Advantages of Fleet Leasing
The General Communiqué on Income Tax (Serial No. 311) promulgated on 27 May 2020 by the Ministry of Treasury and Finance of Turkey has introduced new taxation rules for vehicles purchased and leased by corporations.
In 2020, the General Communiqué on Income Tax (Serial No. 311) has defined a cap for car rental payments according to which it is possible to recognise rental payments up to TRY5,500 as an expense. This amount is increased each year by the Ministry of Treasury and Finance of Turkey considering the increase in brand-new cars. The Communiqué also allows the corporations to recognise the cars purchased by them as an expense up to TRY140,000 including the VAT and special consumption tax. The limit for depreciation remains capped at a ceiling of TRY160,000 (of the acquisition price). Furthermore, regardless of the method of acquisition (e.g., purchase or lease), up to 70% of overheads may be recognised as an expense.
If a company wishes to purchase a car instead of renting it, it will face different expense recognition restrictions due to this new legislation. Restrictions such as prohibition for the recognition of VAT and special consumption tax as an expense, exclusion of motor vehicles tax, and recognition of expenses such as car insurance, traffic, maintenance, repair, etc. up to 70% thereof, pose a disadvantage for the corporate tax. Pursuant to Article 30(b) of the VAT Law, corporations are not allowed to write off VATs of passenger cars purchased by them.
Based on foregoing, all expenses that the company will face for three years after the initial purchase of a vehicle will in any event be included in the rental price when a vehicle is rented. Therefore, without subject to any expense limitation, a corporation will have significant tax advantages both for corporate tax and VAT as an expense item.