NEWSLETTER-2019-metin

313 TAX LAW Taxation of Capital Decrease* Att. Canan Doksat Introduction The legal procedure regarding capital decrease transactions of joint stock companies is regulated, in detail, between Articles 473 and 475 of Turkish Commercial Code No. 6102 (“TCC”). Turkish tax legislation has no specific provision regarding the taxation of capital decrease transactions. However, the Turkish Revenue Administration (“Revenue Administration”) has the tendency to accept that capital decrease transactions should, firstly, be made through taxable funds and items, regardless of the form and reason for the capital decrease. On the other hand, in its current decisions, tax courts generally accept that the Revenue Administration’s above-mentioned approach asserting that capital decrease transactions should be made, firstly, from taxable funds is contrary to the law due to the fact that the tax legislation does not include such a specific taxation rule. This newsletter article evaluates the current approach of the Rev- enue Administration and tax courts in relation to the taxation of capital decrease transactions 1 . The Approach of the Revenue Administration As a general rule, it is essential that capital not be taxed within the scope of the Turkish tax system. Thus, the Turkish tax legislation does not include any specific provision regarding taxation with respect to capital decreases. * Article of January 2019 1 The taxation principles of capital decrease transactions made through the reduc- tion of the losses will be evaluated in a separate newsletter article.