After many questions from our international clients you can see explanaions below regarding the issue.
That incentive was come into effect by Law numbered 6637 enacted in April 2015. The formula of deduction is as follows
The deduction is equal to Cash Capital Increase x Weighted Annual Average Interest Rate for Commercial Loans x Rates which were decided by Resolution of Council of Ministers[i]
It is explained here below what kind of companies can benefit from the deduction and how to calculate this;
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Companies which rise capital paid in cash and have the rise registered in Trade Registry in relevant fiscal year; it is calculated based on its cash capital increase.
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Companies established recently (after July 1st, 2015); it is calculated based on capital paid in cash
Who benefits from the incentive and how?
Only limited liabilities companies will benefit from the incentives.
According to Resolution of Council of Ministers , rate of deduction was determined 50%.
Neverthless, the rate of deduction was made different for companies with Investment Incentive Certificat and shares of which is traded at Stock Exchange.
What kind of companies can not benefit from the incentive and which condition
According to Resolution of Council of Ministers
A. The discount rate for the increase in cash capital was determined 0% for below kind of companies and circumstance. So;
1 - Companies gaining above 25% profit from interest, rental income, bonus, license fees, interest-divident income such as stock certificate, bonds etc
2 - Companies which have more than 50% assets that come from subsidiary company, affiliate etc.
3 - The part of increased cash capital which is capitalised or given as credit for other companies.
4 - For companies which invested land properties, Investment corresponding to land properties
B . Cash Capital Increase due to merger, division and transfer of ownership
When Did The Incentive Execution Start?
The execution has been in practice as of July 1st,2015. It is in force for cash capital increase that after July 1st,2015.
Is there a duration for Incentive Execution?
There is no time limitation related to the execution. It may be benefited for each accounting period seperatedly. It is not determined upper limit about benefitted amount. Amounts not being able to deduct in relevant accounting period due to lacking tax base shall be moved next accounting period. ( You will be informed by our concultancy if new amendment appear)
Calculation;
It is calculated based on Cash Capital Increase of company registerd by Trade Registry in reference to “Central Bank of Republic of Turkey’s weighted annual average interest rate for commercial loans” in year concerned. The calculated amount will be deducted from corporate tax base.
The amount of the discount is calculated by regarding as the whole month in which the cash capital is paid and in reference to the remaining month of the account period.
Calculation method as follows;
The amount being deducted from the corporate tax base =Increased cash capital amount x Central Bank Interest Rate x 50%
For Instance;
The (B) company made a capital increase at an amount of ₺ 500.000 in Febuary 2018 and registered by Trade Registry. The whole increased amount was paid The interest rate announced by the Central Bank of Turkey for Turkish Lira commercial loans is 19%.
Calculation;
Deduction Amount = 500.000 X 0,19 X 0,50 X 11/12
Deduction Amount =43.541,67 TL
[i] “Resolution of Council of The Ministers” is replaced with “The President” depending upon Executive Order No 700