Matters to be considered in the Inflation Adjustment of 500 Capital Accounts and an accounting record example

_____________________________ / ___________________________________

698 Inflation Adjustment Calculation                  26.600.899,00

502 Capital Adjustment Positive Differences                 26.600.899,00

_____________________________ / ___________________________________

In this respect, the paid-in capital account in the balance sheet subject to inflation adjustment dated 31/12/2023 will be shown as follows.

Paid-in Capital 29,100,899.00 TL.

Capital 2,500,000.00 TL.

Capital Adjustment Positive Differences 26,600,899.00 TL.

Carrying the said adjusted capital to the end of the 2024/1-3 provisional tax period (first provisional tax period):

Considering that there is no change in the capital in the first provisional tax period, the adjusted paid-in capital amount of 29,100,899.00 TL will be subject to inflation adjustment by multiplying it with the carry-over coefficient. The carry-over coefficient will be found by dividing the 2024/March period PPI value by the 2023/December PPI value.

Transport Coefficient = 3,100.00 (assumption) / 2,915.02 = 1.06346

_____________________________ / ___________________________________

698 Inflation Adjustment Calculation                1.846.743,05

502 Capital Adjustment Positive Differences                1.846.743,05

_____________________________ / ___________________________________

In this respect, the paid-in capital account in the carried balance sheet dated 31/3/2024 will be shown as follows.

Paid-in Capital                                         30,947,642.05 TL.

Capital                                                         2,500,000.00 TL.

Capital Adjustment Positive Differences  28,447,642.05 TL.

Example 12: (H) Ltd. Şti. was established on 9/6/2020. The formation dates of the capital of the company in question and the calculations regarding the adjustment of the capital are as follows.

The accounting record regarding the recognition of the adjustment difference will be as follows.

_____________________________ / ___________________________________

698 Inflation Adjustment Account 48,884.10

502 Positive Capital Adjustment Differences 24.197,70

503 Negative Capital Adjustment Differences 24,686.40

_____________________________ / ___________________________________

In this respect, the paid-in capital account in the inflation adjusted balance sheet dated 31/3/2024 will be as follows.

Paid-in Capital 819.197,70 TL.

Capital 795.000,00 TL.

Positive Capital Adjustment Differences TL 24.197,70.

In the correction of the capital, the structure of the capital at the date of the correction will be taken into account, and in this context, in the case of capital decreases, it will be determined from which increase item previously added to the capital, and if the item in question is an element that needs to be corrected, this item will be subject to correction over the reduced amount.

The provision of Article 32/B of the Corporate Tax Law No. 5520 should also be taken into consideration in capital decrease transactions.

Example 13: (I) A.Ş. was established on 10/8/2015. The dates of formation of the capital of the said company, whose accounting period is calendar year, appearing in the balance sheet dated 31/12/2023 and its adjusted capital after inflation adjustment are as follows.

Accordingly, the adjusted capital and inflation adjustment difference in the taxpayer’s inflation-adjusted balance sheet dated 31/12/2023 will be as follows.

The recognition of the difference will be as follows.

_____________________________ / ___________________________________

698 Inflation Adjustment Account 21.781.640,00

502 Positive Capital Adjustment Differences 21,781,640.00

_____________________________ / __________________________________

In this respect, the paid-in capital account in the inflation adjusted balance sheet dated 31/12/2023 will be shown as follows.

Paid-in Capital 24.781.640,00 TL.

Capital 3.000.000,00 TL.

Positive Capital Adjustment Differences TL 21.781.640,00.

On the other hand, if there are retained earnings, capital and profit reserves and funds added to the capital in the capital account, the provision of Article 32/B of the Law No. 5520 should be taken into consideration in determining the items from which the capital reduction is made.

The monetary and non-monetary assets included in the economic enterprises by type are mainly included in the lists attached to the General Communiqué on Tax Procedure Law No. 555 (Annex 1 and Annex 2). The economic assets included in the aforementioned lists are shown with the account codes in the “Uniform Chart of Accounts” for the convenience of practitioners. Economic assets that are not included in these lists are treated as the closest economic asset in the lists in terms of nature. In addition, although equity items are not included in these lists, Article 9 of the aforementioned Communiqué

Pursuant to paragraph (2), provided that there is no provision to the contrary and no determination is made in the Communiqué, equity items will be considered as “non-monetary assets” in the application of this Communiqué.

In this context, the capital completion fund transferred by the shareholders of the company, which is decided to complete the capital in accordance with Article 376 of the Turkish Commercial Code dated 13/1/2011 and numbered 6102, will be considered as a non-monetary asset and will be subject to adjustment.

On the other hand, based on the authorization given by subparagraph (8) of paragraph (A) of Article 298 of the duplicate Article (A) of the Law No. 213, the amounts that are outside the scope of Article 376 of the Law No. 6102 and followed in the capital reserves account as capital advances are considered as monetary assets and not subject to adjustment.

FOOTNOTES

4 The registration date will be taken into account for the capital increased due to profit reserves, and in our example, it is assumed that the capital increase is registered in August.

5 It is assumed that the capital decrease made on November 2018 is covered by the capital increase made in December 2017.

6 It is assumed that the capital decrease made on June 2023 is covered by the capital increase made in September 2021.