Taxation of business partnerships under Turkish law

Business partnerships can be categorized under contractual joint ventures, pursuant to their legal characteristics. Becoming widespread in our commercial life and encountered particularly in major public construction projects, business partnerships have a particular position in terms of taxation. Business partnerships are defined as a partnership established by more than one real person or legal entity economically and legally independent from each other in scope of a contract in order to perform a certain construction work, each partner being liable for the whole work to the employer. Business partnerships are classified as ordinary partnerships since they have no legal personality. Characteristic difference of the business partnership is that each partner undertakes the whole work to the employer. Business partnerships are preferable since they can be established practically and they are temporary partnerships. The enterprises that come together to conduct a business may prefer business partnerships despite establishing a company with a legal entity, since corporate tax liability of business partnerships is optional, and they can be taxed as an ordinary partnership. Although being taxed in accordance with the corporate tax principles, providing control and audit opportunities since the accounts of the partnership are being kept separately are advantages of establishing corporate tax liability, there is a disadvantage that the partners cannot write off the loss in case the business partnership makes a loss. As a matter of fact, in the taxation of ordinary partnerships, it is possible for the partners to write off the loss if the partnership makes a loss. This study first discusses the legal structure and tax liabilities of business partnerships, analyses the advantages and disadvantages of business partnerships as being a corporate tax payer, subsequently examines the problems that occurs in practice.