PATENT BOX REGIME IN TURKEY

With the amendments made in the Corporate Tax General Communiqués in 2015 and 2016, patent and utility model holders are provided with significant exemption opportunities in terms of corporate tax.

In more detail, the incomes obtained in the following cases will be exempted from the Corporate Tax at the rate of 50% if you meet the basic requirements of the communiqué which we will hereunder explain:

a) Incomes derived from selling, transferring or licensing a patent or a utility model right,

b) Incomes derived from sales of products protected by a patent or utility model certificate,

c) Incomes derived from sales of products manufactured by a patented process,

d) Incomes pertaining to insurances or compensations obtained as a result of infringement of  patent or utility model rights

In particular, items (b) and (c) brings a considerable tax advantage for companies which somehow achieve to commercialize their patents or utility models. In detail, although there are few companies selling or licensing their patent or utility model rights in Turkey, many companies are already marketing their innovative products which are under patent or utility model protection and/or which are produced by their patented processes.

Companies wishing to benefit from the tax exemption have to meet all of the following conditions:

• to have a Turkish Patent Certificate which is issued after official patent examination procedures or a Turkish Utility Model Certificate, which is issued as a result of a novelty search report wherein there is no novelty destroying prior art cited.

• to realize all R&D and production processes in Turkey.

In addition to above, a company who hold an Exclusive License or takes over a patent or utility model right becomes eligible to benefit from the tax exemption provided that the above mentioned conditions are met. In such case, VAT will also be at zero rate instead of %18 for all royalty/assignment incomes at Licensor/Assignor side.

It is also worth to mention that tax exemption will be proportional if only a part of a product or process is under patent or utility model protection.  For instance, if a company sells a vacuum cleaner, but only patented the cable collection mechanism, in this case, the exemption will be effective only for revenues attributed to the patented portion.

As a final advise, we  strongly recommend to have a well-grounded report, to which an experienced patent attorney and financial adviser is contributed, in your archive covering all above mentioned aspects as such report will be very helpful during any tax inspection procedure.  

Erdem Kaya

Managing Partner

European Patent Attorney

e.kaya@erdemkayapatent.com