Page 14 - VG_Aralik2023

Vergide Gündem
English Translation

Inflation adjustment according to Tax

Procedure Law in the light of recent
developments and specific subjects

1. Introduction

Draft Tax Procedure Law General Communique on inflation adjustment (hereinafter
referred to as "Draft Communiqué") was added to the official website of the Turkish
Revenue Administration (TRA) on 18 October 2023. The Draft Communique in
question was updated with changes and additions as a result of the comments
received, and the updated Draft Communique was made available on the official
website of the Turkish Revenue Administration on 24 November 2023.

2. Specific subjects in terms of inflation adjustment

2.1. Financial statements to be subject to adjustment: Balance sheet
With Article 7/2 of the Draft Communique; based on the authority granted by
subparagraph (b) of paragraph (8) of paragraph (A) of Article 298 of Law No. 213,
taxpayers who have to make inflation adjustment are required only to restate the
balance sheet from the financial statements to be subjected to inflation adjustment.
2.2. Shares and participations purchased in foreign currency

In accordance with Article 5/1-ç of the Draft Communique prepared by the Turkish
Revenue Administration on the subject; shares and subsidiaries denominated in
foreign currencies will be subject to inflation adjustment by multiplying the relevant
foreign currency amount by the exchange rate on the adjustment date.

2.3. Aggregated method applications in subjecting inventories to inflation
adjustment
Two types of aggregated methods, namely the "simple average method" and the
"stock turnover rate method", have been determined within the scope of Article 18
of the Draft Communique prepared by Turkish Revenue Administration regarding
the determination of the aggregated method that may be valid for stocks in
the correction of the balance sheet dated 31.12.2023. On the other hand, the
aggregated methods that can be taken as basis in inflation adjustment transactions
for the 2024 accounting period and the following periods, depending on the
continuation of the conditions, have been determined as the "Simple Average
Method" and "Moving Weighted Average Method" according to Article 37/2 of the
Draft Communique.
2.4. Deduction from tax base in subsequent accounting periods after
determination and adjustment of non-real financing costs
In accordance with Article 40/3 of the Draft Communique; limited to the adjustment
of the balance sheet at the end of the 2023 accounting period, the undepreciated
amount from the cost of unreal financing expenses added to asset value may be
taken into account as an expense in determining the period earnings in 5 years and
in equal installments in 2024 and subsequent accounting periods.

14 December 2023