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16February2021

Financing Expense Restriction Started

Financing Expense Restriction Started

With the presidential Decree No. 3490, published on Official Gazette No. 31385, as of 01.01.2021, the enterprises whose foreign resources exceed equity, 10% of the total of interest, commission, maturity difference, dividend, exchange rate difference, similar expenses and cost elements related to the foreign resources used in the enterprise, excluding those added to the cost of the investment, will not be considered as an expense in determining the earnings by income and corporate tax taxpayers.

Within the scope of the decision, credit institutions, financial institutions, financial leasing, and factoring companies are excluded.

Decision will be effective as of 2021/01 Temporary Taxation Period.

The application principles for income and corporate taxpayers in the taxation of earnings as of 2021/01 are as follows;

  • The enterprises whose foreign resources exceed equity within one period, excluding those added to the cost of the investment, payments such as interest, commission, maturity difference, dividend, exchange rate difference will be considered as an expense related with foreign financing.
  • 10% of the portion of expenses, which are considered as financing cost and exceeding total equities, will not be subject to discount.
  • Since the interest paid for loans or borrowings made for the purpose of financing an investment will be partially or completely added to the investment cost, borrowings to which interest, commission maturity or exchange differences belong to the investment cost in the calculation of the excess of equity will not be included in the total in the foreign resource account.
  • Dividends paid to participation banks will be evaluated as the value of the source used and will be subject to restrictions as financing expenses.

You can access to Presidential Decree No. 3490 from here.

Should you have any queries or need further details, please contact us.

Written by Selma Kıy, Posted in Taxation Law

  • Notification!

    Contents provided in this article serve to informative purpose only. The article is confidential and property of CottGroup® and all of its affiliated legal entities. Quoting any of the contents without credit being given to the source is strictly prohibited. Regardless of having all the precautions and importance put in the preparation of this article, CottGroup® and its member companies cannot be held liable of the application or interpretation of the information provided. It is strictly advised to consult a professional for the application of the above-mentioned subject.

    Please consult your client representative if you are a customer of CottGroup® or consult a relevant party or an expert prior to taking any action in regards to the above content.

About The Author

Selma Kıy

Certified Public Accountant - SMMM
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