Law No. 7417 of 5 July 2022 limited the previously open-ended deduction to the accounting period in which the capital increase is registered and the following four accounting periods.
Under the change made by Law No. 7417 of 5 July 2022, the open-ended right to benefit from the deduction was limited by reference to the accounting period in which the capital increase resolution or, at the initial incorporation stage, the articles of association is registered, and the four accounting periods following that period. It was further provided that this amendment would also apply, for 5 accounting periods, to cash capital increases made before the amendment.
This Communiqué sets out explanations on those provisions.
Accordingly:
Capital companies may benefit from the deduction separately for five accounting periods, beginning with the accounting period in which the cash capital increase was made, in respect of cash capital increases carried out from 5 July 2022 onwards.
Any part of the deduction that taxpayers cannot use because of insufficient income during the five accounting periods including the period in which the cash capital increase was made may be deducted in subsequent periods, without any time limit and without indexation.
Since the commercial loan interest rate most recently announced by the Central Bank for the year in which the deduction is used is taken into account in calculating the deduction, the deduction may be used only on an annual accounting period basis.
Benefiting from the deduction for capital increases made from 5 July 2022 onwards:
Capital companies may benefit from the deduction separately for five accounting periods, beginning with the accounting period in which the cash capital increase was made, in respect of cash capital increases carried out from 5 July 2022 onwards.
Example: The general assembly resolution of (BA) Inc. dated 3 December 2022 to increase its capital in cash by TRY 10,000,000 was registered with the trade registry on 10 February 2023, and the whole of the capital commitment was paid into the company’s bank account by the shareholders within that month.
(BA) Inc. will benefit from the deduction for an 11-month period in the 2023 accounting period and, for as long as it continues to meet the conditions, may benefit from the deduction separately for each accounting period in respect of that increased capital up to and including the 2027 accounting period.
Benefiting from the deduction for capital increases made before 5 July 2022:
Under the thirteenth paragraph of temporary Article 15 added to the Corporate Income Tax Law by Article 50 of Law No. 7417, companies that increased their capital or were first established before 5 July 2022 may continue to benefit from the deduction separately for five accounting periods, including the 2022 accounting period.
Example: The general assembly resolution of (BB) Inc. dated 3 August 2015 to increase its capital in cash by TRY 6,000,000 was registered with the trade registry on 24 August 2015, and the whole of the capital commitment was paid into the company’s bank account by the shareholders within that month.
(BB) Inc. benefited from the deduction for a 5-month period in the 2015 accounting period and, for as long as it continues to meet the conditions, may continue to benefit from the deduction separately for a further five accounting periods including the 2022 accounting period (until the end of the 2026 accounting period).