September 12, 2022

Regulation on R&D deduction in Corporate Tax in Türkiye

Article 3/A of the Law No. 5746 regulates the R&D deduction regarding the R&D and innovation activities carried out by the income and corporate taxpayers within their businesses.

 Accordingly, 100% of the amount of research and development expenditures made by income and corporate taxpayers, exclusively for the search for new technology and information,

Provided that the projects within this scope are evaluated as R&D and innovation projects by the Ministry of Industry and Technology, in terms of companies, in accordance with Article 10 of the Law No. 5520, and for income taxpayers, in accordance with Article 89 of the Law No. 193, will be deducted in the determination of earnings.

As of August 9, 2016, the R&D discount application will be utilized by taking into account the Law No. 5746 and the relevant regulations in the discount application regarding research and development projects for the search for new technology and information, which are the subject of applications made within the scope of Article 3/A of the Law No. 5746.

Is it possible to benefit from both the R&D income exemption in Technoparks and the R&D and design deduction related to these earnings? 

The R&D and design deductions are not available to taxpayers who wish to take use of the incentives in Law No. 4691 because they are ineligible to take advantage of the incentives in Law No. 5746. However, if it is preferred and the requirements are met, the supports in Law No. 5746 can be used in place of the incentives in Law No. 4691. 

Can the R&D deduction amount, which cannot be deducted in the relevant year due to insufficient earnings, be carried over to the next accounting periods? 

The amount of R&D deduction, which cannot be deducted due to insufficient earnings in the relevant period, can be carried over to the next accounting periods. 

Will the amount of support provided due to R&D, innovation and design activities be considered as income in legal records?

The support received from international institutions or public institutions and organizations by those engaged in R&D and innovation activities and design activities, from foundations and international funds that use funds or credits to support R&D and innovation projects and design projects, within the public institutions and organizations, established by law or within the scope of technology development project agreements held in a special fund account. 

This fund is not taken into account in determining the taxable income and the amount of R&D or design expenditure made in the relevant year according to Law No. 193 and Law No. 5520. If this fund is transferred to another account or withdrawn from the enterprise in any way other than addition to the capital within five years following the accounting period in which it was obtained, the taxes not accrued on time shall be deemed to have been lost.

 

The grants received for the projects within the scope of the abolished subparagraph (a) of the first paragraph of Article 10 of the Law No. 5520 will be included in the corporate income and the R&D expenditures covered by these supports will be able to benefit from the R&D deduction.

 In case the grant amounts cannot be determined exactly, how will the R&D and design discount amount be determined in the corporate tax calculation?

– The support amounts to be received as grants must be taken into a special fund account on the date of receipt, the amounts in this account should not be included in the corporate income and the R&D and design expenses made from this amount should not be subject to the R&D and design deduction.

– If the amount of support to be received as a grant is determined before the deadline for filing the corporate tax return of the relevant year, R&D and design expenditures exceeding the grant amount can be subject to R&D and design deduction. 

– If the amount of support to be received as a grant is determined after the deadline for filing the corporate tax return of the relevant year, provided that the R&D and design expenditures exceeding the grant amount have not been subject to the R&D and design deduction in the relevant period, a correction declaration is submitted and the subject of R&D and design deduction can be possible. However, the expenditures to be subject to the R&D and design deduction must be R&D and design expenditures and related to the supported R&D and design project.

 What kind of action is taken if the support and incentive conditions used within the scope of R&D are violated or the incentives are used outside of their purpose? 

In case of violation of the provisions of the law or the use of support and incentive elements for other than their purpose, tax loss is deemed to have arisen in terms of taxes that were not accrued on time, and the lost taxes are collected together with default interest and tax loss penalty. On the other hand, non-tax supports are collected in accordance with the provisions of the Law No. 6183 on the Collection of Public Receivables and by applying default interest.

 What will be the costs if the R&D and design project is incomplete or unsuccessful?

In cases where the completion of R&D projects is not possible due to compelling reasons, or there is no economic value due to the failure of the project, the amounts made within the scope of R&D, innovation and design activities and capitalized in previous years are booked as expense.

Can projects supported by KOSGEB (SMALL AND MEDIUM INDUSTRY DEVELOPMENT ORGANIZATION) benefit from deductions and supports within the scope of Law No. 5746? Do these projects also need to be submitted to TUBITAK’s (SCIENTIFIC AND TECHNOLOGICAL RESEARCH COUNCIL OF TÜRKİYE) approval?

It is possible for the R&D and design projects approved by KOSGEB to benefit from the support and incentives included in the Law No. 5746. These projects are also not required to be submitted to TUBITAK’s approval.

Can projects approved by the Ministry of Industry and Technology within the framework of San-Tez Program benefit from deductions and supports within the scope of Law No. 5746?

Projects approved by the Ministry of Industry and Technology within the framework of the San-Tez Program can benefit from the support and incentives included in the Law No. 5746, provided that the conditions are met.

 You can contact us for further information about R&D support and incentives.

Source: Revenue Administration
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