Venture Capital Investment Obligations of Companies Benefiting from Technology Zones Exemption and R&D Discount Amended
A. INTRODUCTION
According to the Presidential Decision Numbered 7953 (“Decision”) published in the Official Gazette on 16 December 2023, the obligations to set aside funds and make venture capital investments have been redefined for corporate taxpayers subject to the Law No. 5746 on Supporting Research, Development and Design Activities (“R&D Law”) and the Technology Development Zones Law No. 4691 (“Technology Zones Law”) and exceeding the amounts determined within the scope of R&D discount and profit exemption.
B. SIGNIFICANT REGULATIONS IN THE DECISION
Before the mentioned Decision, the Law No. 7263 on Amending the Technology Development Zones Law and Certain Other Laws, published in the Official Gazette on February 3, 2021, and effective from January 1, 2022, introduced obligations for corporate taxpayers benefiting from the technology zones earnings exemption and R&D discount. Companies with an exempted or utilised discount amount of TRY 1,000,000 or more are required to transfer 2% of this amount to a temporary account under liabilities. The maximum amount to be transferred to this account by the end of the year and invested in venture capital is capped at TRY 20,000,000.
Under the amendment introduced by the Decision:
i. The lower threshold for exempted earnings under Additional Article 3 of the Technology Zones Law, which triggers the obligation to make venture capital investments, has been increased to TRY 2,000,000.
ii. The lower threshold for utilised deductions under paragraph 14 of Article 3 of the R&D Law, which triggers the obligation to make venture capital investments, has also been raised to TRY 2,000,000.
iii. The rate of funds to be transferred to a temporary account in liabilities based on these amounts has been increased to 3%.
iv. The annual upper limit of liabilities subject to venture capital investment has been raised to TRY 100,000,000.
C. CONCLUSION
The effective date of this Decision is 1 January 2024, and the regulation shall apply to venture capital investments made after this date.
For further information and support, please contact us at info@lbfpartners.com.
LBF Partners Law Firm
According to the Presidential Decision Numbered 7953 (“Decision”) published in the Official Gazette on 16 December 2023, the obligations to set aside funds and make venture capital investments have been redefined for corporate taxpayers subject to the Law No. 5746 on Supporting Research, Development and Design Activities (“R&D Law”) and the Technology Development Zones Law No. 4691 (“Technology Zones Law”) and exceeding the amounts determined within the scope of R&D discount and profit exemption.
B. SIGNIFICANT REGULATIONS IN THE DECISION
Before the mentioned Decision, the Law No. 7263 on Amending the Technology Development Zones Law and Certain Other Laws, published in the Official Gazette on February 3, 2021, and effective from January 1, 2022, introduced obligations for corporate taxpayers benefiting from the technology zones earnings exemption and R&D discount. Companies with an exempted or utilised discount amount of TRY 1,000,000 or more are required to transfer 2% of this amount to a temporary account under liabilities. The maximum amount to be transferred to this account by the end of the year and invested in venture capital is capped at TRY 20,000,000.
Under the amendment introduced by the Decision:
i. The lower threshold for exempted earnings under Additional Article 3 of the Technology Zones Law, which triggers the obligation to make venture capital investments, has been increased to TRY 2,000,000.
ii. The lower threshold for utilised deductions under paragraph 14 of Article 3 of the R&D Law, which triggers the obligation to make venture capital investments, has also been raised to TRY 2,000,000.
iii. The rate of funds to be transferred to a temporary account in liabilities based on these amounts has been increased to 3%.
iv. The annual upper limit of liabilities subject to venture capital investment has been raised to TRY 100,000,000.
C. CONCLUSION
The effective date of this Decision is 1 January 2024, and the regulation shall apply to venture capital investments made after this date.
For further information and support, please contact us at info@lbfpartners.com.
LBF Partners Law Firm
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