Insights

Through the promulgation of Law No. 7352 Amending Tax Procedure Law and the Corporate Tax Law (“Law No. 7352”), published in the Official Gazette dated 29th January 2022 and No. 31734, significant regulations have been made regarding (i) postponement of inflation adjustment and (ii) corporate tax exemption envisaged for income gained through currency protected TRY deposit accounts.

Essential amendments introduced through the Law No. 7352 may be summarized as follow:

Postponement of Inflation Adjustment

Inflation adjustment will not be applicable on the financial statements for FY 2021, 2022 and provisional tax periods for FY 2023 regardless of whether the conditions for inflation adjustment are met.

Financial statements dated 31.12.2023 will be subject to inflation adjustment regardless of whether the conditions are met. The profit/loss difference resulting from the inflation adjustment will be indicated in the previous years' profit/loss statements. The previous year's profit will not be taxed and the previous year's losses will not be considered as an expense item.

Corporate Tax Exemption for Income Gained Through Currency Protected TRY Deposit Accounts

a) Foreign currencies converted to TRY until 17th February 2022

Provided that (i) foreign currencies recorded in the balance sheet dated 31.12.2021 are converted into TRY deposit and participation accounts at the conversion rate until the due date of the declaration for the fourth advanced tax period of 2021 (17 February 2022) and (ii) the relevant TRY assets are remained in TRY term deposit and participation accounts for at least three months; the following income will be exempt from corporate tax:

• Portion of foreign exchange (“f/x”) gains, arising from year-end valuation of such foreign currencies, corresponding to the period between 01/10/2021 and 31/12/2021,
• F/x income related to accounts converted into TRY until the due date of the declaration for the fourth advanced tax period of 2021 (17 February 2022) and interest & dividends and other related income generated at the end of the maturity (including those arising from the period-end valuation).

b) Foreign currencies converted to TRY after 17th February 2022

Provided that (i) foreign currencies recorded in the balance sheet dated 31.12.2021 are converted into TRY deposit and participation accounts after the date of 17 February 2022 and (ii) the relevant TRY assets have remained in TRY term deposit and participation accounts for at least three months; the portion of the f/x income generated between the end of the advanced taxation period and the conversion date will be exempt from corporate tax.

Interest & dividends and other related income generated at the end of the maturity (including those arising from the period-end valuation) may also benefit from the exemption.

Additionally, it is possible to deduct f/x rate difference losses occurred as a result of the conversion. In case of withdrawal from TRY deposit or participation account before the maturity date, taxes not accrued on time due to the exempted amounts will be collected together with delay interest and tax loss penalty.

Law No. 7352 entered into force on the date of its publication (29th January 2022).

You may find the full text of Law No. 7352 here (Turkish).