The tax-compliance reduction lowers by 5% the income tax or corporate tax calculated in the annual return of a taxpayer who meets the required conditions. It is not an exemption from earnings, an expense deduction or a restructuring of tax debt. Eligibility and the reduction calculation are reviewed separately: high profit does not prevent the right to the reduction, but a prior return or a final tax assessment may lead to the loss of that right. For annual returns to be filed in 2026, the upper limit of the reduction amount is 12,000,000 TL. This amount is not the limit of tax debt permitted for benefiting from the reduction. [1]
Legal Nature of the Reduction and How It Differs from Other Obligations
This reduction is not an expense deducted from commercial income or an exemption from earnings, but a reduction applied to the income or corporate tax calculated for a taxpayer who meets the conditions. Filing returns on time, paying taxes and compliance for past transactions are separate conditions.
Who Can Benefit and Which Income Is Excluded?
Taxpayers subject to income tax because of commercial, agricultural or independent professional activity, together with corporate tax taxpayers within its scope, may benefit from the reduction. Those operating in the finance and banking sector, insurance and reinsurance companies, pension companies and pension investment funds are outside its scope. Looking only at a company's trade name is not enough; the nature of the activity and the tax liability must be examined.
A person who receives only wages, rent or income from capital investments is not granted this reduction because of regular tax payment. However, a person who has rental income in addition to independent professional earnings is not excluded from the whole return. The reduction applies to the part of the calculated income tax that corresponds to the covered earnings. Non-resident tax liability (dar mükellefiyet) alone does not bar the reduction; the covered activity and the other conditions must still be present.
How Is Timely Filing of Returns for the Year and the Two Preceding Years Reviewed?
The returns required by law for the year to which the reduction return relates and for the two preceding years must have been filed on time. For income earned in 2025 and declared in 2026, the review years are 2025, 2024 and 2023. Timely filing of the income tax or corporate tax return alone is not enough: provisional tax (geçici vergi), withholding and social security premium service returns (muhtasar ve prim hizmet beyannamesi), value added tax (KDV) and special consumption tax (ÖTV) returns are also checked within their scope.
A timely original return that is later corrected and an original return filed late for the first time do not produce the same result. If the original return was filed on time, a correction or voluntary-disclosure return filed later does not automatically violate the timely-filing condition. However, the payment, assessment or tax evasion conditions arising from the correction are still evaluated separately. Meeting one condition does not remove another deficiency.
Final Tax Assessments and Tax Evasion Acts Are Examined for Different Periods
For the tax types subject to returns in the relevant three-year period, the finalization of an assessment made by way of supplementary assessment (ikmalen), ex officio (re’sen) or by the administration affects the reduction right. Assessments not yet final must be distinguished from final assessments. The small-amount tolerance for assessments under the law is measured against 1% of the upper limit of the reduction for the relevant year. Filing the return in 2026 does not automatically apply the 2026 upper limit to a prior-year assessment.
For the purposes of Article 359 of the Tax Procedure Law (Vergi Usul Kanunu), which covers tax evasion acts (kaçakçılık fiili), the review period is longer: the year to which the return relates and the four preceding calendar years are taken into account. Therefore, a clean three-year return record alone does not show that this separate five-year condition is met. The period of the act, the nature of the determination and the relevant case file must be assessed together.
Which Debts Must Have Been Paid, and by When?
The taxes accrued on the returns listed in the law must have been paid by the date on which the annual return on which the reduction is calculated was filed. This rule should not be confused with the condition that every tax must in all cases have been paid on its own due date in the past. If the annual return is filed early, the control date also comes earlier; filing a reduced return without waiting for a later payment may cause problems.
For payment by offset (mahsuben ödeme), special tolerance and completion conditions set by law are assessed where the required information and documents have been fully submitted but the offset amount proves insufficient. Taxes that were deferred (tecil) and whose write-off (terkin) conditions were not later met have a special payment period. These exceptions do not mean that an offset request without documents, or one not yet made, counts as a payment.
On the return date, a further check is made for overdue debts exceeding 1,000 TL. The scope of tax types covered by this check matters; not all public receivables can be placed in the same basket. The guide explains that motor vehicles tax (motorlu taşıtlar vergisi) does not fall within the debt scope for this reduction. However, penalties and ancillary amounts (fer’i) relating to taxes within the scope must not be overlooked. The accrual, payment, offset and debt statements must be reconciled as of the same date.
On Which Tax Amount Is the 5% Reduction Calculated?
For corporate taxpayers, the reduction is 5% of the annual corporate tax calculated under the applicable conditions, and the upper limit applies. For income tax, only the tax corresponding to the share of covered earnings in the total tax base is used. Tax-exempt earnings, losses, return deductions and the net amounts of income items must be determined correctly before the proportion is applied.
| Illustrative corporate tax calculation | Amount |
|---|---|
| Tax calculated on the tax base at an assumed 25% rate | 250,000 TL |
| 5% compliance reduction | 12,500 TL |
| Provisional tax to be offset | 200,000 TL |
| Remaining tax payable | 37,500 TL |
The example only shows the order of the reduction and the offset. It assumes there is no minimum corporate tax, no earnings at a different rate and no other exemption. In an actual return these checks must be performed separately. For an individual with mixed income, applying 5% directly to the total calculated tax may produce an excessive reduction.
How Is the Remaining Amount Used If the Reduction Exceeds the Tax Payable?
If the reduction amount exceeds the tax payable, the remaining part may be offset against other taxes that the taxpayer declares and that accrue within one full year from the date on which the annual return was required to be filed. The start of this period is not the day on which the taxpayer actually filed the return early. No cash refund is made for this remaining amount, and any part not used within one year does not carry forward indefinitely to later years.
For this reason, tracking should cover not only the right to the reduction but also its use. The period of the tax to be offset, its accrual, the request date and the remaining reduction amount should be kept in a single tracking record. Showing the amount as a receivable in the accounts does not extend the statutory period of use.
What Happens If It Is Later Found That the Conditions for the Reduction Were Not Met?
Tax that was not collected because of the reduction is recovered if it becomes clear that the conditions were not met. The fact that the special provision on this recovery does not impose a tax loss penalty (vergi ziyaı cezası) does not mean that the taxpayer will face no sanction for another incorrect declaration or a separate violation. The legal grounds for the assessment and for the recovery of the reduction must be examined separately.
The case file for the application should retain the three-year return list, the payment and offset documents, the final assessment information, the five-year check under Article 359 and the calculation table. The fact that the reduction automatically appears in the filing software does not replace these substantive conditions. For a notice of assessment (ihbarname) received later, the period, the finalization of the assessment and the reduction being recovered are examined separately.
How Are Shortfalls in Offset Payments and Deferred Taxes Assessed?
Where the information and documents for the offset request have been fully submitted, a payment shortfall arising because the refund receivable has decreased is assessed under the condition that it does not exceed 10% of the amount requested to be paid by offset. This tolerance does not turn an offset request that was not made at the outset, or whose documents were not completed, into a payment. [1]
For taxes that are deferred and written off when certain conditions occur, if the write-off condition is not met, the special completion period becomes significant: payment by the close of the fifteenth day following the end of the statutory deferral period is assessed for that condition. A regular installment arrangement should not be confused with this special deferral-and-write-off provision. [1]
In both cases, the file should separately show the date of the offset request, the amount requested, the documents submitted, any shortfall identified later and the payment date. In this way the loss of the reduction right can be examined against all the statutory conditions, not only the accounting balance.
Decision and File to Be Prepared Before Action
Before sending the reduced return, verify the three-year return and assessment records, the five-year tax evasion act condition and the debt position on the return date. For mixed income, separate the tax corresponding to the eligible earnings. For a reduction that cannot be used in full, create a one-year offset calendar.