Turkey: "Yes, But Not Enough" – Despite Tax Exemptions Financial Leasing Companies Are Still Prejudiced!

Thanks to the Law regarding Amendments to Certain Laws and Decrees numbered 6495 ("Bundle Law") passed by the Turkish Parliament on August 2, 2013 which granted value added tax ("VAT") and corporate income tax ("CIT") exemptions to sale and lease back of real property, industry officials are expecting an increase of 100% in the 2014 sale and lease-back transaction volume. The Bundle Law amended Article 17 of the Value Added Tax Law numbered 3065 ("VAT Law") by including "sale and lease back of real property" in the list of exempt transactions on the condition that ownership of the property is returned to the seller at the end of the lease term. In addition, subject to the same condition, the Bundle Law amended Article 5(1)(e) of the Corporate Tax Code numbered 5520 ("CTC") by granting full exemption to such transactions and waived the 2-year holding-on principle applicable to the proceeds of sale of real property.

Despite the recent VAT and CIT exemptions, financial leasing companies are still prejudiced due to lack of specific financial leasing legislation that allows for deduction of the general and special provisons set aside by financial leasing companies in a given year from their corporate tax base. Unlike the Law regarding Financial Leasing, Factoring and Financing Companies numbered 6361 ("Financial Leasing Law"), Article 53 of the Banking Law numbered 5411 ("Banking Law") allows deposit and participation banks (both can engage in financial leasing transactions) to deduct 100% of the special provisions set aside in a given year from their corporate tax base. General provisions set aside by banks are listed among Excluded Deductions by CTC Article 11(1)(ç) and, therefore, not allowed. With respect to special provisions, banks and financial leasing companies follow similar criteria to set aside such provisions and in a nutshell, a special provision can be set aside for the receivables based upon three main aging categories:

Banks: (i) third tier loans and receivables (limited collection capability): receivables aged more than 90 days but less than 180 days, (special provision allowed is 20%), (ii) fourth tier loans and receivables (doubtful collection capability): receivables aged more than 180 days but less than 1 year, (special provision allowed is 50%), and (iii) fifth tier loans and receivables (loss provision): receivables overdue more than 1 year (Special Provision allowed is 100%).

Financial Leasing Companies: (i) principal and interest receivables aged more than 150 days but less than 240 days (special provision allowed is 20%), (ii) principal and interest receivables aged more than 240 days but less than 1 year (special provision allowed is 50%), and (iii) principal and interest receivables overdue more than 1 year (special provision allowed is 100%).

As a general rule, in the absence of an industry specific law allowing for special provision deductions, tax payers would utilize amortization provisions of the Tax Procedure Law numbered 213 with respect to their doubtful receivables. Article 323 of the Tax Procedure Law defines "doubtful receivable" as one being related to deriving commercial and agricultural revenue, and that is either (i) subject to a pending litigation or an execution proceeding, or (ii) despite more than one payment notice is served, it is not worth initiating legal proceedings. It is important to note, however, that a "financial leasing special provision" does not in and of itself qualify for a "doubtful receivable" as defined under article 323 of the Tax Procedure Law and therefore, is not allowed to be deducted under this general rule.

In a recent private opinion1 (özelge), the Turkish Revenue Administration ("TRA") stated that financial leasing companies cannot utilize the 323 deduction for the special provisions they set aside under the financial leasing legislation, which does not allow for any deduction. TRA further stated that deduction under Tax Procedure Law Article 323 is not allowed for financial leasing companies because the "323 deduction" is only allowed for commercial and agricultural enterprises which recognize revenue on an accrual basis which, in turn, has a direct effect on the final accounts and/or profit of the respective year. Given the nature of the financial leasing receivables, financial leasing companies are also not allowed to utilize the 323 doubtful receivables deduction for the leasing receivables that had not been recognized as revenue in the respective year.

In view of the foregoing, despite the recent tax exemptions, financial leasing companies are still prejudiced due to lack of specific leasing legislation allowing for deduction of special provisions being set aside against leasing receivables. Further, Article 53 of the Banking Law creates an uneven playing field that favors the banks by allowing them to make such deduction. The situation could be remedied either by allowing the deduction of financial leasing special provisions under the Financial Leasing Law or by introducing financial leasing special provisions as a new deduction item among Deductible Items from corporate tax base listed under Article 8 of the Corporate Tax Code.


1 Turkish Revenue Administration Private Opinion No. 11395140-105.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.