of personnel or the total working hours subject to the incentive from 50% to 75%. The increased rate will be applicable until 31 December 2023.

What do the amendments mean?

i. The rates of monthly delay interest and annual deferred interest have been increased.

Presidential Decree No. 5801 increased the monthly delay interest from 1.6% to 2.5% per month to be applied separately for each month.

In addition, the rate of 2.5% will also be applicable to late payment interest and delay interest for voluntary declaration, due to the reference to the monthly delay interest in the laws regulating the aforementioned interests and rates.

On the other hand, through the amendments made by the Collection General Communiqué, the annual deferred interest rate, which was 15%, was increased to 24% per year. The change is to be implemented as of the publication date of the said communiqué, 21 July 2022.

ii. Remote working period has been increased for technology development zones and R&D/design centers.

Presidential Decree No. 5806 increased the rate determined, regarding the income withholding tax incentive, for the period that can be spent outside the TDZ and R&D or design centers as per the number of personnel or the total working hours subject to the incentive from 50% to 75%. The increased rate will be applicable until 31 December 2023.

Accordingly, to benefit from the exemption, incentive and promotions in the related legislation, (i) 25% of the R&D and support personnel must work at the related zones and centers, or (ii) the R&D and support personnel must spend 25% of the total monthly working hours in the zones and centers.

Conclusion

New regulations published in the Official Gazette dated 21 July 2022 made important changes in the tax law. Specifically, the regulation on remote working hours as to the TDZ, R&D and design centers provided significant support for the entities that have adopted the remote working method. On the other hand, taxpayers must take the increased default interest and deferred interest rates into consideration in related calculations.