Page 8 - VGTemmuz_2023

Vergide Gündem
English Translation

Deduction application in cash capital

increase

We may shortly define deduction application in cash capital increase as deduction
of half of the interest calculated based on capital amount increased in cash by
companies from tax assessment included in corporate tax return. This practice has
been introduced in 2015 in order to promote capital increase in cash.

Only stock corporations can benefit from right to deduction. In other words, it
is also applicable for joint stock and limited companies as well. However, banks,
financial leasing, factoring and financing companies and entities carrying out
activities in finance sector such as asset leasing companies and insurance
companies and public economic enterprises cannot benefit from such deduction
opportunity.

Only increases in cash

Deduction can only be applied in case of a capital increase in cash. Bank statement
approved by the bank branch regarding the actual depositing of capital increase
amount to the bank account of the company by the shareholders should be
submitted to the tax office attached to the corporate tax return.

Capital increase made as deduction of in balance sheet items to each other is not
accepted as capital increase in cash. It is not possible to benefit from deduction
opportunity since a capital increase in cash shall not be a matter of question in case
net profit for the period or retained earnings, extraordinary Reserves, legal reserves
and inflation differences, which are included in equities of the company are used in
capital increase.

If shareholder borrows

Shareholders or persons related to shareholders should fulfill their capital share
paid to capital in their participations from their equities. If companies procure
the capital share deposited in cash through utilizing loans or borrowing, such
companies cannot benefit from deduction opportunity.

Interest rate

Interest rate, used in the calculation of deduction amount is defined In the
legislation as “weighted annual average interest rate applied to TRY commercial
loans opened by Banks” announced by Central Bank of Turkey at the latest for the
year in which deduction is benefited.

This rate was announced as 13.47 for 2022 on the website of Central Bank of
Turkey. Interest Rate which shall be used for capital increase made in 2023 shall be
announced by Central bank of Turkey within the first week of 2024 as of December
29, 2023.

8 July 2023