Domestic minimum corporate tax: calculation and exemptions
The logic of the domestic minimum corporate tax introduced by Law No. 7524, the calculation steps, items deductible in the minimum tax calculation, exempt companies and the effect on advance tax.
Although the corporate tax rate is 25%, because of deductions and exemptions the tax paid by some companies could be far below this rate. The domestic minimum corporate tax ensures that the tax payable does not fall below a certain floor.
The rule
Corporate tax calculated cannot be less than 10% of corporate income before deductions and exemptions. If the tax calculated by the normal method is below this amount, additional tax equal to the difference is paid. The rule applies from the 2025 accounting period and advance tax periods.
Calculation steps
- Normal calculation: corporate income is found by adding non-deductible expenses to commercial profit and deducting deductions and exemptions; 25% is applied.
- Minimum calculation: 10% is calculated on corporate income before deductions and exemptions. Some items listed in the Law can also be deducted in this calculation.
- Comparison: the higher of the two amounts is paid.
Example
| Amount | |
|---|---|
| Corporate income before deductions and exemptions | TRY 10,000,000 |
| Exemption not deductible in the minimum tax calculation | TRY 7,000,000 |
| Corporate income under the normal method | TRY 3,000,000 |
| Tax under the normal method (25%) | TRY 750,000 |
| Minimum tax (10,000,000 × 10%) | TRY 1,000,000 |
| Corporate tax payable | TRY 1,000,000 |
Whereas this company would pay TRY 750,000 under the normal method because of its exemption, it pays TRY 1,000,000 because of the minimum tax. If the exemption had been one that is also deductible in the minimum tax calculation, the result would have been different. With your own figures: Corporate tax calculator
Items deductible in the minimum tax calculation
The Law lists, on a limited basis, the deductions and exemptions that continue to be deductible from the minimum tax base. The main ones:
- The participation income exemption and the share premium exemption,
- Technology development zone and free zone income exemptions,
- The R&D and design deduction,
- Venture capital fund and sheltered workplace deductions,
- Other exemptions listed in the Law, such as the operating income of ships registered in the Turkish International Ship Registry, sale-and-leaseback and asset leasing transactions.
Prior-year losses: the Communiqué initially stated that they could not be deducted; after the Council of State's stay of execution, the Revenue Administration announced on 14 April 2025 that prior-year losses can also be deducted from the minimum tax base.
Items deducted from the minimum tax calculated: the 5-point reduction applied to export income, the 1-point reduction for manufacturers with an industrial registry certificate, the public offering reduction and the investment contribution amount under incentive certificates obtained before 2 August 2024 can also be deducted from the minimum tax. Advance tax paid and taxes withheld during the period are also offset.
Check separately whether every deduction your company uses is on this list; exemptions not on the list stay within income in the minimum tax calculation.
Who is outside the scope?
- Newly formed companies for three accounting periods from formation (except those formed through merger, transfer, change of type and division),
- Those exempt from corporate tax,
- Those whose income is determined on a revenue basis.
Advance tax and the return
The minimum tax is also calculated in advance tax periods. So at the end of each quarter both the normal and the minimum calculation must be made and the relevant sections of the return filled in. Advance tax guide: How is advance tax calculated? · Annual return: Corporate tax return
Who is affected most?
- Companies earning most of their income within exemptions (e.g. some real estate sale gains, foreign income),
- Companies using exemptions that are not on the list.
Before planning, work through the position of each exemption against the minimum tax with your accountant.
Legal basis: Corporate Tax Law No. 5520 art. 32/C; Law No. 7524; communiqués amending Corporate Tax General Communiqué (Serial No. 1).