Effective July 1, Turkey will introduce a new tax benefit for
companies that increase their share capital in cash.
Under the new rule, 50% of the deemed interest on a capital
increase paid in cash as paid-in or issued capital, as well as
contributions paid in cash to the share capital of
newly-established companies until the end of the fiscal year, can
be deducted from the corporate income tax base. The Central Bank of
Turkey's most recent "annual average weighted interest
rate applied to commercial loans in Turkish lira extended by
banks" is used to calculate the amount of deductible deemed
Companies operating in the banking, finance and insurance
sectors and public economic enterprises, however, are ineligible
for this tax benefit.
Companies are permitted to deduct 50% of the interest amount
from the corporate income tax base each financial year, starting
with the financial year in which the capital increase decision or,
in the case of a newly-established company, the articles of
association are registered.
The deduction is calculated for the remaining months in the
financial year after the capital increase, including the whole
month in which the cash capital is paid. Amounts that cannot be
deducted due to an insufficient tax base are rolled over to the
Capital increases through the transfer of non-cash assets,
merger, acquisition and spin‑off, or by adding the
shareholders' equity items to the share capital, or by
shareholder loans or related-party loans, are not included in the
If a company later decreases its capital, the amount of the
decrease is excluded from the calculation of the deduction.
The Council of Ministers is entitled to make certain amendments
to this rule, e.g., to change the percentage of interest which may
Actions to consider
As this provision will enter into force on July 1, companies
planning to increase their share capital may wish to consider
postponing a capital increase until after this date.
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.
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