323 TAX LAW in the period before the legal changes. The main supports of this approach are as follows:7 • In accordance with Article 11(1)(c) of CTL, the amount above the arm’s length price of the transaction between related parties is not accepted as a deduction from the corporate income. Therefore, the regulation in question only concerns financial profit. In this context, the amounts corresponding to the disguised income cannot be evaluated within the scope of Article 30(d) of VATL. • In Article 30(d) of VATL, entitled “Non-Deductible Value Added Tax”, it is stipulated that the VAT paid due to expenses that are not accepted as a deduction in determining the income according to the Income and Corporate Tax Laws cannot be deducted. The main purpose of the provision of this article is to prevent the deduction of expenses that are not related to a business or the corporations. In this context, the expenses incurred for obtaining and maintaining commercial income can be deducted. As a matter of fact, transactions that result in disguised income distribution are within the scope of commercial activity. A contrary interpretation contradicts the basic principle of VAT. This principle says that the taxes incurred by taxpayers in context of work-related expenses should not born by taxpayers. • VAT must be processed as a chain. In cases where goods or services are purchased from the related party at a higher price than their counterparts, the transaction subject to disguised gain is “calculated VAT” for one party and “discount VAT” for the other party. In this context, not allowing VAT deduction on one side in accordance with Article 30(d) of VATL interferes with the functioning of the VAT chain and disrupts the chain system. • Disguised profit distribution through transfer pricing is one of the tax security methods regulated by the CTL and must remain within the scope of the CTL. Therefore, since the 7 Softa, Taşkesen, p.75.
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