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Tax Bulletin:


05 February 2021


With the regulation made in Article 41 of the Personal Income Tax (PIT) Law and Article 11 of the Corporate Income Tax (CIT) Law by the Law No. 6322, the limitation on financing expense deductions, which was previously implemented and abolished on 01.01.2004 by the Law No. 5024, was re-established with some amendments.

Pursuant to the mentioned regulation, CIT taxpayer businesses whose utilized foreign liabilities exceed their equity, except for credit institutions, financial institutions, financial leasing, factoring and financing companies, are unable to deduct the portion determined by the Council of Ministers  (currently by the President), so as not to exceed 10% of the total of the expense and cost items related to the utilized foreign liabilities made under the title of interest, commission, delay interest, dividend, F/X differences, etc. as an expense in determining tax base.

Although the effective date of the mentioned Law article was 01.01.2013, since a decision was not taken within the scope of the authority granted in the relevant articles by the Council of Ministers and then by the President in the previous periods, the said regulation regarding the limitation on financing expense deductions did not become effective until 1.1.2021.