Financing Expense Restriction Started

With the presidential Decree No. 3490, published on Official Gazette No. 31385, as of 01.01.2021, the enterprises whose foreign resources exceed equity, 10% of the total of interest, commission, maturity difference, dividend, exchange rate difference, similar expenses and cost elements related to the foreign resources used in the enterprise, excluding those added to the cost of the investment, will not be considered as an expense in determining the earnings by income and corporate tax taxpayers.

Within the scope of the decision, credit institutions, financial institutions, financial leasing, and factoring companies are excluded.

Decision will be effective as of 2021/01 Temporary Taxation Period.

The application principles for income and corporate taxpayers in the taxation of earnings as of 2021/01 are as follows;

• The enterprises whose foreign resources exceed equity within one period, excluding those added to the cost of the investment, payments such as interest, commission, maturity difference, dividend, exchange rate difference will be considered as an expense related with foreign financing.
• 10% of the portion of expenses, which are considered as financing cost and exceeding total equities, will not be subject to discount.
• Since the interest paid for loans or borrowings made for the purpose of financing an investment will be partially or completely added to the investment cost, borrowings to which interest, commission maturity or exchange differences belong to the investment cost in the calculation of the excess of equity will not be included in the total in the foreign resource account.
• Dividends paid to participation banks will be evaluated as the value of the source used and will be subject to restrictions as financing expenses.

You can access to Presidential Decree No. 3490 from here.

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