On the Interest Rate Applicable to Cash Capital Reduction
With the Law No. 6637 “Law on the Amendment of Certain Laws and Decree Laws” published in the Official Gazette dated 07.04.2015, interest deduction in cash capital increases was added to Article 10 of the Corporate Tax Law.
With this provision, with the exception of institutions operating in the finance, banking and insurance sectors and state-owned enterprises, capital companies’ cash capital increases in the amount of paid-in or issued capital registered in the trade registry within the relevant accounting period, or in the case of newly established capital companies, the “weighted annual average interest rate applied to TL-denominated commercial loans opened by banks” announced most recently by the Central Bank of the Republic of Turkey for the year in which the deduction is utilized over the portion of the paid-in capital covered in cash 50% of the amount calculated until the end of the relevant accounting period can be deducted from the corporate tax base.
With the Council of Ministers Decree No. 2015/7910 issued pursuant to the authorization granted by the aforementioned article, the conditions for the higher or lower application of the said discount rate have been determined.
In addition, with the Law No. 7338 published in the Official Gazette dated 26.10.2021, the following provision was added to Article 10 of the Corporate Tax Law: “This rate is applied as 75% for the portion of cash capital increases covered by cash brought from abroad.”
In the calculation of the cash capital deduction, the interest rate of “Commercial Credits (Opened in TL) (Excluding Legal Entity ODA and Corporate Credit Cards)” from the “Weighted Average Interest Rates Applied to Loans Extended by Banks” announced by the CBRT for the year in which the deduction is utilized is used. The last interest rate announced by the CBRT for 2021 is 24.51%. For this reason, this rate will be used in the calculation of cash capital deduction for capital increases registered and paid in cash after 01.07.2015. Cash capital allowance can be utilized in the 2021/4th period provisional tax return and 2021 corporate tax return.
The latest interest rate announced by the CBRT for 2021 is available here
Sincerely,
BİLGENER
