Regarding the implementation of the R&D deduction, subparagraph (a) of the first paragraph of Article 10 of Law No. 5520 was repealed as of August 9, 2016, pursuant to Article 58 of Law No. 6728.
Article 3/A was added to Law No. 5746 by Article 60 of Law No. 6728.
Article 3/A of Law No. 5746 regulates the R&D deduction mechanism for income and corporate taxpayers in relation to R&D and innovation activities conducted within their enterprises.
Accordingly, 100% of the research and development expenses incurred exclusively for the search for new technology and information by income and corporate taxpayers within their enterprises will be deductible when determining taxable income, provided that these projects are deemed R&D and innovation projects by the Ministry of Industry and Technology in accordance with Article 10 of Law No. 5520 and Article 89 of Law No. 193.
As such, from August 9, 2016, onward, R&D deductions will be utilized in line with Law No. 5746 and its relevant regulations for applications concerning research and development projects aimed at the search for new technology and information. On the other hand, for projects submitted before August 9, 2016, R&D deductions will be applied according to the provisions of subparagraph (a) of the first paragraph of Article 10 of the Corporate Tax Law as it existed prior to the amendments made by Law No. 6728.
Additionally, it is clear that the R&D and design deduction can be utilized under Article 3 of Law No. 5746.
Under the Technology Development Zones Law No. 4691, income derived from R&D, software, and design activities in these zones is exempt from income and corporate taxes. Can such income also benefit from the R&D and design deduction?
Taxpayers opting to benefit from the incentives under Law No. 4691 cannot simultaneously benefit from the incentives under Law No. 5746, including the R&D and design deduction. However, if preferred and the conditions are met, it is possible to utilize the supports under Law No. 5746 instead of the incentives under Law No. 4691.
Can unused R&D deduction amounts be carried forward to subsequent fiscal periods due to insufficient taxable income?
Yes, unused R&D deduction amounts due to insufficient taxable income can be carried forward to subsequent fiscal periods.
Will the support amounts provided for R&D, innovation, and design activities be treated as income when determining taxable income?
According to Law No. 5746, support received by those engaged in R&D, innovation, and design activities from public institutions, organizations established by law, or international institutions under technology development project agreements must be kept in a special fund account. These funds are not included in taxable income or considered when determining the amount of R&D or design expenditures for the respective year. If the fund is transferred to another account or withdrawn from the business within five years following the fiscal period in which it was received, except for its addition to capital, taxes not previously accrued will be considered evaded and collected with late interest and penalties.
Grants received under the repealed subparagraph (a) of the first paragraph of Article 10 of Law No. 5520 will be included in corporate income, and R&D expenditures covered by such support will also be eligible for the R&D deduction.
If grants received as support cannot be fully determined during the relevant fiscal period, how will the R&D and design deduction amounts be calculated for corporate tax purposes?
Grants received as support must be allocated to a special fund account upon receipt, and amounts in this account must not be included in corporate income or used for R&D and design deductions. If the support amounts are determined before the corporate tax return submission deadline, R&D and design expenditures exceeding the grant amount can be deducted. If determined after the deadline, adjustments can be made via an amended tax return, provided the expenditures were not already deducted.
What happens if support and incentive conditions are violated or the incentives are misused?
Violations of legal provisions or misuse of support and incentives will result in tax evasion, with taxes not previously accrued being collected along with late interest and penalties. Non-tax incentives will be recovered under the provisions of the Law on Collection Procedure of Public Receivables No. 6183, with additional late payment interest applied.
What happens if an R&D or design project cannot be completed or fails?
If a project cannot be completed due to compelling reasons or fails to yield an economic asset, amounts previously capitalized in prior years under R&D, innovation, and design activities will be written off as expenses.
Can projects supported by KOSGEB benefit from the deductions and incentives under Law No. 5746? Do they also need to be submitted for TÜBİTAK approval?
R&D and design projects approved by KOSGEB can benefit from the support and incentives under Law No. 5746 without requiring TÜBİTAK approval.
Can projects supported under the San-Tez Program by the Ministry of Industry and Technology benefit from deductions and incentives under Law No. 5746?
Projects deemed eligible for support under the San-Tez Program by the Ministry of Industry and Technology can benefit from the support and incentives under Law No. 5746, provided the conditions are met.
Source: Revenue Administration of Republic of Türkiye
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