15March2016

Corporate Tax Deduction in Case of Cash Capital Increase

The issue of deduction in case of capital increase is given in detail in the "Communique (Serial No. 9) on the Amendment to the General Communique of Corporate Tax" issued by the Ministry of Finance (Revenue Administration) and published on the official gazette dated March 4, 2016.

In summary, any capital companies that make a cash capital increase shall make a calculation with the annual average interest rate applied to the commercial loans in Turkish Lira (CBRT-Central Bank of the Republic of Türkiye) based on this increased capital amount and show the said amount separately on the corporate tax return and deduct it from the corporate earnings. Some important issues are stated below.

In the calculation of the amounts to be deducted, any paid cash capital increases registered to the trade registry as of 07/01/2015 or the part paid in cash of the paid-in capital in the newly established capital companies.
Any capital increases realized in the form of setting off from each other of the balance sheet items may not be considered in calculation of the deduction amount.
Any subscribed/increased capital shall be actually deposited with the bank account of the company in cash. Any amounts not actually deposited may not be considered in the calculation.
In calculation of the deduction amount, as the interest rate of the commercial loans last announced for the year of extension by CBRT shall be taken into consideration, this deduction may only be applied for the fourth provisional taxation period, out of the provisional taxation periods.
Any amounts that cannot be deducted in the relevant account period due to inadequacy of the earning may be subjected to deduction in determination of the provisional tax basis of the provisional taxation periods related with the next account period.
Separate deductions may be benefited from for each account period following the account period when the cash capital increase is made by applying deduction.
Any capital companies intending to benefit from such deduction shall submit the bank statement that contains the transactions related with actual payment of the subscribed capital increase amount in cash to the bank account of the company and approved by the relevant bank branch in paper or electronically within the period for submission of corporate tax return related with the relevant period to the tax office, which they are affiliated to in terms of corporate tax.
Any capital companies other than institutions operating in finance, banking and insurance industries as well as any public economic enterprises may benefit from this deduction.

Please click here to view the Communique that includes the relevant regulation. Please contact your customer representative or an expert for further information.

Author CottGroup Hukuk ve Mevzuat Ekibi, Category Taxation Law

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