New Developments
The Presidential Decree No. 3516 ("Decree") published in the Official Gazette on February 6, 2021, decreased the export to abroad condition rate required for the salary withholding incentive provided to free trade zones from 85% to 80% for 2020.
What Does the Decree Mean?
According to Temporary Article 3 of the Law on the Free Trade Areas No. 3128, if a taxpayer exports 85% of the FOB fees of the goods produced in a free trade zone to abroad, the taxpayer write offs the portion of the income tax calculated over the salaries of its personnel after the deduction of the minimum living allowance over the respective withholding tax return (i.e. the taxpayer withholds the income tax but does not remit it to the tax office and instead keeps it as a benefit to itself).
The President has the power to decrease the export to abroad rate required for taxpayers to benefit from the income tax withholding incentive down to 50%.
The Decree decreases the export to abroad rate required to benefit from the income tax withholding incentive to 80% from 85% only for 2020.
Conclusion
The export to abroad rate required to benefit from the income tax withholding incentive on salaries applicable on free trade zones was decreased to 80% for 2020 due to the negative effects of the COVID-19 pandemic on the economy and exports. The export rate will continue to be applied as 85% for 2021 and subsequent years unless there would be further amendments.
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