Turkey: Tax System In Turkey - Depreciation

Last Updated: 20 March 1997
The Tax Procedures Code contains rather liberal provisions with respect to depreciation. According to the definition, depreciation is set aside on assets that are used in the entity for more than one year and that are subject to wear and tear. (Land is not subject to depreciation.) Taxpayers may determine the depreciation rate for all of their fixed assets, excluding buildings, provided that such rates do not exceed 20% on a straight line basis. Previously this rate was 25%; it was reduce to 20% effective 1 January 1995. Fixed assets that are subject to depreciation at rates higher than this and the applicable rates are announced in general communiques issued by the Ministry of Finance. For example, the rate of depreciation on factory plants and workshops is 4%; the rate applicable to administrative buildings and social facilities, is 2% .

For the fixed assets purchased after 6 July 1994, depreciation for the year of acquisition is calculated on a partial basis, by taking the month in which the purchase was made as a complete month. During the last year of depreciation, the depreciation set aside partially in the year of acquisition is completed to make up a full year. For example, the depreciation allowable for a fixed asset purchased in December 1994 at a purchase cost of 120 will be calculated as follows (based on a rate of 20%)

1994 120 x 20%/12 = 2
1995           24
1996           24
1997           24
1998           46 

Total depreciation 120

Alternatively, depreciation by the double declining method is also possible. If this method is applied, the rate of depreciation corresponds to double the rate used under the straight line method, provided that it does not exceed 40% .

In cases when extraordinary depreciation is required, due to economic and technical reasons, the rate of depreciation is determined by the Ministry of Finance.

The capitalization or direct expense recording of pre-operating and start-up expenses depends on the preference of the taxpayer. If such expenses are capitalized, depreciation is applied over a period of 5 years and in 5 equal installments.

Depreciation of leasehold improvements is calculated on the basis of the duration of the lease period and in equal yearly installments over the life of the lease.

Taxpayers may discontinue the application of double the declining method and change to the straight line method. However, once they start using the straight line method, they may not return to the double declining method.

Please do not hesitate to contact us if you need any additional information regarding the matters discussed here.

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.

For further information contact Mustafa Camlica, Tax Manager on tel: +90 212 232 1210, fax: +90 212 230 8231, or e-mail mustafa.camlica@arthurandersen.com or enter a text search 'Arthur Andersen' and 'Business Monitor'.

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