Understanding Pillar Two and QDMTT Implementation
The global minimum corporate tax (OECD Pillar Two) represents a fundamental reform designed to ensure that multinational enterprises (MNEs) with annual consolidated revenue exceeding €750 million pay a minimum effective tax rate of 15% in each jurisdiction where they operate.
If the effective tax burden in a particular country falls below this threshold, the shortfall is collected through the following mechanisms:
- Income Inclusion Rule (IIR): The parent company’s jurisdiction collects the top-up tax for its low-taxed subsidiaries.
- Undertaxed Payments Rule (UTPR): When the IIR cannot be applied, other jurisdictions where the group operates may collect the shortfall through disallowance of expenses or equivalent adjustments.
The declaration and payment are made by the end of the 15th month following the close of the fiscal year (extended to 18 months for the first year of implementation).
Turkey’s Qualified Domestic Minimum Top-Up Tax (QDMTT)
To align with the OECD’s global framework, Turkey has introduced the Qualified Domestic Minimum Top-Up Tax (QDMTT).
This mechanism allows Turkey to collect the top-up tax on profits earned within its borders that are taxed below 15%, ensuring that the additional tax revenue remains within the country instead of being collected by foreign jurisdictions under the IIR or UTPR rules.
- Scope: Applies to Turkish subsidiaries of multinational groups exceeding the €750 million threshold.
- Calculation: Annual basis only (not during provisional periods).
- Declaration and Payment Deadline: The last day of the 12th month following the fiscal year-end.
- Example: For fiscal year 2024, declaration and payment are due by 31 December 2025.
Domestic Minimum Corporate Tax (Local Implementation)
Separate from the OECD framework, Turkey has also enacted a Domestic Minimum Corporate Tax applicable to all corporate taxpayers, whether multinational or not.
This measure aims to prevent companies from paying no tax through excessive use of exemptions and deductions.
- Tax Base: Commercial accounting profit before exemptions and deductions (subject to certain exceptions).
- Rate: 10% applied over the calculated profit.
- Comparison Mechanism: Taxpayers compare the standard corporate tax (25%) with the 10% minimum tax and pay whichever is higher.
- Exemption: Newly established entities are exempt for their first three fiscal periods.
- Declaration: Calculated quarterly (for provisional tax) and annually together with the corporate tax return.
Draft Communiqués and Implementation
The Turkish Revenue Administration (GİB) has published two draft communiqués outlining the implementation details:
- Draft General Communiqué on Global and Local Minimum Top-Up Corporate Tax:
Describes how the Pillar Two and QDMTT mechanisms will apply to MNEs exceeding the €750 million revenue threshold, including specific exemptions (public institutions, non-profit entities, etc.). - Draft Amendment to the Corporate Tax General Communiqué (Serial No. 1):
Clarifies the calculation base for the Domestic Minimum Corporate Tax and the three-period exemption rule.
These new provisions are incorporated under Articles Additional 1–13 of the Corporate Tax Law No. 5520, and the implementation communiqués are currently under review.
Key Takeaway
Turkey’s alignment with the OECD’s Pillar Two framework through the QDMTT marks a significant step toward global tax transparency and fairness.
At the same time, the Domestic Minimum Corporate Tax ensures that all Turkish taxpayers contribute a fair minimum level of taxation, strengthening the integrity of the local tax base.
