You Got the 100% Deduction and Still Owe Tax: Turkey's Minimum Corporate Tax Wall (2026)

Legislation note: This article is based on the position as of 14 August 2026 under Corporate Tax Law No. 5520 Art. 10/1-ğ, Art. 32/7-8-9 and Art. 32/C; Presidential Decree No. 11257 (OG 30/4/2026, 33239); section 32.5 of Corporate Tax General Communiqué No. 1 as added by Communiqué No. 23 (OG 28/9/2024, 32676); and the decision of the 3rd Chamber of the Council of State numbered E.2024/5700, K.2025/4831. Legislation changes; verify the current text and your own position before acting.

There is an odd line this year on the return of a company selling software abroad: the entire profit has been deducted from the tax base, the base is zero — and there is still tax to pay. It is not a mistake. From 1/1/2026 the service-export earnings deduction became 100%, but that deduction cannot be subtracted from the domestic minimum corporate tax base.

Short answer: a 100% deduction zeroes the base, not the tax. In a company that meets the conditions and has completed its first three accounting periods, TL 10,000,000 of service-export income is untaxed under the ordinary computation while the minimum base can produce a burden of TL 1,000,000 — the figure moves with your own balance sheet and disallowed expenses. The only thing creating that gap is that the law enumerated one paragraph and left out another.

Where the deduction comes from

Paragraph (ğ) of the first subsection of Article 10 of the Corporate Tax Law allows a deduction for income arising from services rendered in Turkey to persons not resident in Turkey and used exclusively abroad. The scope is enumerated in the law: architecture, engineering, design, software, medical reporting, bookkeeping, call centre, product testing, certification, data storage, data processing, data analysis. Two further items join them: service businesses in vocational training fields determined by the Ministry of Finance after taking the opinion of the relevant ministries, and those operating in education and health subject to the permission and supervision of the relevant ministry. So in education and health the test is not permission alone — it is permission and supervision.

The rate in the text of the law is still 80%. The final paragraph of the same provision empowers the President to reduce that rate to zero or increase it up to 100%. Decree No. 11257 used that power: “the deduction rate to be applied under paragraph (ğ) of the first subsection of Article 10 of the same Law is set at 100%.” The Decree entered into force on its publication date, to apply to tax periods beginning on or after 1/1/2026.

The three conditions of the deduction are unchanged and none has been relaxed: the customer must be resident abroad, the service must be used exclusively abroad, and the entire income must be transferred to Turkey by the filing date of the return. The law also requires that the invoice or an equivalent document be issued in the name of the foreign customer — the document need not be an invoice as such; a legally valid equivalent will do.

The minimum corporate tax wall

CTL Art. 32/C, added by Law No. 7524, provides that the corporate tax computed “cannot be less than 10% of the corporate income before deductions and exemptions.” The base here is not the taxable profit: the sixth paragraph defines it as the amount found by adding disallowed expenses to the commercial balance sheet profit.

The second paragraph of the article determines the exemptions and deductions that may be subtracted from that base by enumerating them. As regards deductions the enumeration reads: “the deductions under paragraphs (g), (h), (i) and (j) of the first subsection of Article 10.”

Paragraph (ğ) is not in that list. The venture capital fund is there, the sheltered workplace deduction is there, foreign brokerage income is there, the qualified service centre is there — service exports are not.

The communiqué says the same thing. In the list headed “deductions that cannot be subtracted from the minimum corporate tax base” in Corporate Tax General Communiqué No. 1, the item appears by name: “Deduction for income from software, engineering, education and health services provided abroad (Law No. 5520 Art. 10/1-ğ).” In the section immediately above, the exemption for income earned in technology development zones and the R&D and design deduction are listed among the subtractable items. That is exactly the line dividing the technopark from service exports.

The list was revisited twice, and service exports were left out twice

The second paragraph of Art. 32/C was updated in 2026: Law No. 7582 brought the paragraphs after (ğ) into scope — the deductions for foreign brokerage income (10/1-i) and the qualified service centre (10/1-j) were added to the enumeration in subparagraph (b); the income deduction in Art. 6/1-a of Law No. 7412 was preserved through a separate subparagraph inserted into the same paragraph, Art. 32/C-2-(d). Communiqué No. 26, published on 4 July 2026, moved the same three items to the “subtractable” side at the administrative level.

The legislator opened the list, shielded three new incentives from erosion by the minimum tax — and again did not take in the service-export deduction. I could not reach the primary text of the legislative rationale, so I could not verify the reason for that choice.

⚠️ Warning about a misleading reading: You may read that Communiqué No. 26 removed a “(ğ)” item from the “non-subtractable” list. That is not the service-export deduction. In the communiqué’s own internal lettering, the letter (ğ) corresponds to CTL Art. 10/1-i; service exports sit at letter (f) in the same list and remain there. The statutory enumeration confirms it: the Art. 32/C list is (g), (h), (i) and (j).

One detail causes confusion here: the scope of paragraph 10/1-i changed in 2026. In 2024 Communiqué No. 23 listed that paragraph under the heading “deduction for income earned by entities operating in the Istanbul Finance Centre Region.” Law No. 7582 rewrote the paragraph: it now covers 95% of income from selling goods bought abroad without bringing them into Turkey and from brokering purchases and sales of goods abroad — 100% for entities in the IFC Region. So today’s paragraph (i) is the foreign brokerage / transit income deduction; it is not specific to the IFC. The income deduction in Art. 6/1-a of Law No. 7412 mentioned elsewhere in this article is an entirely different provision, separately shielded against the minimum tax by Art. 32/C-2-(d). (Some professional publications call that provision the “Istanbul Finance Centre deduction”; the statutory text enumerates it by this address, not by that name.) None of the three items is the service-export deduction.

The administration’s approach is clear too. In a ruling dated 2 April 2026 the Revenue Administration set out the principle in the context of the investment allowance: “Investment allowance amounts that are not among the deductions listed in Article 32/C of the Corporate Tax Law as subtractable from the minimum corporate tax base cannot be subtracted from that base.” A deduction that is not enumerated is not subtracted — that is the rule.

In figures: what you pay on TL 10,000,000 of income

Assume a limited liability company providing software services to foreign customers, operating outside any zone, in its fourth year. Commercial balance sheet profit is TL 10,000,000, there are no disallowed expenses, all of the income falls under 10/1-ğ and all of it was brought to Turkey in time.

Step 1 — Ordinary computation. Income TL 10,000,000, deduction 100% → base 0 → corporate tax computed TL 0.

Step 2 — Minimum base. Corporate income before deductions and exemptions is TL 10,000,000 (commercial balance sheet profit + disallowed expenses). Minimum tax: 10,000,000 × 10% = TL 1,000,000.

Step 3 — Is the 5-point export reduction creditable? The paragraph numbers must not be mixed up: the credit is created by the third paragraph of Art. 32/C, and that paragraph enumerates the sixth, seventh and eighth paragraphs of Article 32; the 5-point export reduction is in the seventh, the reduced rate applied to production income in the eighth, and the ordering rule for reduced rates in the ninth. So Art. 32/C-3 allows the “tax not collected because of the reduced-rate application” to be credited against the minimum tax. In other words, if the 5-point reduction was applied to export income, the difference that would otherwise have been collected is credited against the minimum tax.

At this point a formula in the communiqué comes into play and reverses the result at a 100% rate. The base subject to the reduced rate is found as follows:

Base subject to the reduced rate = Base × [(Income from export activity − Amount deducted under CTL 10/1-ğ) / (Commercial balance sheet profit − Amount deducted under CTL 10/1-ğ)]

In the communiqué’s own example, TL 400,000 of TL 500,000 export income had been deducted under 10/1-ğ; the remaining TL 100,000 was “taken into account as income derived from exports” and the base for the 5-point reduction came out at TL 75,000.

When the rate is applied at 100%, the amount deducted equals the whole of the export income. Note carefully: in the scenario above both the numerator and the denominator fall to zero (10,000,000 − 10,000,000), so the fraction is mathematically undefined — you cannot say “the numerator is zero, therefore the result is zero.” The communiqué does not regulate what the formula becomes when the deduction is used in full; this is a point on which the text is silent.

The result still lands in the same place, but the reasoning comes from the article rather than the formula: under CTL Art. 32/7 the 5-point reduction applies to income derived exclusively from exports. If the whole profit has been deducted from the base under 10/1-ğ, no base remains for the reduced rate to apply to; the corporate tax computed is already zero. If no reduced rate has been applied, the “tax not collected” that Art. 32/C-3 makes creditable does not arise either. In a partial deduction the position differs: the formula works for the export income left outside, and the credit does come into play.

Step 4 — Amount payable. If you adopt the view that there is no amount to credit, the minimum corporate tax payable is TL 1,000,000. That figure rests on the 5-point assessment above; because the administration has published no statement, litigation risk remains — if the view that the 5-point credit does arise is adopted, the amount is computed lower. Taxes withheld during the accounting period and advance tax paid are credited separately.

This is a different result from the calculations circulating in practice. Two professional articles addressing the topic subtract the 5-point reduction from the minimum tax in the same scenario and arrive at a lower figure. Against the communiqué’s formula I take the view that this credit does not arise on income deducted at 100% — and on this point there is no published ruling or circular from the administration. As it stands the matter is open to interpretation; the larger the amount, the larger the gap.

The minimum corporate tax also applies for advance tax periods; you see the burden not at year end but in the first advance tax return.

Four scenarios, four different outcomes

Simulation notes. I took income equal to the commercial balance sheet profit and left disallowed expenses out of the table; if you have them the base grows and the minimum tax rises. The minimum rate is 10% (CTL Art. 32/C-1). The “~0” in the technopark row is for corporate tax only: the venture capital fund obligation, the CPA (YMM) attestation fee and zone costs arise separately. The third row is only for entities commencing operations for the first time — companies formed through merger, transfer, change of type or division cannot use that door. In the fourth row the income tax tariff is computed separately; the comparison concerns the minimum corporate tax alone.

💡 Note from Gökay GÜL: In newly founded software companies, build the sequence backwards. The minimum tax does not apply for three accounting periods to entities commencing operations for the first time (CTL Art. 32/C, fifth paragraph); if all income comes from a service within the deduction and there is no other tax adjustment, corporate tax falls to zero in the company’s first three years. When the fourth year arrives the picture changes overnight and TL 1,000,000 enters the cash plan on TL 10,000,000 of income. Put the founding year and the fourth year’s cash requirement in the same table — the decision to move into a technopark usually becomes meaningful in that year too.

Risks and points that get confused

Partial transfer burns the whole deduction. The entire income had to arrive by the filing date. If part of it arrived, or all of it arrived late, the deduction does not apply; bringing it the following year does not restore the right. When the deduction falls away the base grows, and on top of that the minimum tax base is still there.

The base is not taxable profit. The sixth paragraph of Art. 32/C defines the base as commercial balance sheet profit + disallowed expenses. Every item booked as an expense in accounting but not accepted for tax pushes the base up. Passenger car expense restrictions, severance pay provisions, amounts above the donation limit — all of them enlarge the minimum tax.

Scope looks at the nature of the service, not its name. The law enumerates the service types and is not extended by analogy: general consultancy or advertising management, which are not enumerated, do not fall within scope by themselves. The single flexible point is vocational training: the Ministry of Finance determines the service businesses in that field after taking the opinion of the relevant ministries. But care is needed in the other direction too — design is among the services enumerated in the law; a design engagement labelled “consultancy” is assessed separately by reference to the contract and the actual output. Nor does the buyer being located in a free zone by itself satisfy the “resident abroad” condition; the buyer’s legal status, statutory and business centre, and the place where the service is used are examined separately.

Do not confuse this with a double tax treaty. The service-export deduction is a domestic incentive; it sits inside the minimum tax base. By contrast, income not being taxed in Turkey under a double taxation treaty is an entirely different mechanism, and its result against Art. 32/C is assessed separately by reference to the relevant treaty provision and the nature of the income. Both are spoken of with the words “abroad”; their tax consequences are computed separately.

The global minimum tax is a separate regime. CTL Art. 32/C is a domestic safeguard covering all corporate taxpayers. The local and global minimum top-up tax concerning groups with consolidated revenue above EUR 750 million is a different regulation; its rate, base and taxpayer differ. If your group is below that threshold the Pillar Two debate is not your problem.

Do not over-generalise the Council of State decision. The 3rd Chamber of the Council of State (E.2024/5700, K.2025/4831) annulled the provisions of the minimum tax communiqué concerning prior-year losses. The reasoning was this: the law had made no further determination as to the computation of the base and had granted no authority to the administration; where the law is silent, a communiqué cannot lay down a rule. That logic does not carry over to the service-export deduction — because here the law is not silent, it enumerates. Besides, the route of appeal to the Council of State Tax Litigation Chambers Board is open; I could not verify whether the decision became final as at the date this article was prepared.

If the deduction exceeds TL 500,000, CPA (YMM) attestation is mandatory. General Communiqué No. 49 on the Law on Certified Public Accountancy and Sworn-in CPAs (OG 30/12/2025) enumerates the items made subject to attestation; item 13 of the list is “Deduction for Income from Software, Engineering, Education and Health Services Provided Abroad (Law No. 5520 Art. 10/1-ğ).” The rule is this: where this deduction has its own line on the return and is enumerated in the list, if it exceeds TL 500,000 it must be attested by a report drawn up by a sworn-in CPA. The application is effective for the 2025 accounting period and subsequent periods.

The report is filed electronically through the digital tax office either together with the corporate tax return or within two months following the end of the filing period. If it is not filed in time, the taxpayer is granted an extension under Tax Procedure Law repeated Art. 227; if it is still not submitted within that period the taxpayer cannot benefit from the right subject to attestation — that is, the deduction itself is lost. Since the rise from 80% to 100% makes the same turnover produce a larger deduction, the number of taxpayers crossing the threshold rises too; set the attestation calendar together with the filing calendar.

Action list

1. Run the two computations side by side. In each advance tax period compute both the corporate tax under general provisions and the 10% minimum tax on commercial balance sheet profit + disallowed expenses; the larger one is payable.
2. Track disallowed expenses as part of the base. They enlarge the minimum tax base directly; do not let them accumulate through the year and surface at year end.
3. Tie the transfer calendar to the filing calendar. Document with bank receipts that the entire income reached Turkey; a partial or late transfer burns the whole deduction.
4. Tie the CPA attestation calendar to the filing calendar. If your deduction exceeds TL 500,000 the attestation report is mandatory; it is filed electronically together with the return or within two months following the end of the filing period. If that period is missed, the deduction right lapses at the end of the extension granted — set the calendar at the start of the year. If you have a full attestation engagement, clarify with your sworn-in CPA whether a separate report is required.
5. Put the fourth-year threshold on the calendar. When the first-three-periods relief ends the cash outflow arises at once; take the technopark or alternative structure decision before that date.
6. Manage the open point deliberately. There is no published administrative view on the intersection of the 100% deduction with the 5-point reduction. If the amount is large, document your position and, if needed, request a ruling before the transaction.

Sources

Corporate Tax Law No. 5520 Art. 10/1-ğ, Art. 32/7-8-9 and Art. 32/C; Presidential Decree No. 11257 (OG 30/4/2026, 33239); Law No. 7524 Art. 36 (the provision adding CTL 32/C); Law No. 7582 Art. 7, 8 and 9; Corporate Tax General Communiqué No. 1 sections 32.1.2.9.1, 32.5.3, 32.5.4, 32.5.5 and 32.5.6 (Communiqué No. 23, OG 28/9/2024, 32676); Corporate Tax General Communiqué No. 26 (4 July 2026); General Communiqué No. 49 on the Law on CPAs and Sworn-in CPAs (OG 30/12/2025); Law No. 4691 Provisional Article 2; Income Tax Law No. 193 Art. 89/1-13; Council of State 3rd Chamber E.2024/5700, K.2025/4831 (25/11/2025); Revenue Administration rulings E-71877763-125[2025/Yeni] (02.04.2026) and E-38418978-125[32-2025] (28.05.2025).

Points that could not be verified: The exact wording of the relevant articles of Communiqué No. 26 could not be seen in the Official Gazette text; statements concerning that communiqué rest on the article-numbered reporting of professional publications. The Official Gazette reference of Law No. 7582 was taken from secondary sources. The appeal and finality status of the Council of State decision could not be verified. No Revenue Administration ruling or circular was found on the intersection of the 100% rate with the 5-point export reduction.