34. International Public Finance Conference
Public Enterprises and Taxation Issues Within the Framework of Turkish Corporate TaxErkan Aydın
On top of their main purpose of delivering public service, it is possible for the public administrations and public institutions to establish economic enterprises in order to engage commercial, industrial and agricultural activities. In this respect, as per the Article 2 of the Corporate Tax Law No. 5520, the public enterprises are considered as corporate taxpayers. The main reason behind the taxation of public enterprises is to avoid competitive distortions between public and private enterprises. Therefore, public enterprises should not seek profit but engage with the enacted activities. Also, public enterprises are unincorporated entities that are considered as corporate taxpayers even in the absence of independent accounting, dedicated capital or business office. However, as per the Article 4 of the Corporate Tax Law, the public administrations and public institutions that are engaging in activities such as education, health, social welfare, culture and art are exempt from corporate tax.
Public enterprises gain assests depending on their emergence as an economic enterprise in accordance with their activities. Economic enterprises emerge as a result of permanent commercial, industrial and agricultural activities. However, sometimes there are different opinions on under which circumstances a public enterprise becomes an economic enterprise as far as the tax applications are concerned.
In this regard, there are sometimes issues on determining under which circumstances the enterprises with revolving capital are not exempt from corporate tax and if their activities form an economic enterprise. Similarly, there are sometimes issues on determining if the activities of the community facilities that are run by public administrations and public institutions breaching the conditions of corporate tax exemption. In addition, it is also an arguable issue that the economic enterprises that are owned by professional organisations that are legal entities with the status of a public institution are considered within the scope of the enterprises owned by assosications, whilst not regarded as public enterprises in terms of tax applications.