As explained in our Newsletter (No.Q2/2015); through the amendment made on Article 10 of the Corporate Income Tax Law by the Law No. 6637, companies were enabled to deduct 50% of the interest calculated over capital increases made in cash from the corporate income tax base. Based on the authority provided to the Council Of Ministers under the legal regulation, the Council of Ministers amended this rate with Decree No.2015/7910 (published in the Official Gazette dated June 30, 2015 and No. 29402). Accordingly, the deduction applies as follows;
- For publicly held companies whose shares are traded in the stock exchange, 50 points will be added to 50% deduction rate if the rate of the nominal value of the shares traded in the stock exchange registered in the Central Securities Depository ("Merkezi Kayıt Kuruluşu A.Ş.") comparing to the paid–in capital or issued capital registered with trade registry of those is more than 50%; 25 points will be added to 50% deduction rate if the above stated ratio is less than 50%.
- If the capital increased in cash is used in production and industry plants with investment incentive certificates and investments of machines and equipment in relation to these plants and/or investments of lands and plots allocated to construction of these plants, the deduction in question shall apply by adding 25 points to the 50% rate stated above, as limited to the fixed investment amount in the investment incentive certificate.
On the other hand, as per the Decree, such deduction shall apply at the rate of 0%:
- for companies 25% or more of whose income comprises passive incomes such as interest, dividend, rental, license fee, marketable security sales etc. apart from commercial, agricultural or independent professional activities conducted through capital, organization and personnel employment parallel to the activities of the company,
- for companies 50% or more of whose total assets comprise of long-term securities, participation shares, and subsidiaries,
- for the portion of the increased capital which is used in the capital increase in other companies or extended as loan to other companies,
- for companies investing in lands and plots, as limited to the amount corresponding to the land or plot investment,
- for the decreased capital amount, if capital has been decreased in the period between March 08, 2015 and July 01, 2015.
The above mentioned rates have become effective as of 1 July 2015 in parallel with the effective date of the respective provision of law.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.