Time Limitation is Envisaged for the Application of Interest Rate Deduction Resulting from Cash Capital Increase

Through Law No. 7417 on the Amendment to the Civil Servants Law, Certain Laws and Decree No. 375 ("Law No. 7417") published in the Official Gazette dated 5th July 2022 and No. 31887, a significant amendment is introduced for the application of interest rate deduction resulting from cash capital increase.

In this context, the right to benefit from interest rate deduction envisaged for cash capital increases regulated pursuant to Article 10/1-ı of Corporate Tax Law No. 5520 (“CTL”) is limited to (i) the accounting period during which the decision regarding the capital increase was registered, or during which the articles of associations regarding the establishment procedure was registered; and to (ii) the consecutive four accounting periods.

It is also regulated that this deduction will be applied for five accounting periods, including the 2022 accounting period for the capital increase transactions completed before the promulgation date of Law No. 7417.

It should be emphasized that the aforementioned time-limitation, which is made afterward regarding the previous capital increases, should be evaluated in terms of essential constitutional principles such as the principle of non-retroactivity, and the principle of certainty.

Therefore, we would like to remind that the issue should be analyzed in detail in terms of the former capital increase transactions in order to prevent any potential loss of rights.

You may find the full text of Law No. 7417 here.