The General Directorate of Taxes informs all taxpayers engaged in software production/development that the Council of Ministers approved decision no. 730, date 12.12.2018, “For the determination of activities included in the field of software production/development, as well as the procedures for applying the corporate income tax for legal entities engaged in these activities,” this decision was published in the Official Gazette No. 176, dated December 13, 2018.
The activities carried out by legal entities in the field of software production/development, for which the 51% corporate income tax rate applies, are as follows:
- Software design
- Software system development and maintenance
- Software testing
- Design and development of communication systems
- Design and development of security systems
- Development of migration systems
- Improvement/upgrade of information systems
- Operations, management, usage support, and technical/informatics auditing for software systems.
Legal entities must have these activities defined in their company's bylaws as the scope of operations in order to apply the 5% rate of income tax.
In addition to these, any other activities the company may undertake must be in the field of information technology. When other activities, if any, do not fall within this field, they must be carried out through separate NPIs in order to apply the 51% corporate tax rate.
Also, the legal entity must submit to the relevant Regional Tax Directorate a declaration stating the activity or activities of its business operations for which it is applying this tax rate.
It should be borne in mind that for the economic activities in the information technology field carried out by the legal entity, the standard 15% rate of Corporate Income Tax will apply.
In order to apply the reduced rate, entities must clearly reflect in the explanatory notes to the financial statements the revenues derived from the activity/activities for which the 5% tax rate applies, as well as the expenses incurred.
Source: General Directorate of Taxes.
