NEWSLETTER-2020-metin

316 NEWSLETTER 2020 to the fore in the said company, since there is a decrease in the assets of the transferor company. In this article, the tax consequences of the capital decrease made within the scope of a partial spin-off are evalu- ated within the scope of the approach of the Revenue Administration and judicial decisions. Partial Spin-Off within the Framework of Legal Regulations Partial spin-offs are regulated in Article 159 of the TCC as, “In a partial spin-off, one or more parts of a company’s assets are trans- ferred to other companies. The shareholders of the transferor com- pany acquire the shares and rights of the transferee companies, or the transferor company establishes an affiliate by acquiring the shares and rights in the transferee companies in exchange for the transferred assets.” InArticle 19/3 of the CTL, a partial spin-off is defined as, “Trans- fer of real estate, participation shares held for more than two years, and manufacturing or service business lines that are recorded on the balance sheet of a fully liable equity company, or a non-resident eq - uity company’s workplace or permanent establishment in Turkey, to an existing or a newly established fully liable equity company, over their net book values as capital in kind.” As is clear from the above-mentioned regulations, within the scope of a partial spin-off, the assets that are subject to the transfer have been specified in a limited number. These are (i) immovables, (ii) participation shares (held for at least 2 years); and (iii) manufacturing and service business lines. As well, partial spin-offs can be affected through two different methods. The first one is where the shares remain in the transferor company, also known as the “participation relationship method.” In this method, the value of the company assets that are subject to the partial spin-off become an affiliate or subsidiary of the transferor com- pany. Another is the giving of share certificates of the company where capital in kind is contributed to the transferor company’s shareholders as a result of the partial spin-off.