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Turkish tax system provides incentives to the capital investment in Turkish companies by the foreign investors, in order to attract foreign capital. Under the provisions of Corporate Income Tax Law, Turkish companies could benefit from these incentives on the capital amount spent within the scope of an investment incentive certificate, or on capital investments made in cash.
Taxpayers, which will make investments within the scope of an investment incentive certificate, are allowed to follow the foreign exchange differences in a special fund account under “Shareholders' Equity”, without associating them with the income statement, in case these fx differences are arising from the capital investment in foreign currency which are spent on the investments stated in the investment incentive certificate. Only the capital invested until the end of the accounting period following the accounting period in which the taxpayers start their business could benefit from this incentive.
Under Corporate Income Tax Law, there is a special provision provides a deduction on the cash capital contributions. Based on the relevant article, the deduction is calculated over the cash capital injections registered to the trade registry within the accounting period from the date the capital is paid until the end of the accounting period, by multiplying the capital injection amount with latest commercial loans interest rate announced by the Central Bank within that accounting period. The deduction is calculated as 50% of this calculated amount. The deduction is applied as 75%, if the capital investment is made by foreign investors.
Türkiye provides these incentives to promote foreign direct investments. Also, instead of using loans as a source of financing, it is aimed to attract capital into the country and strengthen the financials of Turkish companies by eliminating foreign exchange losses and interest expenses stemming from loans.
Reference/ Citation
Turkish Tax Procedures Law, Article 280/A
Tax Procedure Law General Communiqué Serial Numbered 495
Corporate Income Tax Law, Article 10-1/ı
Law No. 7338 on Amendments to the Tax Procedural Law and Certain Laws
