16.05.2022/31
Regarding the Tax Procedure Law General Communiqué No. 537 on Revaluation
Summary The Tax Procedure Law (TPL) General Communiqué No. 537 on the revaluation application that can be utilized within the scope of repeated 289/Ç and provisional Article 32 of the Tax Procedure Law (TPL) entered into force after being published in the Official Gazette dated 14/05/2022 and numbered 31835.
1. Continuous Revaluation (Continuous) within the scope of Tax Procedure Law Tax Procedure 298/Ç
According to the repeated Article 298/Ç of TPL, depreciable economic assets and their depreciations recorded in the assets as of the end of the period in which the inflation adjustment conditions are not met can be subject to revaluation. The value increase resulting from continuous revaluation is not taxable.
a) Economic Assets that cannot be subject to revaluation
- Economic assets subject to sale-leaseback transaction or lease certificate issuance as long as they maintain these qualifications,
- Vacant land and plots not subject to depreciation,
- For those who are continuously engaged in the purchase, sale and construction of economic assets, the assets in the nature of commodities registered in their assets for this purpose,
- Economic assets subject to depreciation that are not registered in the assets as of the end of the period in which the revaluation will be made,
- Depreciable economic assets included in the assets in the accounting period in which the revaluation will be made
are not subject to revaluation.
In this context, investments in progress or investment expenditures of economic assets cannot be subject to revaluation, and it is not possible to revalue the depreciable economic asset transferred to the relevant account following the completion of the investment in the accounting period in which it is capitalized. For example, it is not possible to revalue buildings that are constructed and capitalized in the accounting period in which they are capitalized, and buildings within this scope can only be revalued in the accounting periods following the accounting period in which they are capitalized.
b) Revaluation Basis Value
The values of the economic assets and their depreciations determined in accordance with the valuation provisions of the TPL and included in the legal book records as of the end of the accounting period in which the valuation will be made are taken into consideration.
While determining this value, exchange rate differences and loan interests, except those related to the accounting period in which the economic assets are capitalized, and the depreciation corresponding to them are not included in the scope of revaluation.
In the event that the depreciation of the economic assets is allocated incompletely or not allocated at all in any year, the value to be taken as basis for revaluation is determined by assuming that these depreciations are fully allocated
c) Revaluation Time
In periods when the conditions for inflation adjustment are not met, revaluation shall be made on the basis of the revaluation values of the economic assets subject to depreciation and their depreciation in the legal book records as of the end of the period in which the revaluation is to be made.
Due to the fact that the revaluation is not made in any accounting period or the revaluation rate is applied low, revaluation cannot be made in the following accounting periods regarding the previous accounting periods.
It is also possible to make revaluation as of temporary tax periods.
Revaluation is optional and taxpayers have the right not to revalue. Failure to revalue in one period does not eliminate the possibility of revaluation in subsequent periods.
d) Other Issues
Revaluation may be made for some of the economic assets and not for others.
The value increases arising after the revaluation to be made according to Repeated Article 298/Ç are taken into a special fund account. In the event that the economic assets subject to revaluation are disposed of due to reasons such as sale, transfer (except for the transfer and type change cases listed in Article 81 of Law No. 193 and the transfer and spin-off cases made according to Law No. 5520), withdrawal from the business, liquidation, the value increases corresponding to them and shown in a special fund account in the liabilities of the balance sheet are treated exactly like depreciation. In other words, in case the economic asset is sold, the value increase fund will be added to the profit.
However, the value increases added to the capital are not taken into account in determining the profit and loss related to the sale or disposal in any way.
The fact that revaluation has not been made in an accounting period does not allow revaluation for past periods in the next period.
2. Revaluation within the scope of TPL Provisional Article 32 (One Time)
The taxpayers, who can perform revaluation pursuant to paragraph (Ç) of the repeated Article 298 of the TPL, may revalue their immovable properties and other economic assets subject to depreciation recorded in their balance sheets as of the end of the previous accounting period before the revaluation to be made for the first time within the scope of the said paragraph, if they wish.
The revaluation to be made within the scope of Provisional Article 32 is intended to approximate the current values of the economic assets acquired in the past dates before the continuous revaluation.
The revaluation to be made within the scope of Provisional Article 32 also includes lands and plots of land, unlike the revaluation to be made according to Repeated Paragraph 298/Ç.
The tax calculated at the rate of 2% over the value increase amount calculated as a result of the revaluation and shown in a special fund account in the liabilities is declared to the tax office in terms of income or corporate tax (in terms of value added tax for collective, ordinary limited partnership and ordinary companies) until the evening of the last day of the month following the date of revaluation and paid in three equal installments (the first installment within the declaration period, the following installments in the second and fourth months following the declaration period, respectively).
In the event that the economic assets subject to revaluation made within the scope of Provisional Article 32 are disposed of due to reasons such as sale, transfer, withdrawal from business, liquidation, the value increase amounts corresponding to them and shown in a special fund account in the liabilities are not taken into account in the determination of the income and the fund account continues to remain in the records.
In cases of transfer and change of type listed in Article 81 of the Law No. 193 and in cases of transfer and spin-off according to the Law No. 5520, the amounts in the fund account are not considered to be withdrawn from the business or transferred to another account.
3. Common Considerations
If taxpayers wish, they may revalue according to duplicate 298/Ç without applying provisional Article 32.
Likewise, revaluation may be made according to provisional Article 32 and repeated 298/Ç may not be applied. However, in this case, it should be kept in mind that retrospective revaluation cannot be made for the periods in which duplicate 298/Ç is not applied.
On the other hand, revaluation is also possible for the provisional tax periods in accordance with Repeated 298/Ç.
It is possible for those who have previously made revaluation within the scope of provisional article 31 to make revaluation for the same economic assets within the scope of provisional article 32 and repeated 298/Ç.
Revaluation applications can be utilized for some of the economic assets. However, after the revaluation made for the first time within the scope of paragraph (Ç) of Article 298 of the Tax Procedure Law, the provisional Article 32 of the same Law cannot be utilized. The fact that some of the economic assets subject to depreciation within the scope have been subject to revaluation for the first time within the scope of the aforementioned paragraph (Ç), the fact that the provisional Article 32 has not been fully or partially utilized in terms of the economic assets within the scope of the provisional Article 32, the fact that the economic assets that were not previously taken into account in the revaluation made for the first time within the scope of the aforementioned paragraph (Ç) will be subject to revaluation for the first time in the following periods, do not provide the ability to benefit from the provisional Article 32 after the revaluation made for the first time within the scope of the aforementioned paragraph (Ç).
Therefore, if revaluation is made within the scope of repeated Article 298/Ç for only a part of the economic assets, revaluation cannot be made within the scope of provisional Article 32 in the following periods.
The relevant Communiqué is available here.
You can also access our blog post on the subject here.
Sincerely,
BİLGENER
