NEWSLETTER-2020-metin

317 TAX LAW Indeed, through the statement, “The transferee company shares acquired in return for the asset s transferred in the partial spin-off can either remain in the transferor company, or be given directly to the shareholders of this company.” In the section entitled “19.2.2.3. Giv- ing the participation shares to the shareholders,” in Communiqué No. 1, it is accepted that the share certificates of the company, where capi- tal in kind is contributed, can also be given to the shareholders. In this method, due to the decrease in company assets, which is derived from giving the shares to the transferor’s shareholders, a capital decrease is performed by the company. Through the statement, “ If the shares of the transferee company acquired in return for the transferred asset s are given to the sharehold- ers, it is natural that a capital decrease will be made in the transferor company.” In Communiqué No. 1 , it is accepted that capital decrease is a natural result of a partial spin-off in terms of tax legislation, as well. Therefore, in the event that the transferee company shares are given to the shareholders of the transferor company, a capital decrease constitutes an element of the partial spin-off, and cannot be considered as a separate capital decrease transaction. Although this is the case, the companies that make a capital decrease within the scope of a partial spin-off may face a corporate tax assessment with tax penalty and income tax assessment arising from profit distribution, because of the assumption of tax administra- tion that the inflation correction positive differences and the previous year’s profits were firstly withdrawn from the business. Capital Decrease in Partial Spin-Off and Tax Consequences Applicable Regulation In a partial spin-off, it is a choice whether the shares of the trans- feree company, which are acquired in return for the transferred assets, remain in the transfer company, or are given directly to the sharehold- ers of the company. If these shares are given to the shareholders of the