Scope of the Received Profit
Limited liability profit of the limited taxpayer institution without a workplace or permanent representative in Turkey acquired from the sale of shares owned by the full-liability taxpayer institution in Turkey is within the scope of other profits and incomes received in Turkey.
Estimation of the Received Profit
Other profits and incomes received by limited taxpayer institutions within this scope serve as appreciation profit and are determined according to the net appreciation Repeating Article 81 of Income Tax Law.
However, limitations on registry, terms and deadlines and exceptions on not taxing in Income Tax Law about other profits and incomes (except for the provisions of securities received for capital in cash or kind returned to Turkey personally and foreign exchange gain on selling out participation stocks) are not considered.
Declaration of Received Profit "Special Declaration"
Received profits are declared in accordance with the provisions regarding the special declaration in Article 26 of the Corporate Tax Law.
Hereunder, if other profits and incomes (except for fees received for sale, transfer and assignment of copyright, franchise, patent, operating right, commercial name, trademark and similar incorporeal rights) indicated in the Income Tax Law constitute a foreign institution's taxable income that is subject to limited liability, a foreign institution or individuals acting on its behalf in Turkey must declare these earnings to the appropriate tax office with a declaration within fifteen days of the date of receipt.
Status of Received Profit in relation to "Avoidance of Double Taxation Agreements"
Profit received is mentioned in the Avoidance of Double Taxation Agreements under the title of "APPRECIATION PROFITS". The provisions of the relevant section of the Double Taxation Agreement between the country in which the Limited Taxpayer institution is located and the Republic of Turkey should therefore be taken into consideration separately when taxing the aforementioned income in Turkey.
Case Study
For instance, how the taxation will be prosecuted in the act of a Spanish resident company A selling to another full-fledged taxpayer company in Turkey the shares that a full-fledged taxpayer company B in Turkey has owned and kept for six months? Avoidance of Double Taxation Agreement between Spain and Turkey must be examined primarily. Taxation right belongs to Spain according to Paragraph 4 of the Article 13 titled Appreciation Profits of the agreement mentioned. However; according to the Paragraph 5 of the same Article, the fact that the shares were held for less than a year and were sold to another resident company in Turkey gives Turkey the right to tax them as well. Turkey would not have the right to tax if the shares were held for more than a year or sold to an individual who does not reside in Turkey.
On the other hand, subparagraph (a) of the first paragraph of Article 22 of the Agreement between the Republic of Turkey and Spain for the Avoidance of Double Taxation and Tax Evasion Agreement will be used to prevent double taxation that will result if both countries tax appreciation profits and the tax that must be paid in Spain can be absorbed by the amount of tax that was paid in Turkey for appreciation profits.