Tax Incentives For Stock Certificates in Turkey
Tax relief for stock certificates will be explained from the scope of Income Tax Act, Corporate Tax Act and Value Added Tax Act.
Share certificates are crucial for confirming ownership in a joint stock company. They also enable shareholders to enjoy tax benefits when transferring shares. These tax benefits include exemptions from income tax for individual shareholders and notably from stamp duty for corporate shareholders. By issuing share certificates under the right conditions, shareholders can avoid higher tax burdens.
Income Tax Exemption for SCs
According to article 80 of the Income Tax Law No.193, profits from the sale of company shares generally fall under capital gains and are taxable. Nevertheless, profits from share certificates held for over two years are not taxed under income tax rules.
This means that while individual shareholders of a joint stock company would normally pay income tax on profits from share sales, any profit from selling share certificates held for two years or more remains untaxed, irrespective of the amount.
Corporate Tax Exemption for SCs
Under article 5 of the Corporate Tax Law No.5520, 75% of the gains from the sale of shares owned by corporations for at least two years are free from corporate tax. The existence of share certificates does not alter this exemption.
Therefore, if a corporation sells its shares within two years of acquisition, those profits are liable for corporate tax. However, if the share certificates or the shares themselves are sold after being held for two years, 75% of the profit is exempt from corporate tax. Thus, issuing share certificates does not provide additional corporate tax benefits.
Value Added Tax Exemption for SCs
As per the Value Added Tax Law No.3065, article 17, clause 4/g, the transfer of share certificates is not subject to VAT. Furthermore, clause 4/r states that sales of participation shares held in corporate assets for at least two years are also VAT-exempt.
These VAT exemptions apply regardless of when the share certificates are transferred after issuance. If no share certificates are issued, the shares must be held in the corporate assets for a minimum of two years to qualify for this tax exemption.
Tax relief for stock certificates should be taken into consideration when it comes to the transfer of shares with high values. For more detailed information to benefit from our consultancy services, feel free to contact us. With over 25 years of expertise and experience, we are here to support you. You may also explore the publications of our founder, Dr. Soner Altaş, in the field of Commercial Law, or take a closer look at Tacirsoft Legal Information System, Turkey’s first and only specialized database on Company Law and Organized Industrial Zones Law.
