NEWSLETTER-2020-metin

318 NEWSLETTER 2020 transferee company, it may be possible to balance the balance sheet of the company whose assets decreased only by reducing capital. The decrease in the total assets in the balance sheet of the trans- feror company, is the reduction in the capital account. In this way, equality of assets and liabilities are ensured by the transferor company. This situation proves that it is a natural consequence of a partial spin- off to perform a capital decrease transaction in a company due to a decrease in assets of the transferor company. Considering both the corporate tax, value added tax, stamp tax, and title deed exemptions included in the tax legislation, and the rel- evant legal grounds, a partial spin-off is an arrangement introduced in order to serve as a tax deferral in all company restructuring processes. It is considered that there is no basis for taxing a capital decrease transaction as a separate transaction, which is a natural result of a par- tial spin-off contrary to the purpose and spirit of these regulations. In summary and, in essence, the regulation for the taxation of a capital decrease as a separate transaction, and a capital decrease as a result of a partial spin-off does not exist in any law or communiqué. The Approach of Revenue Administration There is a critical perspective of the tax administration against a capital decrease as a separate transaction, and a capital decrease due to the transfer of the shares acquired through a partial spin-off to the shareholders of the transferor company. Although there is no legal ex- planation regarding this issue, the tax administration has the opinion that a capital decrease has been made from the accounts related in the following order, and that it must be withdrawn from the business: 1. Accounts to be subjected to corporate tax and post-tax tax deduction due to profit distribution (such as inflation adjust- ment positive difference, real estate sales gain exception); 2. Accounts to be subjected to tax deduction related to profit distribution (such as previous year profits); and